Livent(LTHM) - 2022 Q2 - Quarterly Report

Glossary of Terms This section defines key terms and acronyms used throughout the financial report for clarity and understanding Glossary of Terms | Term | Definition | | :--- | :--- | | 2025 Notes | $245.75 million principal amount 4.125% Convertible Senior Notes due 2025 | | ASU | Accounting Standards Update, under U.S. GAAP | | Credit Agreement | The Original Credit Agreement, as amended | | EAETR | Estimated annual effective tax rate | | ESG | Environmental, social and governance | | EV | Electric vehicle | | FASB | Financial Accounting Standards Board | | FMC | FMC Corporation | | Livent NQSP | Livent Non-Qualified Savings Plan | | Nemaska | Nemaska Lithium Shawinigan Transformation Inc., a subsidiary of Nemaska Lithium Inc., a Canadian lithium company based in Québec, Canada | | Nemaska Project | The ownership and operation of the business previously conducted by Nemaska, through a joint venture in which Livent owns a 50% equity interest through its ownership of QLP | | Offering | On June 15, 2021, the Company closed on the issuance of 14,950,000 shares of its common stock, par value $0.001 per share, at a public offering price of $17.50 per share, in an underwritten public offering. Total net proceeds from the offering were $252.2 million, after deducting underwriters' fees and offering expenses payable by the Company | | OEM | Original equipment manufacturer | | Original Credit Agreement | On September 18, 2018 Livent Corporation entered into the credit agreement, which provides for a $400 million senior secured revolving credit facility | | PRSU | Performance-based restricted stock unit | | QLP | Québec Lithium Partners (UK) Limited, a wholly owned subsidiary of Livent. QLP owns a 50% equity interest in the Nemaska Project | | QLP Merger | On June 6, 2022, Livent closed on the Transaction Agreement and Plan of Merger with The Pallinghurst Group to provide Livent with a direct 50% ownership interest in the Nemaska Project. Livent issued 17,500,000 shares of its common stock to acquire the remaining 50% share of Québec Lithium Partners (UK) Limited, previously owned by The Pallinghurst Group and certain of its investors | | Revolving Credit Facility | Livent's $400 million senior secured revolving credit facility | | RSU | Restricted stock unit | | SEC | Securities and Exchange Commission | | Securities Act | Securities Act of 1933 | | Separation | On October 15, 2018, Livent completed its initial public offering and sold 20 million shares of Livent common stock to the public at a price of $17.00 per share | | TSR | Total Shareholder Return | | U.S. GAAP | United States Generally Accepted Accounting Principles | | VAT | Value-added tax | Part I - Financial Information This part presents Livent's unaudited condensed consolidated financial statements and management's analysis of financial condition and operations Item 1. Financial Statements This section presents Livent's unaudited condensed consolidated financial statements and notes for the specified periods Condensed Consolidated Statements of Operations This statement details Livent's revenues, costs, and net income for the three and six months ended June 30, 2022 Condensed Consolidated Statements of Operations Highlights | Metric (in Millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $218.7 | $102.2 | $362.2 | $193.9 | | Gross margin | $102.5 | $20.4 | $162.4 | $33.7 | | Income from operations before equity in net loss of unconsolidated affiliate, interest expense, net and other gain | $84.7 | $5.4 | $130.8 | $7.1 | | Net income | $60.0 | $6.5 | $113.2 | $5.7 | | Net income per weighted average share - basic | $0.36 | $0.04 | $0.69 | $0.04 | | Net income per weighted average share - diluted | $0.31 | $0.04 | $0.58 | $0.03 | Condensed Consolidated Statements of Comprehensive Income This statement presents Livent's net income and other comprehensive income, including foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income Highlights | Metric (in Millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $60.0 | $6.5 | $113.2 | $5.7 | | Foreign currency translation (loss)/gain arising during the period | $(4.4) | $1.2 | $(5.4) | $0.9 | | Unrealized hedging (losses)/gains, net of tax | $(0.1) | — | — | $0.1 | | Comprehensive income | $55.5 | $7.8 | $107.8 | $6.7 | Condensed Consolidated Balance Sheets This statement provides a snapshot of Livent's assets, liabilities, and equity as of June 30, 2022 and December 31, 2021 Condensed Consolidated Balance Sheets Highlights | Metric (in Millions) | June 30, 2022 | December 31, 2021 | | :------------------------------------------------------------------------------------------------ | :-------------- | :---------------- | | Total current assets | $386.3 | $399.3 | | Investments | $421.3 | $27.2 | | Property, plant and equipment, net | $803.2 | $677.9 | | Total assets | $1,721.4 | $1,202.5 | | Total current liabilities | $148.8 | $131.3 | | Total current and long-term liabilities | $441.3 | $407.1 | | Total equity | $1,280.1 | $795.4 | | Total liabilities and equity | $1,721.4 | $1,202.5 | Condensed Consolidated Statements of Cash Flows This statement summarizes Livent's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights | Metric (in Millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $61.2 | $30.6 | | Cash used in investing activities | $(124.1) | $(42.7) | | Cash provided by financing activities | $0.2 | $216.9 | | (Decrease)/increase in cash and cash equivalents | $(64.0) | $205.0 | | Cash and cash equivalents, end of period | $49.0 | $216.6 | - Non-cash investment in unconsolidated affiliates was $387.1 million for the six months ended June 30, 2022[23] Condensed Consolidated Statements of Equity This statement details changes in Livent's equity components, including common stock, retained earnings, and comprehensive loss Condensed Consolidated Statements of Equity Highlights | Metric (in Millions) | Balance, December 31, 2021 | Net Income (Q1 2022) | Issuance of Common Stock - QLP Merger | Balance, June 30, 2022 | | :------------------------------------------------------------------------------------------------ | :------------------------- | :------------------- | :------------------------------------ | :--------------------- | | Common Stock, $0.001 Par Value Per Share | $0.1 | — | — | $0.1 | | Capital In Excess of Par | $778.1 | $1.7 | $373.9 | $1,155.1 | | Retained Earnings | $60.9 | $53.2 | $60.0 | $174.1 | | Accumulated Other Comprehensive Loss | $(42.9) | $(1.0) | $(4.4) | $(48.3) | | Treasury Stock | $(0.8) | $(0.1) | $(0.1) | $(0.9) | | Total Equity | $795.4 | $849.0 (March 31, 2022) | $1,280.1 | $1,280.1 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of Livent's accounting policies, financial items, and other disclosures Note 1: Description of the Business Livent manufactures lithium products for batteries and specialty applications, driven by EV and energy storage market growth - Livent Corporation manufactures a wide range of lithium products, primarily for 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] - Significant growth in lithium chemical markets is occurring in Asia, followed by Europe and North America, driven by lithium-ion battery development[31] Note 2: Principal Accounting Policies and Related Financial Information This note outlines Livent's key accounting policies, including those for interim reporting, functional currency, and equity awards - The condensed consolidated financial statements were prepared in accordance with SEC interim reporting requirements and U.S. GAAP[32] - Livent's Argentina subsidiary uses the U.S. dollar as its functional currency, with peso-denominated assets and liabilities remeasured at the official exchange rate[33] - A cash gain of $8.2 million (Q2 2022) and $22.2 million (H1 2022) was recorded from transferring U.S. dollars into Argentina via the Blue Chip Swap method[33] - Performance-Based Restricted Stock Unit (PRSU) awards granted on February 23, 2022, are valued using a Monte Carlo model, with the final number of PRSUs earned based on Livent's Total Shareholder Return (TSR) relative to the Russell 3000 Chemical Supersector Index[34][35] Note 3: Recently Issued and Adopted Accounting Pronouncements and Regulatory Items This note discusses the company's evaluation of new accounting standards, including ASU No. 2021-10 and ASU No. 2020-04 - The company is evaluating the impact of ASU No. 2021-10, Government Assistance (Topic 832), effective for annual periods beginning after December 15, 2021[38] - ASU No. 2020-04, Reference Rate Reform (Topic 848), is not expected to have a material impact on the condensed consolidated financial statements[39] Note 4: Revenue Recognition This note disaggregates Livent's revenue by region and product, discussing customer concentration and supply agreements Disaggregated Revenue by Major Geographical Region (in Millions) | Region | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $41.2 | $15.0 | $62.5 | $28.3 | | Latin America | $1.1 | — | $1.1 | — | | Europe, Middle East & Africa | $32.0 | $14.2 | $46.7 | $31.7 | | Asia Pacific | $144.4 | $73.0 | $251.9 | $133.9 | | Total Revenue | $218.7 | $102.2 | $362.2 | $193.9 | Disaggregated Revenue by Major Product Category (in Millions) | Product Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Lithium Hydroxide | $113.6 | $59.8 | $181.1 | $109.7 | | Butyllithium | $81.2 | $22.9 | $114.9 | $48.7 | | High Purity Lithium Metal and Other Specialty Compounds | $16.7 | $9.0 | $30.1 | $17.9 | | Lithium Carbonate and Lithium Chloride | $7.2 | $10.5 | $36.1 | $17.6 | | Total Revenue | $218.7 | $102.2 | $362.2 | $193.9 | - For the three months ended June 30, 2022, one customer accounted for approximately 21% of total revenue, and the 10 largest customers accounted for approximately 63% of total revenue[42] - The aggregate amount of revenue expected from unsatisfied or partially unsatisfied multi-year take-or-pay supply agreements is approximately $763 million in the next three years[48] - On July 25, 2022, Livent entered into a long-term supply agreement for battery-grade lithium hydroxide (2025-2030), including a $198 million advance payment from the customer[49] Note 5: Inventories, Net This note provides a breakdown of Livent's inventory components, including finished goods, semi-finished goods, and raw materials Inventories, Net (in Millions) | Category | June 30, 2022 | December 31, 2021 | | :--------------- | :-------------- | :---------------- | | Finished goods | $44.8 | $52.2 | | Semi-finished goods | $62.1 | $43.6 | | Raw materials, supplies, and other | $49.4 | $38.8 | | Inventory, net | $156.3 | $134.6 | Note 6: Investments This note details Livent's investment activities, particularly the QLP Merger and its impact on the Nemaska Project ownership - On June 6, 2022, Livent closed the QLP Merger, issuing 17,500,000 shares of common stock to acquire the remaining 50% share of QLP, thereby gaining a direct 50% ownership interest in the Nemaska Project[52] - Upon consummation of the QLP Merger, Livent recorded an Investment of $387.1 million and a corresponding increase to additional paid-in capital of $373.9 million[52] - Equity in net loss of unconsolidated affiliate related to the Nemaska Project was $2.7 million for Q2 2022 and $4.9 million for H1 2022[53] - The carrying amount of Livent's equity interest in the Nemaska Project increased to $418.0 million as of June 30, 2022, from $23.8 million as of December 31, 2021[53] Note 7: Restructuring and Other Charges This note outlines Livent's restructuring and other charges, including severance, environmental remediation, and transaction fees Restructuring and Other Charges (in Millions) | Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Severance-related and exit costs | — | $0.1 | $0.5 | $0.1 | | Environmental remediation | $0.1 | $0.1 | $0.2 | $0.2 | | Other (primarily transaction-related legal fees) | $2.8 | $1.8 | $3.2 | $2.0 | | Total | $2.9 | $2.0 | $3.9 | $2.3 | Note 8: Income Taxes This note presents Livent's income tax expense and effective tax rates, highlighting factors influencing changes in tax provisions Income Tax Expense/(Benefit) and Effective Tax Rate | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes (in Millions) | $30.2 | $(2.5) | $34.9 | $(1.6) | | Effective tax rate | 33.5% | (62.5)% | 23.6% | (39.0)% | - The increase in income tax expense was primarily due to higher income from operations and fluctuations in foreign currency impacts in Argentina, including inflationary adjustments[59][159][167] Note 9: Debt This note details Livent's long-term debt, including convertible senior notes and available funds under its revolving credit facility Long-Term Debt (in Millions) | Debt Instrument | Interest Rate | Maturity Date | June 30, 2022 | December 31, 2021 | | :-------------------------------- | :------------ | :------------ | :-------------- | :---------------- | | Deferred Payment Note (QLP Note) | 8.0% | 2022 | $13.5 | — | | 4.125% Convertible Senior Notes due 2025 | 4.125% | 2025 | $245.8 | $245.8 | | Transaction costs - 2025 Notes | — | — | $(4.6) | $(5.4) | | Total long-term debt | — | — | $241.2 | $240.4 | - Holders of the 2025 Notes have the option to convert through September 30, 2022, as the common stock price exceeded 130% of the conversion price for at least 20 trading days[62] - As of June 30, 2022, Livent had $385.5 million available funds under its $400 million senior secured revolving credit facility and was in compliance with all debt covenants[60][67] Note 10: Equity This note outlines changes in Livent's common stock, accumulated other comprehensive loss, and dividend policy Common Stock Issued and Outstanding | Metric | December 31, 2021 | June 30, 2022 | | :-------------------------------- | :------------------ | :------------------ | | Issued Shares | 161,791,602 | 179,374,126 | | Outstanding Shares | 161,689,984 | 179,270,450 | - The increase in issued common stock is primarily due to the issuance of 17,500,000 shares for the QLP Merger on June 6, 2022[70] - Accumulated other comprehensive loss, net of tax, increased to $(48.3) million as of June 30, 2022, from $(42.9) million as of December 31, 2021, primarily due to foreign currency translation adjustments[72] - No dividends were paid for the three and six months ended June 30, 2022 and 2021, and none are expected in the foreseeable future[74] Note 11: Earnings Per Share This note provides detailed calculations for Livent's basic and diluted earnings per share, including potentially dilutive securities Earnings Per Share (EPS) Data | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (in Millions) | $60.0 | $6.5 | $113.2 | $5.7 | | Weighted average common shares outstanding - basic (in Millions) | 166.6 | 148.7 | 164.2 | 147.6 | | Weighted average common shares outstanding - diluted (in Millions) | 196.5 | 178.0 | 194.0 | 177.0 | | Basic earnings per common share | $0.36 | $0.04 | $0.69 | $0.04 | | Diluted earnings per common share | $0.31 | $0.04 | $0.58 | $0.03 | - Potentially dilutive securities include stock options, restricted stock units, performance restricted stock units, and 2025 Notes[76] Note 12: Financial Instruments, Risk Management and Fair Value Measurements This note describes Livent's use of derivative financial instruments to manage market risks, including foreign currency and interest rates - Livent uses derivative financial instruments, primarily foreign exchange forward contracts, to mitigate currency risk from international operations[85][87] - The estimated fair value of the 2025 Notes was $756.4 million, with a carrying amount of $259.3 million as of June 30, 2022, classified as Level 2 in the fair value hierarchy[84] - As of June 30, 2022, the company had open foreign currency forward contracts designated as cash flow hedges in accumulated other comprehensive loss with a net after-tax gain of $0.2 million[89] - The company does not hedge foreign currency risks associated with the Argentine peso due to limited availability and high cost of suitable derivative instruments[87] Note 13: Commitments and Contingencies This note discusses Livent's legal proceedings, customs and tax audits, and operating lease liabilities, including their maturity analysis - Livent is a party to various legal proceedings, including customs and tax audits by Argentine authorities for 2016-2019, for which a range of reasonably possible liabilities cannot be currently estimated[107][111][112] - All leases are operating leases for corporate offices, manufacturing facilities, and land, with a weighted average remaining lease term of 8.0 years and a weighted average discount rate of 4.9% as of June 30, 2022[113][115] Maturity Analysis of Operating Lease Liabilities (in Millions) | Period | Undiscounted cash flows | | :--------------- | :---------------------- | | Remainder of 2022 | $0.7 | | 2023 | $1.2 | | 2024 | $1.0 | | 2025 | $1.1 | | 2026 | $0.2 | | Thereafter | $2.6 | | Total future minimum lease payments | $6.8 | | Less: Imputed interest | $(1.2) | | Total | $5.6 | Note 14: Supplemental Information This note provides detailed breakdowns of Livent's prepaid and other current assets, other assets, and various accrued and long-term liabilities Prepaid and Other Current Assets (in Millions) | Category | June 30, 2022 | December 31, 2021 | | :-------------------------- | :-------------- | :---------------- | | Tax related items | $21.5 | $17.7 | | Prepaid expenses | $7.3 | $12.2 | | Argentina government receivable | $7.1 | $13.3 | | Other receivables | $3.2 | $2.3 | | Bank Acceptance Drafts | $0.6 | — | | Derivative assets (Note 12) | $0.8 | $0.2 | | Other current assets | $7.7 | $9.6 | | Total | $48.2 | $55.3 | Other Assets (in Millions) | Category | June 30, 2022 | December 31, 2021 | | :-------------------------- | :-------------- | :---------------- | | Argentina government receivable | $71.5 | $55.8 | | Advance to contract manufacturers | $15.9 | $16.0 | | Long-term raw materials inventory | $1.6 | $4.9 | | Tax related items | $3.8 | $1.3 | | Capitalized software, net | $1.4 | $1.5 | | Other assets | $10.3 | $11.4 | | Total | $104.5 | $90.9 | Accrued and Other Current Liabilities (in Millions) | Category | June 30, 2022 | December 31, 2021 | | :-------------------------- | :-------------- | :---------------- | | Accrued investment in unconsolidated affiliate | — | $6.2 | | Accrued payroll | $12.7 | $17.1 | | Plant restructuring reserves | $3.2 | $3.2 | | Advance customer payments | $4.0 | — | | Retirement liability - 401k | $1.4 | $2.5 | | Derivative liabilities | $0.6 | — | | Environmental reserves, current | $0.6 | $0.5 | | Severance related | $0.2 | — | | Other accrued and other current liabilities | $26.7 | $32.3 | | Total | $49.4 | $61.8 | Other Long-Term Liabilities (in Millions) | Category | June 30, 2022 | December 31, 2021 | | :-------------------------- | :-------------- | :---------------- | | Deferred compensation plan obligation | $5.7 | $5.9 | | Contingencies related to uncertain tax positions | $5.9 | $2.3 | | Self-insurance reserves | $1.7 | $1.5 | | Asset retirement obligations | $0.3 | $0.3 | | Other long-term liabilities | $2.6 | $1.7 | | Total | $16.2 | $11.7 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Livent's financial condition and results, highlighting growth, estimates, outlook, liquidity, and risks Special Note Regarding Forward-Looking Information This note cautions that forward-looking statements are subject to risks and uncertainties, including economic instability and supply chain issues - The report contains forward-looking statements based on current views and assumptions, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially[127] - Key risk factors include the continuing effects of COVID-19, supply chain shortages, inflation, rising interest rates, increased energy costs, economic and political instability in Argentina, and volatility in lithium prices[128][129] - The company does not undertake any obligation to publicly revise or update forward-looking statements[131] Application of Critical Accounting Estimates This section identifies critical accounting estimates, emphasizing the judgment involved and potential impact of global economic conditions - Critical accounting estimates include revenue recognition, trade and other receivables, impairment and valuation of long-lived assets, and income taxes[135] - These estimates involve significant judgment and are based on historical experience, current conditions, and other reasonable factors, but actual results may differ[133][136] - The company has assessed the impact of the COVID-19 pandemic, inflation, and rising interest rates on these estimates and is not aware of any specific events requiring material updates as of the report date[136] Overview This section provides a high-level summary of Livent's business strategy, recent financial highlights, and ongoing operational challenges Business Strategy and Products Livent focuses on supplying high-performance lithium compounds to the growing EV and energy storage battery markets - Livent is a pure-play, fully integrated lithium company focused on supplying high-performance lithium compounds to 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 maintain its position as a leading global producer of butyllithium and high purity lithium metal[137] Second Quarter 2022 Highlights Livent reported significant revenue and net income growth in Q2 2022, driven by higher pricing across all products - Revenue for Q2 2022 increased by approximately 114% to $218.7 million, primarily due to higher pricing across all products[141] - Net income for Q2 2022 was $60.0 million, up from $6.5 million in Q2 2021, driven by higher pricing and an $8.2 million gain from Argentina bond sales, partially offset by increased costs[141] - Adjusted EBITDA for Q2 2022 increased by $79.0 million to $95.0 million, mainly due to higher product pricing[141] COVID-19 Impacts The COVID-19 pandemic continues to negatively affect Livent's operations through supply chain disruptions and increased costs - The COVID-19 pandemic continues to negatively impact Livent's business, operations, and financial performance, particularly due to China's zero-COVID strategy causing supply chain disruptions and logistics problems[139][140] - Increased costs were incurred for COVID-19 testing kits, personal protective equipment, cleaning, medical personnel, and personnel transportation[141] - Social distancing measures and health protocols have led to reduced workforce numbers in certain locations, potentially disrupting operations and expansion projects[140][142] Business Update Livent faces global economic challenges, including inflation, supply chain issues, and unique operational hurdles in Argentina - Global economic challenges, including the conflict in Ukraine, inflation, and supply chain disruptions, continue to impact the business, increasing energy costs and contributing to inflation[144] - Operations in