Livent(LTHM) - 2023 Q2 - Quarterly Report

Glossary of Terms This section defines key terms and abbreviations, detailing the proposed merger with Allkem, financial instruments, and operational subsidiaries - The proposed transaction involves a merger of equals, stock-for-stock transaction between Livent and Allkem, expected to close by the end of calendar year 2023. Livent stockholders will receive 2.406 shares of NewCo for each Livent share[10] - Livent owns a 50% equity interest in Nemaska Lithium Inc. (NLI), which is developing the Whabouchi Mine and a lithium hydroxide conversion plant in Québec, Canada[10] Part I - FINANCIAL INFORMATION Item 1. Financial Statements This item includes Livent Corporation's unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022, comprising statements of operations, comprehensive income, balance sheets, cash flows, and equity, along with detailed explanatory notes Condensed Consolidated Statements of Operations This section presents the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 Three Months Ended June 30 (YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $235.8 | $218.7 | +7.8% | | Cost of sales | $92.4 | $116.2 | -20.5% | | Gross margin | $143.4 | $102.5 | +39.9% | | Income from operations | $100.6 | $84.7 | +18.8% | | Net income | $90.2 | $60.0 | +50.3% | | Basic EPS | $0.50 | $0.36 | +38.9% | | Diluted EPS | $0.43 | $0.31 | +38.7% | Six Months Ended June 30 (YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $489.3 | $362.2 | +35.1% | | Cost of sales | $179.9 | $199.8 | -9.9% | | Gross margin | $309.4 | $162.4 | +90.5% | | Income from operations | $247.4 | $130.8 | +89.1% | | Net income | $205.0 | $113.2 | +81.1% | | Basic EPS | $1.14 | $0.69 | +65.2% | | Diluted EPS | $0.98 | $0.58 | +69.0% | Condensed Consolidated Statements of Comprehensive Income This section provides the unaudited condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2023 and 2022 Three Months Ended June 30 (YoY) | Metric | 2023 (Millions) | 2022 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net income | $90.2 | $60.0 | | Foreign currency translation adjustments | $(1.0) | $(4.4) | | Derivative instruments (net of tax) | $0.4 | $(0.1) | | Comprehensive income | $89.6 | $55.5 | Six Months Ended June 30 (YoY) | Metric | 2023 (Millions) | 2022 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Net income | $205.0 | $113.2 | | Foreign currency translation adjustments | $0.5 | $(5.4) | | Derivative instruments (net of tax) | $0.6 | $0.0 | | Comprehensive income | $206.1 | $107.8 | Condensed Consolidated Balance Sheets This section details the unaudited condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022 Balance Sheet Highlights (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | Change (%) | | :--------------------------------- | :----------------------- | :----------------------- | :--------- | | Total current assets | $532.7 | $544.0 | -2.1% | | Investments | $455.7 | $440.3 | +3.5% | | Property, plant and equipment, net | $1,137.4 | $968.3 | +17.5% | | Total assets | $2,283.8 | $2,074.2 | +10.1% | | Total current liabilities | $141.5 | $148.7 | -4.8% | | Total current and long-term liabilities | $630.8 | $631.2 | -0.1% | | Total equity | $1,653.0 | $1,443.0 | +14.6% | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 Six Months Ended June 30 (YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Cash provided by operating activities | $181.6 | $61.2 | +196.7% | | Cash used in investing activities | $(180.2) | $(124.1) | +45.2% | | Cash (used in)/provided by financing activities | $(21.6) | $0.2 | -10900% | | Decrease in cash and cash equivalents | $(21.2) | $(64.0) | -66.9% | | Cash and cash equivalents, end of period | $167.8 | $49.0 | +242.4% | - The increase in cash provided by operating activities was primarily driven by an increase in net income and a decrease in trade receivables, partially offset by an increase in inventories and a decrease in accounts payable[171] - The increase in cash used in investing activities was primarily due to higher capital expenditures for expansion projects and a $29.5 million investment in Nemaska Lithium[173] Condensed Consolidated Statements of Equity This section outlines the unaudited condensed consolidated statements of equity for the six months ended June 30, 2023 and 2022 Equity Balance (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :--------------------------------- | :----------------------- | :----------------------- | | Common