Livent(LTHM) - 2022 Q1 - Quarterly Report

Glossary of Terms The report defines key terms and abbreviations used throughout the document - The report includes a glossary defining key terms and abbreviations used throughout the document, such as '2025 Notes', 'ASU', 'Credit Agreement', 'ESG', 'EV', 'FASB', 'FMC', 'Livent NQSP', 'Nemaska', 'Nemaska Project', 'Nemaska Transaction', 'Offering', 'OEM', 'Original Credit Agreement', 'PRSU', 'QLP', 'Revolving Credit Facility', 'RSU', 'SEC', 'Securities Act', 'Separation', 'TSR', 'U.S. GAAP', and 'VAT'[8][9] Part I - Financial Information This part presents the unaudited condensed consolidated financial statements, management's analysis, and disclosures on market risk Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements and accompanying notes for Q1 2022 Condensed Consolidated Statements of Operations The company's revenue grew significantly, leading to a substantial shift from a net loss to a net income in Q1 2022 | Metric (in Millions, Except Per Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :--------------------------------: | :--------------------------------: | | Revenue | $143.5 | $91.7 | | Cost of sales | $83.6 | $78.4 | | Gross margin | $59.9 | $13.3 | | Selling, general and administrative expenses| $11.8 | $10.7 | | Research and development expenses | $0.9 | $0.7 | | Restructuring and other charges | $1.0 | $0.3 | | Separation-related costs/(income) | $0.1 | $(0.1) | | Total costs and expenses | $97.4 | $90.0 | | Income from operations before equity in net loss of unconsolidated affiliate, interest expense, net and other gain | $46.1 | $1.7 | | Equity in net loss of unconsolidated affiliate | $2.2 | $1.3 | | Interest expense, net | — | $0.3 | | Other gain | $(14.0) | — | | Income from operations before income taxes | $57.9 | $0.1 | | Income tax expense | $4.7 | $0.9 | | Net income/(loss) | $53.2 | $(0.8) | | Net income/(loss) per weighted average share - basic | $0.33 | $(0.01) | | Net income/(loss) per weighted average share - diluted | $0.28 | $(0.01) | | Weighted average common shares outstanding - basic | 161.7 | 146.5 | | Weighted average common shares outstanding - diluted | 191.4 | 146.5 | - Revenue increased by 56% to $143.5 million in Q1 2022 from $91.7 million in Q1 2021, primarily due to higher pricing across all products, partially offset by decreased sales volumes[12] - Gross margin significantly improved to $59.9 million from $13.3 million, a 350% increase[12] - The company reported a net income of $53.2 million in Q1 2022, a substantial improvement from a net loss of $(0.8) million in Q1 2021, partly due to a $14.0 million 'Other gain' in 2022[12] Condensed Consolidated Statements of Comprehensive Income/(Loss) Comprehensive income improved significantly, driven by higher net income despite foreign currency translation losses | Metric (in Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------- | :--------------------------------: | :--------------------------------: | | Net income/(loss) | $53.2 | $(0.8) | | Foreign currency translation loss arising during the period | $(1.0) | $(0.3) | | Unrealized hedging gains, net of tax of $0.1 | $0.1 | — | | Other comprehensive loss, net of tax | $(0.9) | $(0.3) | | Comprehensive income/(loss) | $52.3 | $(1.1) | - Comprehensive income for Q1 2022 was $52.3 million, a significant improvement from a comprehensive loss of $(1.1) million in Q1 2021[15] - This change was primarily driven by the increase in net income, partially offset by foreign currency translation losses and, in 2022, unrealized hedging gains[15] Condensed Consolidated Balance Sheets Total assets and equity increased, driven by investments in property, plant, and equipment and net income for the period | Metric (in Millions) | March 31, 2022 | December 31, 2021 | | :------------------- | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $68.5 | $113.0 | | Trade receivables, net | $105.5 | $96.4 | | Inventories, net | $150.5 | $134.6 | | Total current assets | $364.5 | $399.3 | | Property, plant and equipment, net | $737.8 | $677.9 | | Total assets | $1,242.6 | $1,202.5 | | LIABILITIES AND EQUITY | | | | Accounts payable, trade and other | $62.2 | $65.4 | | Total current liabilities | $120.3 | $131.3 | | Long-term debt | $240.8 | $240.4 | | Total current and long-term liabilities | $393.6 | $407.1 | | Total equity | $849.0 | $795.4 | | Total liabilities and equity | $1,242.6 | $1,202.5 | - Total assets increased to $1,242.6 million as of March 31, 2022, from $1,202.5 million at December 31, 2021, driven by an increase in property, plant and equipment[19] - Cash and cash equivalents decreased by $44.5 million, while inventories and trade receivables increased[19] - Total equity grew to $849.0 million from $795.4 million, reflecting the net income for the period[19] Condensed