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Nov. 4, 2021, 5:17 p.m. EDT

10-Q: LIVENT CORP.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION Statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995: We and our representatives may from time to time make written or oral statements that are "forward-looking" and provide other than historical information, including statements contained in Item 2 of this Quarterly Report on Form 10-Q, in our other filings with the SEC, or in reports to our stockholders. In some cases, we have identified forward-looking statements by such words or phrases as "will likely result," "is confident that," "expect," "expects," "should," "could," "may," "will continue to," "believe," "believes," "anticipates," "predicts," "forecasts," "estimates," "projects," "potential," "intends" or similar expressions identifying "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the negative of those words and phrases. Such forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for the company based on currently available information. These forward-looking statements may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement. Currently, one of the most significant factors is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company, which is substantially influenced by the potential adverse effect of the pandemic on Livent's customers and suppliers, the global economy and financial markets and costs of implementing COVID-19 safety protocols. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the development of more contagious variants of the virus, such as the Delta variant, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Additional factors include, among other things: a decline in the growth in demand for electric vehicles with high performance lithium compounds; supply chain disruptions in the electric vehicle manufacturing industry, such as shortages, congestion at ports, and rolling electricity blackouts in China, resulting in delays in customer orders for our high performance lithium compounds; reduced customer demand, or delays in growth of customer demand, for higher performance lithium compounds; volatility in the price for performance lithium compounds; adverse global economic and weather conditions that may result in adverse impact on supply chains and customer demand; competition; quarterly and annual fluctuations of our operating results; risks relating to Livent's capacity expansion efforts and current production; potential development and adoption of battery technologies that do not rely on performance lithium compounds as an input, or that require a lesser amount of performance lithium compounds; difficulty accessing global capital and credit markets; the conditional conversion feature of the 2025 Notes; the lack of sufficient cash flow from our business to pay our debt; the success of Livent's research and development efforts; future acquisitions that may be difficult to integrate or are otherwise unsuccessful; risks inherent in international operations and sales, including political, financial and operational risks specific to Argentina, China and other countries where Livent has active operations; customer concentration and the possible loss of, or significant reduction in orders from, large customers; failure to satisfy customer qualification processes and customer and government quality standards;

fluctuations in the price of energy and certain raw materials;







        APPLICATION OF CRITICAL ACCOUNTING POLICIES
        Our condensed consolidated financial statements are prepared in conformity with
        U.S. GAAP. The preparation of our financial statements requires management to
        make estimates and judgments that affect the reported amounts of assets,
        liabilities, revenues and expenses. We have described our accounting policies in
        Note 2 to our consolidated and combined financial statements included in Part
        II, Item 8 of our 2020 Annual Report on Form 10-K.
        We have reviewed these accounting policies, identifying those that we believe to
        be critical to the preparation and understanding of our condensed consolidated
        financial statements. We have reviewed these critical accounting policies with
        the Audit Committee of our Board of Directors. Critical accounting policies are
        central to our presentation of results of operations and financial condition and
        require management to make estimates and judgments on certain matters. We base
        our estimates and judgments on historical experience, current conditions and
        other reasonable factors.
        The following is a list of those accounting policies that we have deemed most
        critical to the presentation and understanding of our results of operations and
        financial condition. See the "Critical Accounting Policies" section included
        within "Management's Discussion and Analysis of Financial Condition and Results
        of Operations" within Part II, Item 7 of our 2020 Annual Report on Form 10-K for
        a detailed description of these policies and their potential effects on our
        results of operations and financial condition.
         Revenue recognition and trade receivables
         Impairment and valuation of long-lived assets
         Income taxes
        Due to the COVID-19 pandemic, there has been uncertainty and disruption in the
        global economy and financial markets. The estimates used for, but not limited
        to, revenue recognition and the collectability of trade receivables, impairment
        and valuation of long-lived assets, and income taxes could be impacted. We have
        assessed the impact and are not aware of any specific events or circumstances
        that required an update to our estimates and assumptions or materially affected
        the carrying value of our assets
        


or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS AND REGULATORY ITEMS See Note 3 to these condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of recently adopted accounting guidance and other new accounting guidance.

