Livent(LTHM) - 2021 Q4 - Annual Report

PART I Item 1. Business Livent Corporation, an independent, fully integrated lithium company since 2019, specializes in high-performance lithium compounds for EVs and battery markets, while maintaining leadership in butyllithium and high-purity lithium metal - Livent Corporation was formed and incorporated by FMC Corporation in February 2018, conducted its initial public offering in October 2018, and became an independent company in March 2019[18] - The company is a pure-play, fully integrated lithium company, producing battery-grade lithium hydroxide, lithium carbonate, butyllithium, and high purity lithium metal[20] - Livent's strategy is to focus on supplying high-performance lithium compounds to the fast-growing electric vehicle (EV) and broader battery markets[20] - The company is expanding its production capacities with a 5,000 metric ton lithium hydroxide addition in Bessemer City, North Carolina (online by Q4 2022), and a 20,000 metric ton lithium carbonate expansion in Argentina (in two phases by Q1 2023 and year-end 2023)[25] - Engineering work began in Q1 2022 for a second expansion to add an additional 20,000 metric tons of carbonate capacity in Argentina by the end of 2025, aiming for a total of roughly 60,000 metric tons[26] - Livent operates as one reportable segment due to commonalities in products, customer types, and operating performance evaluation[35] - The company extracts lithium from naturally occurring lithium-rich brines in Salar del Hombre Muerto, Argentina, considered one of the world's most significant and lowest-cost sources of lithium[57] Capacity and Production by Product Type (2019-2021) | Product Category | Product | 2021 Capacity (MT) | 2021 Production (MT) | 2020 Capacity (MT) | 2020 Production (MT) | 2019 Capacity (MT) | 2019 Production (MT) | |---|---|---|---|---|---|---|---| | Performance Lithium | Lithium Hydroxide | 25,000 | 19,671 | 25,000 | 14,686 | 25,000 | 21,348 | | | Butyllithium | 3,265 | 2,549 | 3,265 | 2,180 | 3,265 | 2,437 | | | High Purity Lithium Metal | 250 | 156 | 250 | 160 | 250 | 167 | | Base Lithium | Lithium Carbonate | 18,000 | 15,542 | 18,000 | 15,589 | 18,000 | 16,785 | | | Lithium Chloride | 9,000 | 3,723 | 9,000 | 4,836 | 9,000 | 4,284 | Revenue by Product Category (2019-2021) | Product Category | 2021 Revenue (Millions) | 2020 Revenue (Millions) | 2019 Revenue (Millions) | |---|---|---|---| | Lithium Hydroxide | $208.0 | $157.5 | $213.8 | | Butyllithium | $105.4 | $87.1 | $99.9 | | High Purity Lithium Metal and Other Specialty Compounds | $36.9 | $31.7 | $52.4 | | Lithium Carbonate and Lithium Chloride | $70.1 | $11.9 | $22.3 | | Total Revenue | $420.4 | $288.2 | $388.4 | Revenue by Geographical Region (2019-2021) | Region | 2021 Revenue (Millions) | 2020 Revenue (Millions) | 2019 Revenue (Millions) | |---|---|---|---| | North America | $61.4 | $53.3 | $76.2 | | Latin America | $0.0 | $0.2 | $1.0 | | Europe, Middle East & Africa | $62.2 | $49.2 | $59.0 | | Asia Pacific | $296.8 | $185.5 | $252.2 | | Total Revenue | $420.4 | $288.2 | $388.4 | - One customer accounted for approximately 31% of total revenue in 2021, and the top 10 customers accounted for approximately 69% of revenue in 2021[387] - In 2021, Livent experienced a 15% global headcount increase, driven by expansion efforts in Argentina and the U.S., quality program depth in Asia, and global engineering talent expansion[97] - As of December 31, 2021, Livent had approximately 1,109 full-time, part-time, temporary, and contract employees globally, with 38% in Latin America, 35% in North America, 19% in Asia, and 7% in Europe[108] Item 1A. Risk Factors Livent faces a range of material risks, including the ongoing adverse impacts of the COVID-19 pandemic on operations, supply chains, and customer demand, with growth highly dependent on the continued expansion of the EV market and demand for high-performance lithium compounds - The COVID-19 pandemic continues to adversely impact Livent's business, operations, and financial performance, causing disruptions in supply chains, logistics, and customer demand, and increasing costs[132][133][134] - Livent's growth is highly dependent on the continued growth in demand for electric vehicles (EVs) and high-performance lithium compounds; a slower-than-expected EV market development could negatively impact the business[138] - Lithium prices are volatile, and declines could materially affect Livent's business, financial condition, and results of operations, especially given index-based pricing in some contracts[140] - Production expansion efforts are complex, require significant capital expenditures, and are subject to risks such as technical difficulties, regulatory hurdles, labor issues, and unforeseen costs, which could delay projects or render them infeasible[145] - Substantial international operations, particularly in Argentina, expose Livent to political, financial (e.g., high inflation, foreign exchange restrictions), and operational risks (e.g., mining concession