Consolidated Statements of Cash Flows Operating cash flow decreased while investing cash outflow increased significantly due to capital expansion projects | Metric (in Millions) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------- | :--------------------------------: | :--------------------------------: | | Cash provided by operating activities | $10.8 | $12.7 | | Cash used in investing activities | $(55.4) | $(27.0) | | Cash provided by financing activities | $0.1 | $24.2 | | (Decrease)/increase in cash and cash equivalents | $(44.5) | $9.9 | | Cash and cash equivalents, beginning of period | $113.0 | $11.6 | | Cash and cash equivalents, end of period | $68.5 | $21.5 | - Cash provided by operating activities decreased to $10.8 million in Q1 2022 from $12.7 million in Q1 2021, primarily due to increased inventories and trade receivables[21][171] - Cash used in investing activities more than doubled to $(55.4) million, driven by a significant increase in capital expenditures for capacity expansion[21][172] - Cash provided by financing activities decreased substantially to $0.1 million from $24.2 million, as the company did not draw on its Revolving Credit Facility in 2022[21][173] Condensed Consolidated Statements of Equity Total equity grew, primarily reflecting the period's net income and stock compensation plan activities | Metric (in Millions) | Balance, December 31, 2021 | Net income | Stock compensation plans | Exercise of stock options | Shares withheld for taxes - common stock issuances | Net hedging gains, net of income tax | Foreign currency translation adjustments | Balance, March 31, 2022 | | :------------------- | :------------------------- | :--------- | :----------------------- | :---------------------- | :----------------------------------------- | :----------------------------------- | :--------------------------------------- | :---------------------- | | Common Stock, $0.001 Per Share Par Value | $0.1 | — | — | — | — | — | — | $0.1 | | Capital In Excess of Par | $778.1 | — | $1.7 | $0.1 | $(0.5) | — | — | $779.4 | | Retained Earnings | $60.9 | $53.2 | — | — | — | — | — | $114.1 | | Accumulated Other Comprehensive Loss | $(42.9) | — | — | — | — | $0.1 | $(1.0) | $(43.8) | | Treasury Stock | $(0.8) | — | — | — | — | — | — | $(0.8) | | Total | $795.4 | $53.2 | $1.7 | $0.1 | $(0.5) | $0.1 | $(1.0) | $849.0 | - Total equity increased from $795.4 million at December 31, 2021, to $849.0 million at March 31, 2022[25] - This increase was primarily driven by net income of $53.2 million and stock compensation plans, partially offset by foreign currency translation adjustments[25] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of accounting policies and specific financial statement line items Note 1: Description of the Business Livent manufactures lithium products for batteries and specialty applications, anticipating growth from the EV market - Livent Corporation manufactures a wide range of lithium products, primarily for lithium-based batteries, specialty polymers, and chemical synthesis[28] - The company anticipates significant growth driven by the increasing adoption of electric vehicles (EVs) and other energy storage applications, particularly in Asia, Europe, and North America[29] Note 2: Principal Accounting Policies and Related Financial Information The company recorded a significant gain from a 'Blue Chip Swap' transaction and issued new PRSU awards to key employees - The financial statements are prepared in accordance with SEC interim reporting requirements and U.S. GAAP[30] - A significant event in Q1 2022 was a $14.0 million cash gain from a 'Blue Chip Swap' transaction in Argentina, where the company transferred U.S. dollars into Argentina by purchasing and selling Argentina Sovereign U.S. dollar-denominated bonds[31] - The company granted approximately 63,000 Performance-Based Restricted Stock Unit (PRSU) awards to key employees on February 23, 2022, with the number earned dependent on Livent's Total Shareholder Return (TSR) relative to the Russell 3000 Chemical Supersector Index over a three-year period[32] Note 3: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items The company is evaluating the impact of a new ASU on government assistance disclosures - The company is evaluating the impact of ASU No. 2021-10, 'Government Assistance (Topic 832)', effective for annual periods beginning after December 15, 2021, which requires disclosures about government assistance[36] - The adoption of ASU No. 2020-04, 'Reference Rate Reform (Topic 848)', is not expected to have a material impact on the condensed consolidated financial statements[37] Note 4: Revenue Recognition Revenue growth was driven by the Asia Pacific region and strong performance in Lithium Hydroxide and Carbonate products Disaggregated Revenue by Major Geographical Region (in