immigration restrictions and workforce retention rules remain in place. In India, regional governments have imposed testing requirements, curfews and travel restrictions. We expect government measures and restrictions globally to continue to have a negative impact on demand for certain of our products and a negative impact on the efficient operation of our facilities, supply chains and logistics. Disruptions and delays within our supply chain and logistics operations included problems and congestion at ports, difficulties with scheduling cargo ships, higher shipment and freight costs, additional warehouse costs due to shipment delays, lack of driver availability and fewer transportation options, and the restriction of movements by trucks within and between countries. The severity of these problems and issues has varied in different geographic locations over the course of the COVID-19 pandemic and continues to remain a challenge in all of the countries where we operate. Customer demand for certain types of our products improved during the third quarter of 2021. However, customers continue to protect their interests by diversifying among multiple suppliers. They continue to actively manage their own inventory levels in the current uncertain market environment. In addition, customers in the fast-growing EV manufacturing industry are currently experiencing their own supply chain constraints, including semiconductors shortages, congestion at ports, and rolling electricity blackouts in China. The semiconductor chip shortage is expected to continue and may adversely impact our business. This, and similar supply chain disruptions experienced by our customers, could cause delays in their demand for our high performance lithium compounds, further adversely impacting our business and growth plans. The continuing spread and effects of COVID-19, including health and safety protocols and supply and logistics disruptions in China and elsewhere, are impacting our expansion work in Argentina and the United States. There can be no assurance that such impacts will not turn into long-term or continuing delays, cause us to decide to suspend our capital expansion work, or otherwise negatively impact our capital expansion. Any significant delay in our capital expansion work in Argentina or the United States could have a material adverse effect on our business, financial condition and results of operations. In addition to delays, there have been increased costs due to slowdown of availability of materials for construction.

Health & Safety







        RESULTS OF OPERATIONS
                                                        Three Months Ended September 30,       Nine Months Ended September 30,
                                                             2021               2020                2021               2020
        (in Millions)                                                                 (unaudited)
        Revenue                                         $     103.6          $   72.6          $     297.5          $  206.0
        Cost of sales                                          85.3              69.8                245.5             178.4
        Gross margin                                           18.3               2.8                 52.0              27.6
        Selling, general and administrative expenses           11.8              10.0                 34.2              31.1
        Research and development expenses                       0.8               1.0                  2.2               2.8
        Restructuring and other charges                         1.1               4.4                  3.4              10.1
        Separation-related costs                                0.8               0.6                  1.3               0.8
        Total costs and expenses                               99.8              85.8                286.6             223.2
        Income/(loss) from operations before loss on
        debt extinguishment, equity in net loss of
        unconsolidated affiliates and interest expense,
        net                                                     3.8             (13.2)                10.9             (17.2)
        Loss on debt extinguishment                               -                 -                    -               0.1
        Equity in net loss of unconsolidated affiliates         1.0               0.1                  3.7               0.4
        Interest expense, net                                     -               0.3                  0.3               0.3
        Income/(loss) from operations before income
        taxes                                                   2.8             (13.6)                 6.9             (18.0)
        Income tax expense/(benefit)                           15.4              (3.1)                13.8              (5.4)
        Net loss                                        $     (12.6)         $  (10.5)         $      (6.9)         $  (12.6)
        


In addition to net income, as determined in accordance with U.S. GAAP, we evaluate operating performance using certain non-GAAP measures such as EBITDA, which we define as net income plus interest expense, net, income tax expense/(benefit), and depreciation and amortization, and Adjusted EBITDA, which we define as EBITDA adjusted for restructuring and other charges/(income), separation-related costs and certain other losses/(gains). Management believes the use of these non-GAAP measures allows management and investors to compare more easily the financial performance of its underlying business from period to period. The non-GAAP information provided may not be comparable to similar measures disclosed by other companies because of differing methods used by other companies in calculating EBITDA and Adjusted EBITDA. These measures should not be considered as a substitute for net income or other measures of performance or liquidity reported in accordance with U.S. GAAP. The following table reconciles EBITDA and Adjusted EBITDA from net income.







                                                          Three Months Ended September 30,            Nine Months Ended September 30,
        (in Millions)                                           2021                  2020                 2021                 2020
        Net loss (GAAP)                                 $           (12.6)         $ (10.5)         $          (6.9)         $  (12.6)
        Add back:
        Interest expense, net                                           -              0.3                      0.3               0.3
        Income tax expense/(benefit)                                 15.4             (3.1)                    13.8              (5.4)
        Depreciation and amortization                                 6.2              6.1                     18.7              17.7
        EBITDA (Non-GAAP)                                             9.0             (7.2)                    25.9                 -
        Add back:
        Certain Argentina remeasurement losses (a)                    0.9              1.5                      4.2               4.4
        Restructuring and other charges (b)                           1.1              4.4                      3.4              10.1
        Separation-related costs (c)                                  0.8              0.6                      1.3               0.8
        COVID-19 related costs (d)                                    1.9              1.7                      4.2               1.7
        . . .
        


Nov 04, 2021

COMTEX_396362797/2041/2021-11-04T17:17:02

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