Livent Releases Third Quarter 2019 Results

Full-Year 2019

-  Interest expense

$0 - $1

million

-  Adjusted tax rate

21 - 23

percent

-  Full-year weighted average diluted shares outstanding

~146.5

million

-  Depreciation & Amortization

$20 - $22

million

-  Adjusted cash from operations

$80 - $90

million

-  Capital additions and other investing activities

$210 - $240

million

1.

Although we provide forecasts for adjusted earnings per share, Adjusted EBITDA and adjusted cash from operations, we are not able to forecast the most directly comparable measures calculated and presented in accordance with GAAP.  Certain elements of the composition of the GAAP amounts are not predictable, making it impractical for us to forecast such GAAP measures or to reconcile corresponding non-GAAP financial measures to such GAAP measures without unreasonable efforts. For the same reason, we are unable to address the probable significance of the unavailable information. Such elements include, but are not limited to, restructuring, transaction related charges, and related cash activity.  As a result, no GAAP outlook is provided.

LIVENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Revenue

$

97.7

$

112.0

$

310.0

$

322.7

Cost of sales

69.4

62.5

215.2

167.2

Gross margin

28.3

49.5

94.8

155.5

Selling, general and administrative expenses

10.2

4.7

29.2

12.7

Corporate allocations

—

5.6

—

15.7

Research and development expenses

0.9

0.9

2.5

2.9

Restructuring and other charges

0.9

0.4

4.8

2.7

Separation-related costs

2.5

2.4

5.4

2.4

Total costs and expenses

83.9

76.5

257.1

203.6

Income from operations before non-operating pension benefit and
settlement charges and income taxes

13.8

35.5

52.9

119.1

Non-operating pension benefit and settlement charges

—

(0.4)

—

(0.2)

Income from operations before income taxes

13.8

35.9

52.9

119.3

Income tax (benefit)/expense

(4.2)

5.9

2.5

19.1

Net income

$

18.0

$

30.0

$

50.4

$

100.2

Weighted average common shares outstanding - basic ⁽¹⁾

146.0

123.0

146.0

123.0

Net income per weighted average share - basic

$

0.12

$

0.24

$

0.35

$

0.81

Weighted average common shares outstanding - diluted ⁽¹⁾

146.5

123.0

146.4

123.0

Net income per weighted average share - diluted

$

0.12

$

0.24

$

0.34

$

0.81

____________________

(1)

For the prior periods presented, the weighted average shares outstanding for both basic and diluted earnings per share was calculated, in accordance with ASC 260, Earnings Per Share, using 123.0 million shares of common stock outstanding, which was the number of shares issued to FMC in part in exchange for the asset contribution by FMC to us. Weighted average shares outstanding for the prior periods excludes the 23.0 million shares of common stock subsequently issued as part of the public offering and over-allotment option exercise.

LIVENT CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

RECONCILIATION OF NET INCOME (GAAP) TO ADJUSTED EBITDA (NON-GAAP)

(Unaudited)

The table below provides a reconciliation of Net income to Adjusted EBITDA.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In Millions)

2019

2018

2019

2018

Net income (GAAP)

$

18.0

$

30.0

$

50.4

$

100.2

Add back:

Income tax (benefit)/expense

(4.2)

5.9

2.5

19.1

Depreciation and amortization

5.8

4.5

15.5

13.1

EBITDA (Non-GAAP) ⁽¹⁾

$

19.6

$

40.4

$

68.4

$

132.4

Add back:

Certain Argentina remeasurement losses/(gains) ^(a)

5.2

(1.0)

5.2

(0.6)

Restructuring and other charges ^(b)

0.9

0.4

4.8

2.7

Non-operating pension benefit and settlement charges ^(c)

—

(0.4)

—

(0.2)

Separation-related costs ^(d)

2.5

2.4

5.4

2.4

Adjusted EBITDA (Non-GAAP) ⁽¹⁾

$

28.2

$

41.8

$

83.8

$

136.7

___________________

(1)

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), depreciation, and amortization, and Adjusted EBITDA, which we define as EBITDA adjusted for certain Argentina remeasurement losses/(gains), restructuring and other charges/(income), non-operating pension expense/(benefit) and settlement charges, and separation-related costs. 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. This measure 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 above table reconciles EBITDA and Adjusted EBITDA from net income.

(a)

Represents charges related to currency fluctuations on tax assets and liabilities and on long-term monetary assets associated with our capital expansion, as well as significant currency devaluations. The remeasurement charges are included within "Cost of sales" in our condensed consolidated statement of operations but are excluded from our calculation of Adjusted EBITDA because of: i.) their nature as income tax related; ii.) their association with long-term capital projects which will not be operational until future periods; or iii.) the severity of the devaluations and their immediate impact on our operations in the country.

(b)  

We continually perform strategic reviews and assess the return on our business. This sometimes results in management changes or in a plan to restructure the operations of our business. As part of these restructuring plans, demolition costs and write-downs of long-lived assets may occur.