Millions): | Region | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------- | :--------------------------------: | :--------------------------------: | | North America | $21.3 | $13.3 | | Europe, Middle East & Africa | $14.7 | $17.5 | | Asia Pacific | $107.5 | $60.9 | | Total Revenue | $143.5 | $91.7 | Disaggregated Revenue by Major Product Category (in Millions): | Product Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :--------------------------------: | :--------------------------------: | | Lithium Hydroxide | $67.5 | $49.8 | | Butyllithium | $33.7 | $25.9 | | High Purity Lithium Metal and Other Specialty Compounds | $13.4 | $8.9 | | Lithium Carbonate and Lithium Chloride | $28.9 | $7.1 | | Total Revenue | $143.5 | $91.7 | - Asia Pacific remains the largest revenue contributor, growing to $107.5 million in Q1 2022 from $60.9 million in Q1 2021[38] - Lithium Hydroxide and Lithium Carbonate/Chloride showed significant revenue growth[42] - One customer accounted for approximately 26% of total revenue in Q1 2022, and the top 10 customers accounted for approximately 69% of total revenue in both periods[39] - The company has approximately $557 million in expected revenue from multi-year take-or-pay supply agreements over the next three years, representing unsatisfied or partially unsatisfied performance obligations[45] Note 5: Inventories, Net Net inventories increased, driven by higher levels of semi-finished goods and raw materials Inventories, Net (in Millions): | Category | March 31, 2022 | December 31, 2021 | | :------------------ | :------------- | :---------------- | | Finished goods | $39.1 | $52.2 | | Semi-finished goods | $58.8 | $43.6 | | Raw materials, supplies, and other | $52.6 | $38.8 | | Inventory, net | $150.5 | $134.6 | - Total inventories, net, increased to $150.5 million as of March 31, 2022, from $134.6 million at December 31, 2021[46] - This increase was primarily driven by higher semi-finished goods and raw materials, supplies, and other, while finished goods decreased[46] Note 6: Investments Livent is set to acquire full ownership of its joint venture partner in the Nemaska Lithium project - Livent holds a 50% equity interest in Québec Lithium Partners (QLP), a joint venture with The Pallinghurst Group, which in turn owns a 50% equity interest in the Nemaska Project[47] - The carrying amount of this investment was $29.6 million as of March 31, 2022, up from $23.8 million at December 31, 2021[49] - On May 2, 2022, Livent entered an agreement to acquire Pallinghurst's 50% share of QLP by issuing 17,500,000 shares of its common stock[50] - This transaction will make QLP a wholly-owned subsidiary of Livent, giving Livent a direct 50% ownership interest in Nemaska Lithium Inc[50] Note 7: Restructuring and Other Charges Restructuring charges increased due to severance costs associated with management changes Restructuring and Other Charges (in Millions): | Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :--------------------------------: | :--------------------------------: | | Severance-related and exit costs | $0.5 | — | | Environmental remediation | $0.1 | $0.1 | | Other | $0.4 | $0.2 | | Total | $1.0 | $0.3 | - Total restructuring and other charges increased to $1.0 million in Q1 2022 from $0.3 million in Q1 2021, primarily due to $0.5 million in severance costs for management changes at administrative facilities[51] Note 8: Income Taxes The effective tax rate was significantly impacted by foreign currency fluctuations in Argentina - The provision for income taxes increased to $4.7 million in Q1 2022 from $0.9 million in Q1 2021, with effective tax rates of 8.1% and 900%, respectively[55] - The Q1 2022 rate was primarily impacted by foreign currency fluctuations in Argentina of $(4.3) million[55] Note 9: Debt Long-term debt remained stable, and holders of the 2025 Notes gained a conversion option Long-term Debt (in Millions): | Debt Type | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | 4.125% Convertible Senior Notes due 2025 | $245.8 | $245.8 | | Transaction costs - 2025 Notes | $(5.0) | $(5.4) | | Total long-term debt | $240.8 | $240.4 | - Total long-term debt remained stable at approximately $240.8 million as of March 31, 2022, consisting solely of the 2025 Notes[57] - Holders of the 2025 Notes gained the option to convert their notes through June 30, 2022, due to the common stock price exceeding 130% of the conversion price[59] - The company was in compliance with all financial covenants under its Revolving Credit Facility as of March 31, 2022, with a maximum allowable first lien leverage ratio of 3.5 and a minimum allowable interest coverage ratio of 3.5[62] Note 10: Equity Common shares outstanding increased slightly due to stock awards, and no dividends were paid Common Stock Issued and Outstanding: | Metric | Issued | Treasury | Outstanding | | :-------------------------------------- | :------------ | :---------- | :------------ | | Balance as of December 31, 2021 | 161,791,602 | (101,618) | 161,689,984 | | RSU awards | 49,100 | — | 49,100 | | Stock option awards | 7,905 | — | 7,905 | | Purchases of treasury stock - deferred compensation plan | — | (1,624) | (1,624) | | Balance as of March 31, 2022 | 161,848,607 | (103,242) | 161,745,365 | - The number of common shares outstanding increased to 161,745,365 as of March 31, 2022, from 161,689,984 at December 31, 2021, primarily due to RSU and stock option awards[65] - The accumulated other comprehensive loss increased to $(43.8) million from $(42.9) million, mainly due to foreign currency translation adjustments[67] - The company paid no dividends for the three months ended March 31, 2022 and 2021, and does not expect to pay any in the foreseeable future[69] Note 11: Earnings/(Loss) Per Share The company reported a significant turnaround in earnings per share, from a loss to a profit Earnings/(Loss) Per Common Share: | Metric (in Millions, Except Share and Per Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------------- | :--------------------------------: | :--------------------------------: | | Net income/(loss) | $53.2 | $(0.8) | | Weighted average common shares outstanding - basic | 161.7 | 146.5 | | Dilutive share equivalents from share-based plans | 1.6 | — | | Dilutive share equivalents from 2025 Notes | 28.1 | — | | Weighted average common shares outstanding - diluted | 191.4 | 146.5 | | Basic earnings/(loss) per common share | $0.33 | $(0.01) | | Diluted earnings/(loss) per common share | $0.28 | $(0.01) | - Basic EPS was $0.33 in Q1 2022, a significant improvement from $(0.01) in Q1 2021[73] - Diluted EPS was $0.28 in Q1 2022, also up from $(0.01) in Q1 2021, reflecting the net income and the dilutive effect of share-based plans and 2025 Notes[73] Note 12: Financial Instruments, Risk Management and Fair Value Measurements The company uses foreign exchange forward contracts to mitigate currency risk but does not hedge its Argentine peso exposure - Livent uses derivative financial instruments, primarily foreign exchange forward contracts, to mitigate currency risk from its global operations, particularly for the Euro, British pound, Chinese yuan, and Japanese yen[83] - The company does not hedge Argentine peso risks due to limited availability and high cost of suitable instruments[85] - As of March 31, 2022, the company had open foreign currency forward contracts designated as cash flow hedges with a net after-tax gain position of $0.3 million, and other forward contracts not designated as hedges with a U.S. dollar equivalent of approximately $53.7 million[88][91] Fair Value of Derivative Instruments (in Millions): | Derivatives | March 31, 2022 (Gross Amount) | December 31, 2021 (Gross Amount) | | :---------------------- | :-----------------------------: | :------------------------------: | | Foreign exchange contracts | $0.4 | $0.2 | | Total derivative assets | $0.4 | $0.2 | | Net derivative assets | $0.4 | $0.2 | Note 13: Commitments and Contingencies The company is undergoing an audit by Argentine Customs and has future minimum lease payment commitments - Livent is involved in various legal proceedings in the ordinary course of business and records reserves for probable and estimable losses[106] - The company is currently undergoing an audit by the Argentine Customs Authority related to lithium carbonate exports from 2015-2017, for which a range of possible liabilities cannot yet be estimated[110] Operating Lease Information (in Millions, except for weighted-average amounts): | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :--------------------------------: | :--------------------------------: | | Operating lease cost | $0.4 | $0.2 | | Short-term lease cost | $0.1 | $0.3 | | Total lease cost | $0.5 | $0.5 | | Cash paid for operating leases | $0.4 | $0.5 | | Weighted average remaining lease term (years) | 8.2 | N/A | | Weighted average discount rate | 4.9% | N/A | Maturity Analysis of Operating Lease Liabilities (Undiscounted cash flows in Millions): | Period | Amount | | :---------------- | :----- | | Remainder of 2022 | $1.0 | | 2023 | $1.2 | | 2024 | $1.1 | | 2025 | $1.1 | | 2026 | $0.2 | | Thereafter | $2.8 | | Total future minimum lease payments | $7.4 | | Less: Imputed interest | $(1.3) | | Total | $6.1 | Note 14: Supplemental Information This note provides detailed breakdowns of various asset and liability accounts on the balance sheet Prepaid and Other Current Assets (in Millions): | Category | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Tax related items | $12.6 | $17.7 | | Prepaid expenses | $8.9 | $12.2 | | Argentina government receivable | $6.1 | $13.3 | | Other receivables | $3.3 | $2.3 | | Bank Acceptance Drafts | $1.7 | — | | Derivative assets (Note 12) | $0.4 | $0.2 | | Other current assets | $7.0 | $9.6 | | Total | $40.0 | $55.3 | Other Assets (in Millions): | Category | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Argentina government receivable | $65.7 | $55.8 | | Advance to contract manufacturers | $15.5 | $16.0 | | Long-term raw materials inventory | $5.4 | $4.9 | | Tax related items | $2.5 | $1.3 | | Capitalized software, net | $1.4 | $1.5 | | Other assets | $10.4 | $11.4 | | Total | $100.9 | $90.9 | Accrued and Other Current Liabilities (in Millions): | Category | March 31, 2022 | December 31, 2021 | | :-------------------------------------- | :------------- | :---------------- | | Accrued investment in unconsolidated affiliate | $14.2 | $6.2 | | Accrued payroll | $7.8 | $17.1 | | Plant restructuring reserves | $3.2 | $3.2 | | Advance customer payments | $0.7 | — | | Retirement liability - 401k | $0.6 | $2.5 | | Environmental reserves, current | $0.5 | $0.5 | | Severance related | $0.3 | — | | Other accrued and other current liabilities | $26.9 | $32.3 | | Total | $54.2 | $61.8 | Other Long-Term Liabilities (in Millions): | Category | March 31, 2022 | December 31, 2021 | | :-------------------------------------- | :------------- | :---------------- | | Deferred compensation plan obligation | $6.6 | $5.9 | | Contingencies related to uncertain tax positions | $4.0 | $2.3 | | Self-insurance reserves | $1.5 | $1.5 | | Asset retirement obligations | $0.3 | $0.3 | | Other long-term liabilities | $1.7 | $1.7 | | Total | $14.1 | $11.7 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides its perspective on financial condition, operational results, business outlook, and market risks Special Note Regarding Forward-Looking Information The report contains forward-looking statements subject to numerous risks, including EV demand, price volatility, and supply chain disruptions - The report contains forward-looking statements based on current views and assumptions, which involve known and unknown risks and uncertainties[125] - Key risk factors include declining EV demand, price volatility for lithium compounds, adverse global economic conditions (including inflation), supply chain disruptions, competition, and risks related to international operations and conflicts like the war in Ukraine[126][127] - The ongoing COVID-19 pandemic is a significant factor, causing business and supply chain disruptions, market volatility, and a global economic slowdown, with its full impact remaining uncertain[126] Application of Critical Accounting Estimates Critical accounting estimates involve significant judgment, particularly for revenue recognition, asset valuation, and income taxes - Critical accounting estimates, which involve significant judgment and uncertainty, include revenue recognition, collectability of trade receivables, impairment and valuation of long-lived assets, and income taxes[130][132] - While the company assessed no material updates were needed as of the report date due to COVID-19, actual results could differ[134] Overview Livent is a fully integrated lithium company focused on supplying the growing EV and energy storage markets - Livent is a fully integrated lithium company focused on supplying high-performance lithium compounds, particularly battery-grade lithium hydroxide, to the rapidly growing EV and energy storage battery markets[135] - The company also maintains its position as a leading global producer of butyllithium and high purity lithium metal for various performance applications[136] First Quarter 2022 Highlights The company achieved significant growth in revenue, net income, and Adjusted EBITDA in the first quarter of 2022 First Quarter 2022 Financial Highlights (in Millions, Except Per Share Data): | Metric | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :------------- | :------- | :------- | :--------- | :--------- | | Revenue | $143.5 | $91.7 | $51.8 | 56% | | Net income/(loss) | $53.2 | $(0.8) | $54.0 | N/A | | Adjusted EBITDA | $53.3 | $11.1 | $42.2 | 380% | - Revenue increased by 56% to $143.5 million, driven by higher pricing across all products[139] - Net income significantly improved to $53.2 million from a net loss of $(0.8) million, partly due to a $14.0 million gain from the sale of Argentina Sovereign U.S. dollar-denominated bonds[139] - Adjusted EBITDA surged by $42.2 million to $53.3 million[139] COVID-19 Impacts The COVID-19 pandemic continued to disrupt business operations, supply chains, and expansion projects Business and Operations COVID-19 measures in China and global supply chain issues negatively impacted business and customer demand - The COVID-19 pandemic continued to negatively impact Livent's business, operations, and financial performance in Q1 2022, particularly due to government