Stock | $0.1 | $0.1 | | Capital In Excess of Par | $1,164.3 | $1,160.4 | | Retained Earnings | $539.4 | $334.4 | | Accumulated Other Comprehensive Loss | $(49.9) | $(51.0) | | Treasury Stock | $(0.9) | $(0.9) | | Total Equity | $1,653.0 | $1,443.0 | - Key changes for the six months ended June 30, 2023, include $205.0 million in net income, $4.0 million from stock compensation plans, $0.5 million in foreign currency translation adjustments, and $0.6 million in net hedging gains[27] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanatory notes supporting the condensed consolidated financial statements Note 1: Description of the Business This note describes Livent Corporation's business, focusing on lithium product manufacturing for EV and energy storage markets - Livent Corporation manufactures a wide range of lithium products used primarily in lithium-based batteries, specialty polymers, and chemical synthesis applications[30] - A major growth driver for lithium is the increasing adoption of electric vehicles (EVs) and other energy storage applications[30] - Livent is one of the primary producers of performance lithium compounds, with significant growth occurring in Asia, Europe, and North America, driven by lithium-ion battery development[31] Note 2: Principal Accounting Policies and Related Financial Information This note details Livent's principal accounting policies, including information on the proposed merger with Allkem and specific financial transactions - Livent entered into a Transaction Agreement on May 10, 2023 (amended August 2, 2023) with Allkem Limited for a merger of equals, stock-for-stock transaction, expected to close by the end of calendar year 2023. Livent stockholders will receive 2.406 shares of NewCo for each Livent share[33] - The Transaction Agreement includes a $64.6 million termination fee payable by either party under certain specified conditions[33] - Livent realized an $11.4 million gain for the three and six months ended June 30, 2023, from a 'Blue Chip Swap' transaction in Argentina, involving the purchase and sale of Argentina Sovereign U.S. dollar-denominated bonds due to exchange controls[37] Note 3: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items This note refers to the 2022 Annual Report for information on recently issued and adopted accounting pronouncements - This note refers to Note 3 of the 2022 Annual Report on Form 10-K for information on recently issued and adopted accounting pronouncements[38] Note 4: Revenue Recognition This note provides disaggregated revenue information by geographical region and product category for the three months ended June 30 Disaggregated Revenue by Geographical Region (Three Months Ended June 30, YoY) | Region | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------------- | :-------------- | :-------------- | :--------- | | North America | $40.7 | $41.2 | -1.2% | | Latin America | $0.0 | $1.1 | -100% | | Europe, Middle East & Africa | $23.5 | $32.0 | -26.5% | | Asia Pacific | $171.6 | $144.4 | +18.8% | | Consolidated Revenue | $235.8 | $218.7 | +7.8% | Disaggregated Revenue by Product Category (Three Months Ended June 30, YoY) | Product Category | 2023 (Millions) | 2022 (Millions) | Change (%) | | :--------------------------------------- | :-------------- | :-------------- | :--------- | | Lithium Hydroxide | $153.6 | $113.6 | +35.2% | | Butyllithium | $62.4 | $81.2 | -23.1% | | High Purity Lithium Metal and Other Specialty Compounds | $14.7 | $16.7 | -12.0% | | Lithium Carbonate and Lithium Chloride | $5.1 | $7.2 | -29.2% | | Consolidated Revenue | $235.8 | $218.7 | +7.8% | - For the three months ended June 30, 2023, two customers accounted for approximately 24% and 23% of consolidated revenue, respectively, and the top 10 customers accounted for approximately 72%[40] Note 5: Inventories, Net This note details the composition of inventories, net, as of June 30, 2023, and December 31, 2022 Inventories, Net (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 (Millions) | December 31, 2022 (Millions) | Change (%) | | :-------------------------- | :----------------------- | :----------------------- | :--------- | | Finished goods | $51.0 | $44.6 | +14.3% | | Semi-finished goods | $103.7 | $57.1 | +81.6% | | Raw materials, supplies, and other | $43.1 | $50.6 | -14.8% | | Inventories, net | $197.8 | $152.3 | +29.9% | Note 6: Investments This note describes Livent's equity interest in Nemaska Lithium Inc. and related financial impacts - Livent accounts for its 50% equity interest in Nemaska Lithium Inc. (NLI) as an equity method investment. NLI is a non-public mining company in the development stage, focused on the Nemaska Lithium Project[50][51] - Livent recorded a $7.2 million loss for the three months and $15.3 million loss for the six months ended June 30, 2023, related to its equity interest in NLI, reflecting project-related costs[51] - In Q3 2023, Livent invested an additional $18.9 million cash in Nemaska Lithium, maintaining its 50% ownership stake[52] Note 7: Restructuring and Other Charges This note outlines restructuring and other charges, including costs related to the Allkem transaction and a plant fire loss Restructuring and Other Charges (Three Months Ended June 30, YoY) | Category | 2023 (Millions) | 2022 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Severance-related and exit costs | $0.7 | $0.0 | | Costs related to the Transaction | $18.8 | $2.2 | | Bessemer City plant fire loss | $5.0 | $0.0 | | Environmental remediation | $0.1 | $0.1 | | Other | $(0.4) | $0.6 | | Total | $24.2 | $2.9 | - A fire occurred at Livent's Bessemer City plant on June 26, 2023, destroying a warehouse. The company recorded a $5.0 million loss for clean-up, disposal, and destroyed assets[54][55] - Most production lines at the Bessemer City plant resumed operation by June 29, 2023, but smaller units for high purity lithium metal and pharmaceutical grade lithium carbonate may take several months to restore[54] Note 8: Income Taxes This note presents income tax expense and effective tax rates for the three and six months ended June 30 Income Tax Expense and Effective Tax Rate (Three Months Ended June 30, YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Effective Tax Rate (2023) | Effective Tax Rate (2022) | | :------------------ | :-------------- | :-------------- | :------------------------ | :------------------------ | | Income tax expense | $14.6 | $30.2 | 13.9% | 33.5% | Income Tax Expense and Effective Tax Rate (Six Months Ended June 30, YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Effective Tax Rate (2023) | Effective Tax Rate (2022) | | :------------------ | :-------------- | :-------------- | :------------------------ | :------------------------ | | Income tax expense | $38.5 | $34.9 | 15.8% | 23.6% | - The decrease in income tax expense for Q2 2023 was primarily due to an increase in forecasted jurisdictional mix of earnings with lower statutory rates and a decrease in foreign currency impacts in Argentina[159][160] Note 9: Debt This note details Livent's long-term debt, including convertible senior notes and compliance with debt covenants Long-term Debt (June 30, 2023 vs. December 31, 2022) | Debt Type | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :--------------------------------- | :----------------------- | :----------------------- | | 4.125% Convertible Senior Notes due 2025 | $245.8 | $245.8 | | Transaction costs - 2025 Notes | $(3.1) | $(3.9) | | Total long-term debt | $242.7 | $241.9 | - Holders of the 2025 Notes have the option to convert through September 30, 2023, as the common stock price met the 130% conversion price threshold[63] - Livent was in compliance with all debt covenants as of June 30, 2023, including a maximum allowable first lien leverage ratio of 3.5 and a minimum allowable interest coverage ratio of 3.5. The Revolving Credit Facility had $478.8 million available funds[66][68] Note 10: Equity This note provides information on Livent's common stock, accumulated other comprehensive loss, and dividend policy - As of June 30, 2023, Livent had 179,715,389 shares of common stock outstanding[71] Accumulated Other Comprehensive Loss (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :--------------------------------- | :----------------------- | :----------------------- | | Foreign currency adjustments | $(50.5) | $(51.0) | | Derivative Instruments | $0.6 | $0.0 | | Total | $(49.9) | $(51.0) | - Livent paid no dividends for the three and six months ended June 30, 2023 and 2022, and does not expect to pay any in the foreseeable future[75] Note 11: Earnings Per Share This note presents basic and diluted earnings per share for the three and six months ended June 30 EPS (Three Months Ended June 30, YoY) | Metric | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Basic EPS | $0.50 | $0.36 | | Diluted EPS | $0.43 | $0.31 | EPS (Six Months Ended June 30, YoY) | Metric | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Basic