Argentina face unique challenges such as high inflation, high natural gas prices, social/labor unrest, and severe currency restrictions impacting imports and creating exchange rate divergence[146] - The EV manufacturing industry's supply chain constraints (e.g., semiconductor chip shortages) could cause delays in demand for Livent's high-performance lithium compounds[147] - Management is monitoring key matters including global expansion efforts, the Nemaska Project, lithium supply/demand balance, COVID-19 impacts, inflation, interest rates, recession prospects, and global energy supply concerns[148] 2022 Business Outlook Livent has significantly raised its 2022 financial outlook due to higher average pricing, despite anticipating increased costs - Livent has significantly increased its 2022 financial performance outlook, driven by even higher average pricing across all lithium products, with no expected change in sales volumes[150] - The initial 2022 outlook projected flat volumes and significantly higher average pricing, leading to higher profitability but also higher costs related to logistics, raw materials, and general inflationary pressures[149] Results of Operations This section analyzes Livent's financial performance, comparing results for the three and six months ended June 30, 2022, against the prior year Three Months Ended June 30, 2022 vs. 2021 Livent's Q2 2022 revenue and gross margin significantly increased due to higher pricing, leading to substantial net income growth - Revenue increased by 114% to $218.7 million, primarily due to higher pricing across all products, partially offset by decreased sales volumes[154] - Gross margin increased by 402% to $102.5 million, driven by higher pricing, partially offset by increased logistics, raw material, and other operating costs[155] - Net income rose to $60.0 million from $6.5 million, benefiting from higher pricing and an $8.2 million gain from Argentina bond sales, despite increased costs and a $2.7 million equity loss from the Nemaska Project[161] - Income tax expense increased to $30.2 million from a benefit of $(2.5) million, mainly due to higher income from operations and foreign currency impacts in Argentina[159] Six Months Ended June 30, 2022 vs. 2021 Livent's H1 2022 revenue and gross margin saw substantial growth, driven by higher pricing, resulting in a significant increase in net income - Revenue increased by 87% to $362.2 million, primarily due to higher pricing across all products, partially offset by decreased sales volumes[162] - Gross margin increased by 382% to $162.4 million, driven by higher pricing, partially offset by increased logistics, raw material, and other operating costs[163] - Net income rose to $113.2 million from $5.7 million, benefiting from higher pricing and a $22.2 million gain from Argentina bond sales, despite increased costs and a $4.9 million equity loss from the Nemaska Project[168] - Income tax expense increased to $34.9 million from a benefit of $(1.6) million, mainly due to higher income from operations and foreign currency impacts in Argentina[167] Liquidity and Capital Resources This section assesses Livent's cash position, operating and investing cash flows, capital spending plans, and overall liquidity for future operations - Cash and cash equivalents decreased to $49.0 million as of June 30, 2022, from $113.0 million at December 31, 2021[169] - Cash provided by operating activities increased to $61.2 million for H1 2022 from $30.6 million for H1 2021, driven by higher net income[173] - Cash used in investing activities significantly increased to $(124.1) million for H1 2022 from $(42.7) million for H1 2021, primarily due to ramping up capital expansion work in Argentina and the U.S[174] - Cash provided by financing activities decreased to $0.2 million for H1 2022 from $216.9 million for H1 2021, as the company did not draw on its Revolving Credit Facility in 2022, unlike the prior year's offering proceeds[175] - Livent estimates 2022 total capital spending to be $300 million to $340 million, an increase from earlier estimates due to accelerating expansion opportunities[178] - The company believes its available cash, cash from operations, and $385.5 million remaining borrowing capacity under the Revolving Credit Facility will provide adequate liquidity for the next 12 months[176][179] Derivative Financial Instruments and Market Risks Livent manages market risks, including commodity, interest rate, and foreign currency exposures, using derivative instruments, excluding the Argentine peso - Livent manages market risks related to commodity