measures in China and global supply chain disruptions (e.g., port congestion, freight costs, driver shortages)[137][138][141] - Customer demand for certain products was flat to slightly lower, and EV manufacturing customers faced their own supply chain constraints (e.g., semiconductor chip shortages), potentially delaying demand for Livent's high-performance lithium compounds[142] - Expansion work in Argentina and the U.S. was impacted by COVID-19, leading to potential delays and increased costs for materials and labor[143] - The company is monitoring local labor market tightness and economic instability in regions like Argentina and China[144][145] Liquidity and Financial Resources The pandemic increased cash uses through higher logistical costs and additional health and safety expenses - COVID-19 impacted cash uses through increased logistical costs (truck, freight, air shipping) and additional expenses for health and safety measures (testing, PPE, cleaning, medical personnel, transportation)[146] Corporate Efforts The company implemented response teams and adapted production schedules to mitigate pandemic-related challenges - Livent maintained Global and regional Pandemic Response Teams, identified new suppliers and logistics providers, and altered global production schedules to adapt to changing customer demand and supply chain challenges[147][148] Health & Safety Safety procedures remained in place, with social distancing measures affecting workforce numbers at some sites - The company continued to implement safety procedures based on local guidance, including pre-entry screening, mask/glove use, social distancing, and quarantine[149][150] - While no material employee absences occurred, social distancing led to reduced workforce numbers in some locations, such as the Argentina expansion project[151] Government Programs Livent continues to evaluate government support and tax relief programs in its operating countries - Livent continues to evaluate government support and tax relief programs in its operating countries, including grants, loans, tax deferrals, and tax credits[152] 2022 Business Outlook The company significantly increased its 2022 financial outlook, expecting higher pricing to drive profitability despite rising costs - Livent significantly increased its 2022 financial performance outlook, expecting flat volumes but even higher average pricing across all lithium products, leading to higher profitability compared to the prior year[153] - The company also anticipates higher costs due to logistics, raw materials, and general inflationary pressures[154] Results of Operations Higher pricing drove a 56% revenue increase and a 350% rise in gross margin, resulting in significant net income growth Key Financial Performance (in Millions): | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------- | :--------------------------------: | :--------------------------------: | | Revenue | $143.5 | $91.7 | | Gross margin | $59.9 | $13.3 | | Net income/(loss) | $53.2 | $(0.8) | | EBITDA (Non-GAAP) | $64.3 | $6.6 | | Adjusted EBITDA (Non-GAAP) | $53.3 | $11.1 | - Revenue increased by 56% due to higher pricing, leading to a 350% increase in gross margin[159] - Net income improved significantly from a loss to $53.2 million, partly due to a $14.0 million 'Other gain' from a Blue Chip Swap[160] - Adjusted EBITDA saw a substantial increase to $53.3 million[166] - Restructuring and other charges increased to $1.0 million, including $0.5 million for severance costs[161] - Equity in net loss of unconsolidated affiliate increased to $2.2 million due to project-related costs at the Nemaska Project[162] - Income tax expense rose to $4.7 million, influenced by increased income and foreign currency impacts in Argentina[164][165] Liquidity and Capital Resources Cash decreased due to increased capital spending on expansion projects, but liquidity remains adequate Cash and Cash Equivalents (in Millions): | Period | Amount | | :--------------- | :----- | | March 31, 2022 | $68.5 | | December 31, 2021| $113.0 | | Foreign subsidiaries (March 31, 2022) | $22.4 | - Cash and cash equivalents decreased to $68.5 million as of March 31, 2022, from $113.0 million at December 31, 2021[168] - The company had $385.5 million available under its $400 million Revolving Credit Facility, subject to debt covenants, and no outstanding debt under this facility[169][170] - Cash provided by operating activities decreased due to increased inventories and trade receivables[171] - Cash used in investing activities significantly increased to $(55.4) million, driven by resumed capital expansion work in Argentina and the U.S[172] - The company estimates 2022 total capital spending to be $300 million to $340 million[175] - Livent believes its available cash, cash from operations, and borrowing capacity under the