changes, water access, natural disasters, civil unrest)[155][161][163][165] - The company has not established 'proven' or 'probable' reserves for its minerals, as defined by the SEC, leading to greater uncertainty regarding the economic viability of mineral extraction and future production capacity[188] - Increasing focus on sustainability and ESG matters from stakeholders could negatively impact Livent's business and reputation if it fails to meet or accurately report on its initiatives and goals[189][190] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments[215] Item 2. Properties Livent operates six manufacturing facilities across five countries and ten sales/administrative/R&D facilities in eight countries, including its leased corporate headquarters in Philadelphia, Pennsylvania, holding long-term mineral rights to critical lithium reserves in Argentina - Livent operates six manufacturing facilities in five countries and ten facilities for sales, marketing, research and development, and administrative needs in eight countries[216] - The company holds long-term mineral rights to the Salar del Hombre Muerto lithium reserves in Argentina, which are essential for its raw material supply[217] Key Production and Administrative Properties | Location | Function | Leased/Owned | |---|---|---| | United States (Philadelphia, PA) | Corporate Headquarters | Leased | | United States (Bessemer City, NC) | Manufacturing and Research | Owned | | South America (Fénix, Argentina) | Lithium Extraction and Manufacturing | Owned | | South America (Guemes, Argentina) | Manufacturing | Owned | | Europe (Bromborough, United Kingdom) | Manufacturing and Sales | Leased | | Asia Pacific (Zhangjiagang, China) | Manufacturing | Land use right, building owned | | Asia Pacific (Patancheru, India) | Manufacturing | Leased | Item 3. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 2, Note 9, and Note 16 of the consolidated financial statements - Legal proceedings information is incorporated by reference from Notes 2, 9, and 16 of the consolidated financial statements[218] Item 4. Mine Safety Disclosures This item is not applicable to Livent Corporation - Mine Safety Disclosures are not applicable[219] Item 4A. Executive Officers of the Registrant This section lists the executive officers of Livent Corporation, their current offices, business experience, and ages as of December 31, 2021, along with a summary of their diversity characteristics Executive Officers as of December 31, 2021 | Name | Age | Office | |---|---|---| | Paul W. Graves | 50 | President, Chief Executive Officer and Director | | Gilberto Antoniazzi | 55 | Vice President and Chief Financial Officer | | Sara Ponessa | 50 | Vice President, General Counsel and Secretary | Executive Officer Diversity (Gender and National Origin) | Category | Male | Female | |---|---|---| | Number of executive officers | 2 | 1 | | Hispanic or Latinx | 1 | 1 | | White | 1 | — | | National Origin: United Kingdom | 1 | — | | National Origin: Brazil | 1 | — | | National Origin: U.S. (Puerto Rico) | — | 1 | PART II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Livent's common stock trades on the New York Stock Exchange under the symbol LTHM, with 2,283 holders of record and approximately 117,293 beneficial holders as of February 25, 2022, and no cash dividends declared or planned - Livent common stock (Symbol: LTHM) is traded on the New York Stock Exchange[225] - As of February 25, 2022, there were 2,283 holders of record and approximately 117,293 beneficial holders of common stock[225] - The Board of Directors has not declared any quarterly dividends as of December 31, 2021, and does not expect to pay any dividends in the foreseeable future[226] Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | |---|---|---| | October 1 - October 31, 2021 | 166 | $25.68 | | November 1 - November 30, 2021 | 148 | $30.17 | | December 1 - December 31, 2021 | 173 | $25.78 | | Total Q4 2021 | 487 | $27.08 | - The shares purchased were reacquired by the trustee of the Livent NQSP deferred compensation plan through open-market purchases, not part of publicly announced repurchase programs[230][231] Item 6. [RESERVED] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Livent's 2021 financial performance saw significant improvements, with revenue increasing by 46% to $420.4 million and a return to net income of $0.6 million, driven by higher sales volumes and pricing despite increased costs, with liquidity boosted by a public offering of common stock - Livent is a pure-play, fully integrated lithium company focused on high-performance lithium compounds for the rapidly growing EV and energy storage battery markets[234] - The company completed a public offering of 14,950,000 shares of common stock in June 2021, generating net proceeds of $252.2 million, primarily for growth capital expenditures and debt repayment[236] - The COVID-19 pandemic continued to negatively impact business, operations, and financial performance in 2021, causing supply chain