(c)

Our non-operating pension expense/(benefit) and settlement charges are defined as those costs/(benefits) related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These are excluded from our results and are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We continue to include the service cost and amortization of prior service cost in our Adjusted EBITDA results noted above. These elements reflect operating costs to our businesses for the employment benefits provided to active employees.

(d)

Represents legal, professional, transaction related fees and other separation related activity.

RECONCILIATION OF NET INCOME (GAAP) TO

ADJUSTED AFTER-TAX EARNINGS (NON-GAAP)

(Unaudited)

(In Millions, Except Per Share Data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net income (GAAP)

$

18.0

$

30.0

$

50.4

$

100.2

Special charges:

Certain Argentina remeasurement losses/(gains) ^(a)

5.2

(1.0)

5.2

(0.6)

Restructuring and other charges ^(b)

0.9

0.4

4.8

2.7

Non-operating pension benefit and settlement charges ^(c)

—

(0.4)

—

(0.2)

Separation-related costs ^(d)

2.5

2.4

5.4

2.4

Tax adjustment ^(e)

(9.4)

(1.5)

(12.6)

(6.8)

Adjusted after-tax earnings (Non-GAAP) ^{(1) (2)}

$

17.2

$

29.9

$

53.2

$

97.7

Diluted earnings per common share (GAAP)

$

0.12

$

0.24

$

0.34

$

0.81

Adjustment from GAAP to Non-GAAP average number of shares outstanding ⁽²⁾

—

(0.04)

—

(0.13)

Special charges per diluted share, before tax:

Certain Argentina remeasurement losses/(gains), per diluted share

0.03

(0.01)

0.04

—

Restructuring and other charges, per diluted share

0.01

—

0.03

0.02

Separation-related costs per diluted share

0.02

0.02

0.04

0.02

Tax adjustments per diluted share

(0.06)

(0.01)

(0.09)

(0.05)

Diluted adjusted after-tax earnings per share (Non-GAAP) ⁽¹⁾

$

0.12

$

0.20

$

0.36

$

0.67

Adjusted average number of shares outstanding used in diluted
adjusted after-tax earnings per share computations (Non-GAAP) ⁽²⁾

146.5

146.5

146.4

146.4

___________________

(1)

The company believes that the Non-GAAP financial measures "Adjusted after-tax earnings" and "Diluted adjusted after-tax earnings per share" provide useful information about the company's operating results to management, investors and securities analysts. Adjusted after-tax earnings excludes the effects of special charges and tax-related adjustments. The company also believes that excluding the effects of these items from operating results allows management and investors to compare more easily the financial performance of its underlying business from period to period. As a result, diluted adjusted after-tax earnings is calculated using an adjusted average common shares outstanding (Non-GAAP). Refer to note 2 below for further information.

(2)

The weighted average common shares outstanding (GAAP) for both basic and diluted earnings per share for the three and nine months ended September 30, 2018 on the condensed combined statements of operations was calculated, in accordance with ASC 260, Earnings Per Share, using 123.0 million shares of common stock outstanding, which reflects the number of shares held by FMC prior to the IPO. This results in both basic and diluted earnings per share (GAAP) of $0.24 and $0.81 for the three and nine months ended September 30, 2018, respectively. The weighted average common shares outstanding (GAAP) for basic earnings per share (GAAP) for the three and nine months ended September 30, 2019 was 146.0 million resulting in basic earnings per share (GAAP) of $0.12 and $0.35 for the three and nine months ended September 30, 2019, respectively. The weighted average common shares outstanding (GAAP) for diluted earnings per share (GAAP) was 146.5 million and 146.4 million for the three and nine months ended September 30, 2019, respectively, resulting in diluted earnings per share (GAAP) of $0.12 and $0.34 for the three and nine months ended September 30, 2019, respectively.

Assuming adjusted weighted average shares outstanding of 146.5 million for the three months ended September 30, 2019 and September 30, 2018, adjusted after-tax earnings per share would be $0.12 and $0.20, respectively. Assuming adjusted weighted average shares outstanding of 146.4 million for the nine months ended September 30, 2019 and September 30, 2018,  adjusted after-tax earnings per share would be $0.36 and $0.67, respectively.

(a)

Represents charges related to currency fluctuations on tax assets and liabilities and on long-term monetary assets associated with our capital expansion, as well as significant currency devaluations. The remeasurement charges are included within "Cost of sales" in our condensed consolidated statement of operations but are excluded from our calculation of Adjusted EBITDA because of: i.) their nature as income tax related; ii.) their association with long-term capital projects which will not be operational until future periods; or iii.) the severity of the devaluations and their immediate impact on our operations in the country.

(b)

We continually perform strategic reviews and assess the return on our business. This sometimes results in management changes or in a plan to restructure the operations of our business. As part of these restructuring plans, demolition costs and write-downs of long-lived assets may occur.

(c)

Our non-operating pension expense/(benefit) and settlement charges are defined as those costs/(benefits) related to interest, expected return on plan assets, amortized actuarial gains and losses and the impacts of any plan curtailments or settlements. These are excluded from our results and are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance and we consider these costs to be outside our operational performance. We continue to include the service cost and amortization of prior service cost in our Adjusted EBITDA results. These elements reflect the operating costs to our businesses for the employment benefits provided to active employees.