EPS | $1.14 | $0.69 | | Diluted EPS | $0.98 | $0.58 | - For the three and six months ended June 30, 2023, options to purchase 1,085 shares of common stock at an average exercise price of $23.33 per share were anti-dilutive and excluded from diluted EPS[80] Note 12: Financial Instruments, Risk Management and Fair Value Measurements This note discusses Livent's use of derivative financial instruments for risk management and fair value measurements - Livent uses foreign exchange forward contracts to mitigate currency risk, primarily for the Euro, British pound, Chinese yuan, and Japanese yen, but does not hedge Argentine peso risks[86][88] - As of June 30, 2023, the net derivative financial instrument position was a net asset of $0.8 million. Open cash flow hedge contracts had a U.S. dollar equivalent of approximately $28.2 million, and non-designated forward contracts had approximately $115.2 million[90][94][96] - The fair value hierarchy classifies investments in deferred compensation plans as Level 1 and derivatives (foreign exchange) and 2025 Notes as Level 2[82][83][85][104] Note 13: Commitments and Contingencies This note outlines Livent's commitments and contingencies, including customs audits, export duties, and operating lease liabilities - Livent's Argentine subsidiary, MdA, is subject to customs audits and transfer pricing audits. In June 2023, Livent paid a $21.7 million deposit under protest to Argentine Customs Authorities for claimed export duties[112][113][123] - As of June 30, 2023, all leases are operating leases with a weighted average remaining lease term of 17.3 years and a weighted average discount rate of 6.5%[114][117] Operating Lease Liabilities Maturity Analysis (Undiscounted Cash Flows) | Period | Undiscounted cash flows (Millions) | | :---------------- | :------------------------------- | | Remainder of 2023 | $0.7 | | 2024 | $1.5 | | 2025 | $1.5 | | 2026 | $0.7 | | 2027 | $0.3 | | Thereafter | $7.5 | | Total future minimum lease payments | $12.2 | Note 14: Supplemental Information This note provides supplemental details on prepaid and other current assets, other assets, and accrued and other current liabilities Prepaid and Other Current Assets (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :----------------------- | :----------------------- | | Tax related items | $25.5 | $22.0 | | Prepaid expenses | $9.0 | $11.6 | | Argentina government receivable | $6.2 | $6.7 | | Other receivables | $1.2 | $7.4 | | Bank Acceptance Drafts | $0.5 | $6.9 | | Derivative assets | $0.8 | $0.0 | | Other current assets | $1.6 | $6.5 | | Total | $44.8 | $61.1 | Other Assets (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :----------------------- | :----------------------- | | Argentina government receivable | $108.5 | $80.3 | | Advance to contract manufacturers | $19.4 | $17.2 | | Long-term raw materials inventory | $1.2 | $1.6 | | Tax related items | $3.9 | $3.7 | | Capitalized software, net | $1.4 | $1.4 | | Other assets | $16.7 | $12.2 | | Total | $151.1 | $116.4 | Accrued and Other Current Liabilities (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 (Millions) | December 31, 2022 (Millions) | | :-------------------------- | :----------------------- | :----------------------- | | Accrued payroll | $18.2 | $19.8 | | Restructuring reserves | $2.7 | $3.1 | | Retirement liability - 401k | $1.4 | $2.6 | | Environmental reserves, current | $0.6 | $0.6 | | Other accrued and other current liabilities | $31.6 | $11.2 | | Total | $54.5 | $37.4 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Livent's financial performance, condition, and future outlook, including a discussion of key business developments, operational challenges, and strategic initiatives Special Note Regarding Forward-Looking Information This note cautions readers about forward-looking statements, which are subject to risks and uncertainties and are not subject to public revision - The report contains forward-looking statements based on current views and assumptions, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[131] - Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made. The company is under no duty to publicly revise or update these statements[133] Application of Critical Accounting Estimates This note identifies critical accounting estimates, such as revenue recognition and asset valuation, which are subject to global economic uncertainties - Critical accounting estimates, reviewed with the Audit Committee, include