disruptions, increased costs, and delays in capital expansion work[237][239][241] - Livent expects flat volumes but significantly higher average pricing across its lithium products in 2022, leading to higher profitability, but also anticipates higher costs due to logistics, raw materials, and general inflationary pressures[252] Key Financial Highlights (2021 vs. 2020) | Metric | 2021 (Millions) | 2020 (Millions) | Change (Millions) | Change (%) | |---|---|---|---|---| | Revenue | $420.4 | $288.2 | $132.2 | 45.9% | | Gross Margin | $88.4 | $36.8 | $51.6 | 140.2% | | Net Income/(Loss) | $0.6 | $(16.3) | $16.9 | N/A | | Adjusted EBITDA (Non-GAAP) | $69.5 | $22.3 | $47.2 | 211.7% | - Cash provided by operating activities increased significantly to $26.4 million in 2021 from $6.3 million in 2020, driven by higher net income and decreased payments of accounts payable[272] - Cash used in investing activities increased to $143.3 million in 2021 from $131.1 million in 2020, primarily due to the resumption and significant increase in capital expenditures for lithium carbonate and hydroxide capacity expansion[273][274] - Cash provided by financing activities increased to $218.0 million in 2021 from $119.1 million in 2020, mainly due to $252.2 million net proceeds from the common stock offering, partially offset by Revolving Credit Facility repayment[275][276] - Total capital spending for 2022 is estimated to be in the range of $280 million to $320 million[278] - The company's 2025 Notes are classified as long-term debt, and holders have the option to convert them through March 31, 2022, due to the stock price exceeding 130% of the conversion price[456] Item 7A. Quantitative and Qualitative Disclosures about Market Risk Livent is exposed to market risks from fluctuations in commodity prices, interest rates, and foreign currency exchange rates, utilizing derivative contracts to minimize cash flow exposure to interest and currency rate changes, excluding Argentine peso risks - Livent is exposed to market risks from fluctuations in commodity prices, interest rates, and foreign currency exchange rates[300] - The company uses derivative contracts to hedge exposures and minimize cash flow volatility from interest and currency exchange rates[300][303] - Livent does not hedge foreign currency risks associated with the Argentine peso due to limited availability and high cost of suitable derivative instruments[303] Foreign Currency Exchange Rate Sensitivity (December 31, 2021) | Metric | Net Asset/(Liability) Position (Millions) | |---|---| | Net asset/(liability) position as of December 31, 2021 | $0.2 | | Net liability position with 10% strengthening | $(2.0) | | Net asset position with 10% weakening | $1.6 | - A one percentage point increase or decrease in interest rates would have increased or decreased gross interest expense by $0.2 million for the year ended December 31, 2021[308] Item 8. Financial Statements and Supplementary Data This section presents Livent Corporation's audited consolidated financial statements for 2019-2021, including statements of operations, comprehensive income/(loss), balance sheets, cash flows, and equity, along with detailed notes and an unqualified audit opinion from KPMG LLP Consolidated Statements of Operations (2019-2021) | (in Millions, Except Per Share Data) | 2021 | 2020 | 2019 | |---|---|---|---| | Revenue | $420.4 | $288.2 | $388.4 | | Gross margin | $88.4 | $36.8 | $114.9 | | Income/(loss) from operations before loss on debt extinguishment, equity in net loss of unconsolidated affiliates and interest expense, net | $29.7 | $(21.1) | $58.6 | | Net income/(loss) | $0.6 | $(16.3) | $50.2 | | Net income/(loss) per weighted average share - basic | $0.00 | $(0.11) | $0.34 | | Net income/(loss) per weighted average share - diluted | $0.00 | $(0.11) | $0.34 | Consolidated Balance Sheets (December 31, 2021 and 2020) | (in Millions) | 2021 | 2020 | |---|---|---| | Cash and cash equivalents | $113.0 | $11.6 | | Total current assets | $399.3 | $249.8 | | Property, plant and equipment, net | $677.9 | $545.3 | | Total assets | $1,202.5 | $936.8 | | Total current liabilities | $131.3 | $82.3 | | Long-term debt | $240.4 | $274.6 | | Total current and long-term liabilities | $407.1 | $400.6 | | Total equity | $795.4 | $536.2 | | Total liabilities and equity | $1,202.5 | $936.8 | Consolidated Statements of Cash Flows (2019-2021) | (in Millions) | 2021 | 2020 | 2019 | |---|---|---|---| | Cash provided by operating activities | $26.4 | $6.3 | $58.1 | | Cash used in investing activities | $(143.3) | $(131.1) | $(190.0) | | Cash provided by financing activities | $218.0 | $119.1 | $120.5 | | Increase/(decrease) in cash and cash equivalents | $101.4 | $(5.2) | $(11.5) | | Cash and cash equivalents, end of period | $113.0 | $11.6 | $16.8 | - Livent early adopted ASU 2020-06 on January 1, 2021, using the full retrospective method, which simplifies accounting for convertible debt instruments by reporting them as a single liability[380][381] - The company's 4.125% Convertible