(d)

Represents legal, professional, transaction related fees and other separation related activity.

(e)

The company excludes the GAAP tax provision, including discrete items, from the non-GAAP measure of income, and instead includes a non-GAAP tax provision based upon the projected annual non-GAAP effective tax rate. The GAAP tax provision includes certain discrete tax items including, but not limited to: income tax expenses or benefits that are not related to operating results in the current year; tax adjustments associated with fluctuations in foreign currency remeasurement of certain foreign operations; certain changes in estimates of tax matters related to prior fiscal years; certain changes in the realizability of deferred tax assets and related interim accounting impacts; and changes in tax law. Management believes excluding these discrete tax items assists investors and securities analysts in understanding the tax provision and the effective tax rate related to operating results thereby providing investors with useful supplemental information about the company's operational performance.The income tax expense/(benefit) on  special charges/(income) is determined using the applicable rates in the taxing jurisdictions in which the special charge or income occurred and includes both current and deferred income tax expense/(benefit) based on the nature of the non-GAAP performance measure.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In Millions)

2019

2018

2019

2018

Tax adjustments:

Income tax benefit on restructuring, separation-related and other
corporate costs

$

(0.7)

$

(0.5)

$

(2.2)

$

(1.1)

Revisions to our tax liabilities due to finalization of prior year tax returns

(0.6)

—

(2.0)

(0.8)

Foreign currency remeasurement and other discrete items

(7.6)

—

(9.1)

(4.9)

Other discrete items

(0.5)

(1.0)

0.7

—

Total tax adjustments

$

(9.4)

$

(1.5)

$

(12.6)

$

(6.8)

RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES (GAAP) TO

ADJUSTED CASH FROM OPERATIONS (NON-GAAP)

(Unaudited)

Nine Months Ended
September 30,

(In Millions)

2019

2018

Cash provided by operating activities (GAAP)

$

64.9

$

62.5

Restructuring and other charges

2.1

0.9

Separation-related activities ⁽¹⁾

25.6

4.5

Adjusted cash from operations (Non-GAAP) ⁽²⁾

$

92.6

$

67.9

___________________

(1)

Represents reimbursement to FMC for 2018 income taxes and transaction related costs, pursuant to the Tax Matters Agreement, for which we accrued liabilities at December 31, 2018. Also includes Separation-related costs.

(2)

The company believes that the non-GAAP financial measure "Adjusted cash from operations" provides useful information about the company's cash flows to investors and securities analysts. Adjusted cash from operations excludes the effects of transaction-related cash flows. The company also believes that excluding the effects of these items from cash provided by operating activities allows management and investors to compare more easily the cash flows from period to period.

RECONCILIATION OF LONG-TERM DEBT (GAAP) AND CASH AND CASH EQUIVALENTS (GAAP) TO
NET DEBT (NON-GAAP)

(Unaudited)

(In Millions)

September 30, 2019

December 31, 2018

Long-term debt (GAAP) ⁽¹⁾

$

90.1

$

34.0

Less: Cash and cash equivalents (GAAP)

(23.3)

(28.3)

Net debt (Non-GAAP) ⁽²⁾

$

66.8

$

5.7

___________________

(1)

As of September 30, 2019 and December 31, 2018, the Company had no debt maturing within one year.

(2)

The company believes that the non-GAAP financial measure "Net debt" provides useful information about the company's cash flows and liquidity to investors and securities analysts.

LIVENT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In Millions)

September 30, 2019

December 31, 2018

Cash and cash equivalents

$

23.3

$

28.3

Trade receivables, net of allowance of $0.1 in 2019 and $0.1 in 2018

86.8

141.4

Inventories, net

74.8

71.8

Prepaid and other current assets

68.7

59.8

Total current assets

253.6

301.3

Property, plant and equipment, net

385.9

275.7

Right of use assets - operating leases, net

17.1

—

Deferred income taxes

13.1

3.0

Other assets

87.1

80.0

Total assets

$

756.8

$

660.0

Accounts payable, trade and other

$

65.5

$

72.0

Accrued and other current liabilities

23.7

46.8

Income taxes

0.8

1.6

Total current liabilities

90.0

120.4

Long-term debt, less current portion

90.1

34.0

Operating lease liabilities - long-term

15.6

—

Long-term liabilities

19.2

17.7

Total equity

541.9

487.9

Total liabilities and equity

$

756.8

$

660.0

LIVENT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

(In Millions)

2019

2018

Cash provided by operating activities

$

64.9

$

62.5

Cash required by investing activities

(125.4)

(47.0)

Cash provided/(used) by financing activities

55.9

(3.1)

Effect of exchange rate changes on cash

(0.4)

1.1

(Decrease)/increase in cash and cash equivalents

(5.0)

13.5

Cash and cash equivalents, beginning of year

28.3

1.2

Cash and cash equivalents, end of year

$

23.3

$

14.7