Revolving Credit Facility will provide adequate liquidity for the next 12 months, despite ongoing COVID-19 uncertainties and challenges[177] Derivative Financial Instruments and Market Risks The company manages foreign currency risk with derivatives but faces unhedged exposure to the Argentine peso - Livent uses derivative contracts to manage market risks from fluctuations in commodity prices, interest rates, and foreign currency exchange rates, aiming to minimize cash flow exposure[182] - The primary currency exposures are the Euro, British pound, Chinese yuan, Argentine peso, and Japanese yen, though Argentine peso risks are not hedged[185] Foreign Currency Exchange Rate Sensitivity (in Millions): | Metric | Net asset position on consolidated balance sheets | Net liability position with 10% strengthening | Net asset position with 10% weakening | | :-------------------------------------- | :----------------------------------------------: | :-------------------------------------------: | :-----------------------------------: | | Net asset/(liability) position as of March 31, 2022 | $0.4 | $(1.7) | $1.4 | - As of March 31, 2022, the company had a net financial instrument asset position of $0.4 million[184] - A sensitivity analysis showed that a 10% strengthening of hedged currencies would result in a $(1.7) million net liability position, while a 10% weakening would result in a $1.4 million net asset position[187] - The company had no interest rate swap agreements as of March 31, 2022, and no outstanding balances under its Revolving Credit Facility, meaning its debt portfolio was primarily fixed-rate from the 2025 Notes[188][189] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item refers to the detailed discussion on market risks provided in Management's Discussion and Analysis - The required information for quantitative and qualitative disclosures about market risk is incorporated by reference from the 'Derivative Financial Instruments and Market Risks' section within Item 2 of this report[191] Item 4. Controls and Procedures Management concluded that disclosure controls were effective and reported no material changes in internal financial reporting controls - As of March 31, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[192] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[193] Part II - Other Information This part covers legal proceedings, risk factors, equity sales, and filed exhibits Item 1. Legal Proceedings The company reports no material adverse effects are expected from routine legal proceedings - Livent is involved in legal proceedings in the ordinary course of business, including workers' compensation matters[196] - Based on current information and established reserves, the company does not believe these will have a material adverse effect on its financial position, liquidity, or results of operations[196] - There are no material changes from the legal proceedings previously disclosed in the 2021 Annual Report on Form 10-K, except as set forth in Note 13 of the current report[196] Item 1A. Risk Factors This section references the comprehensive risk factors detailed in the 2021 Annual Report on Form 10-K - Readers should carefully consider the risk factors discussed in Part I, Item 1A of the 2021 Annual Report on Form 10-K, as additional unknown or currently immaterial risks may also adversely affect the business, financial condition, or future results[197] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details common share repurchases made for employee investments under the Livent NQSP Repurchases of Common Shares (Q1 2022): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--------------------------- | :------------------------------- | :--------------------------- | | January 1 through January 31, 2022 | 146 | $23.11 | | February 1 through February 28, 2022 | 201 | $21.63 | | March 1 through March 31, 2022 | 1,277 | $24.98 | | Total Q1 2022 | 1,624 | $24.40 | - The repurchases of common shares totaling 1,624 shares in Q1 2022 were made by the trustee of the Livent NQSP for employee investments and are not part of any publicly announced stock repurchase programs[199][201] Item 6. Exhibits This section lists all exhibits filed with the quarterly report, including certifications and data files - Exhibits include Form of Employee PRSU Award Agreement, Certifying Statements of the CEO and CFO (pursuant to Sections 302 and 1350 of Sarbanes-Oxley Act), Interactive Data File, and the cover page formatted in Inline XBRL[203] Signatures The report is duly signed by the Chief Financial Officer on behalf of the corporation - The report was duly signed on behalf of Livent Corporation by Gilberto Antoniazzi, Vice President and Chief Financial Officer, on May 5, 2022, pursuant to the requirements of the Securities Exchange Act of 1934[205][206]