revenue recognition, collectability of trade receivables, impairment and valuation of long-lived assets, and income taxes[134][135][136] - These estimates may be impacted by global economic uncertainties such as inflation, rising interest rates, and geopolitical conflicts[136] Overview This section provides an overview of Livent's business as a fully integrated lithium company focused on high-performance compounds for EV and energy storage markets - Livent is a pure-play, fully integrated lithium company focused on producing high-performance lithium compounds for the rapidly growing EV and energy storage battery markets[137] - Primary products include battery-grade lithium hydroxide, lithium carbonate, butyllithium, and high purity lithium metal[137] - The company aims to capitalize on the accelerating trend of electrification, leveraging its 80 years of experience, global capabilities, and deep customer relationships[138][139] Second Quarter 2023 Highlights This section highlights key financial performance and strategic developments for the second quarter of 2023, including the proposed merger with Allkem - Livent entered into a Transaction Agreement on May 10, 2023, for a merger of equals with Allkem Limited, expected to close by the end of calendar year 2023[140] Financial Performance (Three Months Ended June 30, YoY) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :--------------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $235.8 | $218.7 | +7.8% | | Net income | $90.2 | $60.0 | +50.3% | | Adjusted EBITDA (Non-GAAP) | $134.5 | $95.0 | +41.6% | - Performance was driven by higher pricing and sales volumes for lithium hydroxide and a favorable mix of raw materials costs, partially offset by decreased butyllithium sales volumes and lower lithium carbonate and butyllithium pricing[140] Other Events During the Quarter This section details other significant events during the quarter, including a payment to Argentine Customs and a fire at the Bessemer City plant - On June 16, 2023, Livent's Argentine subsidiary paid a $21.7 million deposit under protest to Argentine Customs Authorities for claimed export duties from 2018-2022[143] - A fire at the Bessemer City plant on June 26, 2023, resulted in a $5.0 million loss for clean-up and destroyed assets. Most production lines resumed quickly, but smaller units will take several months to restore[144] Business Update This section provides an update on the lithium market, operational challenges, and strategic monitoring efforts amidst global economic uncertainties - The lithium market remains strong due to increased EV adoption, but Livent faces challenges from inflation, high energy costs, supply chain disruptions, and political/economic instability in Argentina, including currency restrictions limiting imports[145][147] - The global EV manufacturing industry is experiencing uncertainties, including normalizing inventory in China, changes to U.S. tax credits, and price reductions by leading EV manufacturers, which may impact customer demand[148] - Management is monitoring global expansion efforts, the Allkem transaction, Nemaska Lithium Project development, lithium supply/demand balance, changing lithium prices, and macroeconomic factors[149] 2023 Business Outlook This section outlines Livent's business outlook for 2023, anticipating higher volumes, pricing, and profitability, alongside increased operational costs - Livent expects higher volumes, particularly in the second half of 2023 due to new production units, and higher average pricing across its lithium products, leading to increased profitability versus 2022[150] - Higher costs are anticipated in 2023, primarily related to royalties, the ramping up of new production units, and general inflationary pressures[150] Results of Operations This section analyzes Livent's financial results, comparing performance for the three and six months ended June 30, 2023, against the prior year Three Months Ended June 30, 2023 vs. 2022 This section compares Livent's financial performance for the three months ended June 30, 2023, against the same period in 2022 - Revenue increased by 8% to $235.8 million, driven by higher lithium hydroxide pricing and sales volumes, partially offset by decreased butyllithium sales and pricing[154] - Gross margin surged by 40% to $143.4 million, primarily due to higher lithium hydroxide performance and favorable raw material costs[155] - Net income increased by 50% to $90.2 million, benefiting from higher