prices, interest rates, and foreign currency exchange rates through a controlled program of risk management, including derivative contracts[184] - The primary foreign currency exposures are the Euro, British pound, Chinese yuan, Argentine peso, and Japanese yen; however, foreign currency risks associated with the Argentine peso are not hedged due to limited availability and high cost of suitable derivative instruments[187] - A sensitivity analysis indicates that an instantaneous 10% weakening in foreign currency exchange rates would result in a net asset position of $4.4 million as of June 30, 2022[189] - As of June 30, 2022, Livent had no interest rate swap agreements and no outstanding balances under its Revolving Credit Facility for the six months ended June 30, 2022[190][191] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item refers to the detailed disclosures regarding quantitative and qualitative aspects of market risk, which are provided in the 'Derivative Financial Instruments and Market Risks' section under Item 2 of this report - 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[192] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that Livent's disclosure controls and procedures were effective as of June 30, 2022. No material changes in internal control over financial reporting occurred during the quarter - As of June 30, 2022, the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[193] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected or are reasonably likely to materially affect, internal control over financial reporting[194] Part II - Other Information This part contains additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings Livent is involved in various legal proceedings in the ordinary course of business. Based on currently available information and established reserves, the company does not anticipate a material adverse effect on its financial position, liquidity, or results of operations from these known matters - Livent is involved in legal proceedings in the ordinary course of business, including workers' compensation matters[197] - Based on current information and reserves, no material adverse effect on financial position, liquidity, or results of operations is expected from known legal proceedings[197] - Further details on legal proceedings are incorporated by reference from Note 13 to the financial statements[197] Item 1A. Risk Factors Investors are advised to carefully consider the risk factors outlined in Livent's 2021 Annual Report on Form 10-K, as well as potential additional unknown or currently immaterial risks that could adversely affect the company's business, financial condition, or future results - Investors should carefully consider the risk factors discussed in Part I, Item 1A of the 2021 Annual Report on Form 10-K[198] - Additional risks and uncertainties not currently known or deemed immaterial may also adversely affect the business, financial condition, or future results[198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the repurchases of Livent's common stock by the Livent NQSP trustee through open-market purchases for employee investments, which are recorded as treasury stock. The company confirms it has no publicly announced stock repurchase programs Summary of Common Stock Repurchases (Q2 2022) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1 through April 30, 2022 | 152 | $23.30 | | May 1 through May 31, 2022 | 126 | $29.39 | | June 1 through June 30, 2022 | 156 | $23.33 | | Total Q2 2022 | 434 | $25.08 | - Shares are reacquired by the trustee of the Livent NQSP through open-market purchases for employee investments and are held in a trust fund, recorded as Treasury stock[203] - Livent Corporation has no publicly announced stock repurchase programs[203] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, agreements related to the QLP Merger, and certifications required by the Sarbanes-Oxley Act - Exhibits include Livent's Certificate of Incorporation (amended June 2, 2022), Executive Severance Guidelines (amended August 1, 2022), and the Transaction Agreement and Plan of Merger (May 2, 2022) related to the QLP Merger[206] - Certifying Statements of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 1350 of the Sarbanes-Oxley Act of 2002 are also included[206] Signatures The Quarterly Report on Form 10-Q is officially signed on behalf of Livent Corporation by Gilberto Antoniazzi, Vice President and Chief Financial Officer, on August 4, 2022 - The report was signed by Gilberto Antoniazzi, Vice President and Chief Financial Officer, on August 4, 2022[209]