Senior Notes due 2025 (2025 Notes) were issued for $245.8 million in 2020, with net proceeds used to finance green projects and repay the Revolving Credit Facility[450] - The Revolving Credit Facility provides for a $400 million senior secured revolving credit facility, with $385.5 million available funds as of December 31, 2021[458][440] - Total unrecognized tax benefits were $2.9 million as of December 31, 2021, with $1.0 million potentially impacting the effective tax rate[435] - KPMG LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[564][565] - The assessment of uncertain tax positions, particularly those not indemnified by FMC, was identified as a critical audit matter due to complex judgment in interpreting tax laws and intercompany pricing policies[571][572] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure[592] Item 9A. Controls and Procedures Livent's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes in internal controls over financial reporting during the fourth quarter of 2021 - Management concluded that Livent's disclosure controls and procedures were effective as of December 31, 2021[593] - No changes in internal controls over financial reporting occurred during Q4 2021 that materially affected or are reasonably likely to materially affect internal control over financial reporting[596] Item 9B. Other Information This item is not applicable - This item is not applicable[597] Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable - This item is not applicable[598] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, the Audit Committee, and the Code of Ethics is incorporated by reference from the Proxy Statement and Item 4A of this Form 10-K - Information on directors, executive officers, Audit Committee, and Code of Ethics is incorporated by reference from the Proxy Statement and Item 4A[600] Item 11. Executive Compensation Information concerning executive compensation, director compensation, and Compensation and Organization Committee interlocks and insider participation is incorporated by reference from the Proxy Statement - Information on executive compensation, director compensation, and Compensation and Organization Committee interlocks is incorporated by reference from the Proxy Statement[601] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement, with details on the company's stockholder-approved equity compensation plans - Security ownership information for beneficial owners and management is incorporated by reference from the Proxy Statement[602] Equity Compensation Plan Information (December 31, 2021) | Plan Category | Number of Securities to be issued upon exercise of outstanding options and restricted stock units (A) | Weighted-average exercise price of outstanding options awards (B) | Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) (C) | |---|---|---|---| | Equity Compensation Plans approved by stockholders | 4,360,918 | $14.37 | 6,322,919 | - The Livent Plan's 'evergreen' provision for increasing available shares was not authorized for January 1, 2022[605] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding independent directors and related party transactions, including the related policy, is incorporated by reference from the Proxy Statement - Information on independent directors and related party transactions is incorporated by reference from the Proxy Statement[605] Item 14. Principal Accountant Fees and Services Information concerning principal accountant fees and services is incorporated by reference from the Proxy Statement, identifying KPMG LLP as the auditor - Information on principal accountant fees and services is incorporated by reference from the Proxy Statement[606] - Auditor Name: KPMG LLP, Auditor Location: Philadelphia, PA (U.S. firm), PCAOB ID: 185[606] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the documents filed with the report, including consolidated financial statements and a comprehensive index of exhibits, many of which are incorporated by reference from previous SEC filings - Consolidated financial statements of Livent Corporation and its subsidiaries are incorporated under Item 8 of this Form 10-K[609] - A detailed index of exhibits is provided, including the Certificate of Incorporation, By-Laws, Credit Agreement, and various compensation plans, many of which are incorporated by reference[607][610][612] Item 16. Form 10-K Summary This is an optional disclosure item and is not included in this report - Form 10-K Summary is an optional disclosure and is not included in this report[612] SIGNATURES This section contains the signatures of Livent Corporation's authorized representatives, including the President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and members of the Board of Directors, certifying the report as of February 28, 2022 - The report is signed by Paul W. Graves (President, CEO, and Director), Gilberto Antoniazzi (VP and CFO), Ronald Stark (Chief Accounting Officer), and other Directors[615][616] - The report was signed on February 28, 2022[615]