lithium hydroxide performance, favorable raw material mix, and lower income tax expense, despite higher restructuring charges and equity losses from unconsolidated affiliates[161] Six Months Ended June 30, 2023 vs. 2022 This section compares Livent's financial performance for the six months ended June 30, 2023, against the same period in 2022 - Revenue grew by 35% to $489.3 million, driven by higher pricing across all products and increased lithium hydroxide sales volumes[162] - Gross margin increased by 91% to $309.4 million, primarily due to higher pricing across all products, higher lithium hydroxide sales volumes, and a favorable mix of raw materials costs[163] - Net income surged by 81.1% to $205.0 million, driven by higher pricing, lithium hydroxide volumes, and favorable raw material mix, partially offset by increased expenses and equity losses from unconsolidated affiliates[168] Liquidity and Capital Resources This section discusses Livent's cash position, operating and investing cash flows, and expected liquidity needs and capital spending - Cash and cash equivalents decreased to $167.8 million as of June 30, 2023, from $189.0 million at December 31, 2022[170] - Cash provided by operating activities significantly increased to $181.6 million for the six months ended June 30, 2023, from $61.2 million in the prior year, driven by higher net income and decreased trade receivables[171] - Cash used in investing activities increased to $180.2 million, primarily due to higher capital expenditures for expansion projects and a $29.5 million investment in Nemaska Lithium. Cash used in financing activities was $(21.6) million, largely due to a $21.7 million payment to Argentina Customs Authorities[173][174] - Livent expects to meet its liquidity needs through available cash, cash from operations, and its $478.8 million Revolving Credit Facility. Estimated 2023 capital spending is $325 million to $375 million[175][176][180] Derivative Financial Instruments and Market Risks This section details Livent's use of derivative financial instruments to manage market risks, including foreign currency exposure - Livent uses derivative financial instruments, primarily foreign exchange forward contracts, to manage market risks related to commodity prices, interest rates, and foreign currency exchange rates[186] - The company is exposed to currency risk from the Euro, British pound, Chinese yuan, Argentine peso, and Japanese yen, but does not hedge Argentine peso risks due to limited availability and high cost of suitable instruments[189] - As of June 30, 2023, Livent had a net derivative financial instrument position of a net asset of $0.8 million and no interest rate swap agreements[188][192] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item refers to the 'Derivative Financial Instruments and Market Risks' section within Item 2 for all required disclosures regarding quantitative and qualitative information about market risk - Information required by this item is provided in 'Derivative Financial Instruments and Market Risks' under Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations[194] Item 4. Controls and Procedures Management, with the participation of the CEO and CFO, concluded that Livent's disclosure controls and procedures were effective as of June 30, 2023. There were no material changes in internal control over financial reporting during the quarter - Livent's disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[195] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect, internal control over financial reporting[196] Part II - OTHER INFORMATION Item 1. Legal Proceedings Livent is involved in various legal proceedings in the ordinary course of business, including workers' compensation matters. Based on current information and established reserves, management does not believe the ultimate resolution of any known legal proceeding will have a material adverse effect on the company's financial position, liquidity, or results of operations, with no material changes from prior disclosures except as noted in Note 13 - Livent is involved in legal proceedings in the ordinary course of business, including workers' compensation matters[199] - Based on current information and established reserves, management does not believe the ultimate resolution of any known legal proceeding will have a material adverse effect on the company's financial position, liquidity, or results of operations[199] - There are no material changes from the legal proceedings previously disclosed in the 2022 Annual Report on Form 10-K, except as set forth in Note 13[199] Item 1A. Risk Factors This section updates the risk factors from the 2022 Annual Report on Form 10-K, with a primary focus on risks related to the proposed transaction with Allkem Limited and operational risks, including cybersecurity. The completion of the Allkem transaction is subject to various conditions and potential delays, and its termination could negatively impact Livent, potentially requiring a $64.6 million fee Risks Relating to the Proposed Transaction with Allkem Limited This section outlines risks associated with the proposed merger with Allkem, including completion uncertainties, regulatory conditions, and potential termination fees - The completion of the proposed transaction with Allkem is uncertain and subject to numerous conditions, including shareholder and regulatory approvals, which could delay or prevent its closing[201][202] - Regulatory and governmental entities may impose conditions on consents that could reduce the anticipated benefits of the transaction or prevent its completion[204][205] - Termination of the Transaction Agreement could negatively impact Livent's business, stock price, and relationships, and may require Livent to pay Allkem a $64.6 million termination fee under certain circumstances[207][208] Operational Risks This section details operational risks, primarily focusing on cybersecurity breaches and disruptions to information technology systems - Livent's business and operations are vulnerable to cybersecurity breaches and disruptions to its information technology systems, as well as those of third-party Business Partners[214] - Such incidents could lead to data leakage, business disruptions, loss of assets (including trade secrets), litigation, regulatory violations, reputational damage, and increased costs, materially affecting financial condition or results of operations[215] - Reliance on Business Partners for security measures means their failures could require significant resources from Livent to mitigate impacts and develop protections[216] Forward-Looking Information This section cautions against undue reliance on forward-looking statements and clarifies the company's non-obligation to revise them - Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date made[217] - The company specifically declines to undertake any obligation to publicly revise any forward-looking statements to reflect events or circumstances after their date or the occurrence of anticipated or unanticipated events[217] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Livent did not have any publicly announced stock repurchase programs. However, the trustee of the Livent Non-Qualified Savings Plan (NQSP) reacquires shares of Livent common stock through open-market purchases for employee investments, with 934.8 shares purchased in Q2 2023 at an average price of $23.06 per share - Livent has no publicly announced stock repurchase programs[220] NQSP Share Repurchases (Q2 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------------- | :------------------------------- | :--------------------------- | | April 1 through April 30, 2023 | 424.3 | $20.66 | | May 1 through May 31, 2023 | 260.3 | $24.27 | | June 1 through June 30, 2023 | 250.2 | $25.86 | | Total Q2 2023 | 934.8 | $23.06 | - Shares are reacquired by the trustee of the Livent NQSP through open-market purchases for employee investments and are held in a trust fund as treasury stock[220] Item 5. Other Information During the second quarter of 2023, none of Livent's directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - None of Livent's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[222] Item 6. Exhibits This item lists the exhibits filed with the Form 10-Q, including the Transaction Agreement with Allkem and its amendment, certifying statements from the CEO and CFO, and the Interactive Data File - Key exhibits include the Transaction Agreement (May 10, 2023) and its Amendment (August 2, 2023) with Allkem, Certifying Statements of the Chief Executive Officer and Chief Financial Officer (pursuant to Sections 302 and 1350 of the Sarbanes-Oxley Act), and the Interactive Data File (Inline XBRL)[225] Signatures This section contains the official signatures for the report, dated August 3, 2023 - The report was signed on August 3, 2023, by Gilberto Antoniazzi, Vice President and Chief Financial Officer of Livent Corporation[228]