Livent Corporation (NYSE: LTHM) Announces Third Quarter 2018 Results Above Prior Guidance and Reaffirms Full Year Guidance for 2018

Full-Year 2018

- Adjusted tax rate

19 - 22

percent

- Adjusted average common shares outstanding

~143.5 ⁽³⁾ 

million

- Depreciation & amortization

~$19

million

- Adjusted cash from operations  

$100 - $120

million

- Capital additions and other investing activities

$80 - $90

million

LIVENT CORPORATION

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Unaudited, in millions)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Revenue

$

112.0

$

94.4

$

322.7

$

234.0

Costs of sales

62.5

52.3

167.2

135.0

Gross margin

$

49.5

$

42.1

$

155.5

$

99.0

Selling, general and administrative expenses

4.7

3.2

12.7

10.1

Corporate allocations

5.6

4.8

15.7

15.5

Research and development expenses

0.9

0.9

2.9

2.3

Restructuring and other charges

0.4

0.4

2.7

3.5

Separation-related costs

2.4

—

2.4

—

Total costs and expenses

$

76.5

$

61.6

$

203.6

$

166.4

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

$

35.5

$

32.8

$

119.1

$

67.6

Non-operating pension benefit and settlement charges

(0.4)

(0.4)

(0.2)

(1.7)

Income from operations before income taxes

$

35.9

$

33.2

$

119.3

$

69.3

Provision for income taxes

5.9

7.7

19.1

16.2

Net income

$

30.0

$

25.5

$

100.2

$

53.1

LIVENT CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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

FMC SEGMENT EBITDA (GAAP), AND PRO FORMA EBITDA (NON-GAAP)

(Unaudited, in millions)

Livent was historically considered a segment of FMC as it functioned as part of the larger group of businesses controlled by FMC. Results for Livent were presented as FMC Segment EBITDA, defined by FMC as segment operating profit excluding depreciation and amortization expense. The table below provides a reconciliation of Net income to Livent Standalone Adjusted EBITDA, on a standalone company basis, to FMC Segment EBITDA, as defined by FMC. Pro Forma EBITDA represents FMC Segment EBITDA excluding incremental standalone costs in connection with operations as an independent company. It is being provided to allow investors and securities analysts a comparison of historical performance on a like-for-like basis.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2018

2017

2018

2017

Net income (GAAP)

$

30.0

$

25.5

$

100.2

$

53.1

Add back:

Provision for income taxes

5.9

7.7

19.1

16.2

Depreciation and amortization

4.5

3.9

13.1

11.7

EBITDA (Non-GAAP) ⁽¹⁾

$

40.4

$

37.1

$

132.4

$

81.0

Add back:

Restructuring and other charges ^(a)

0.4

0.4

2.7

3.5

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

(0.4)

(0.4)

(0.2)

(1.7)

Separation-related costs ^(c)

2.4

—

2.4

—

Livent Standalone Adjusted EBITDA (Non-GAAP) ⁽¹⁾

$

42.8

$

37.1

$

137.3

$

82.8

Carve out adjustments:

FMC Corporate shared service costs allocated to Livent

0.9

0.2

1.9

1.8

Stock compensation expense ^(d)

0.9

0.6

2.7

2.0

FMC Corporate expense allocation ^(e)

2.2

2.8

6.5

7.8

Other carve-out adjustments ^(f)

1.8

(0.5)

1.7

(0.7)

FMC Segment EBITDA (GAAP)

$

48.6

$

40.2

$

150.1

$

93.7

Standalone costs

1.7

—

1.7

—

Pro Forma EBITDA (Non-GAAP)

$

50.3

$

40.2

$

151.8

$

93.7

(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 Livent Standalone Adjusted EBITDA, which we define as EBITDA adjusted for 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 Livent Standalone 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 Livent Standalone Adjusted EBITDA from net income.

(a)

We continually perform strategic reviews and assess the return on our business. This sometimes results 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.

(b)

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 segments 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 Livent Standalone Adjusted EBITDA results noted above. These elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

(c)

Represents legal, professional or transaction related fees primarily associated with the initial public offering and other separation related activities.

(d)

Stock compensation expense represents the allocation of the Parent's Corporate stock compensation expense and the costs specifically identifiable to Livent employees. These amounts exclude the previously allocated portion included within Livent's shared service costs of $0.2 million and $0.6 million for the three and nine months ended September 30, 2018 and $0.2 million and $0.6 million for the three and nine months ended September 30, 2017.

(e)

Represents the additional costs of the centralized functions of the Parent allocated to Livent.

(f)

Other carve-out adjustments primarily consists of charges associated with changes in the LIFO inventory reserve.

RECONCILIATION OF NET INCOME (GAAP) TO

ADJUSTED AFTER-TAX EARNINGS (NON-GAAP)

(Unaudited, in millions)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2018

2017

2018

2017

Net income (GAAP)

$

30.0

$

25.5

$

100.2

$

53.1

Corporate special charges (income):

Restructuring and other charges ^(a)

0.4

0.4

2.7

3.5

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

(0.4)

(0.4)

(0.2)

(1.7)

Separation-related costs ^(c)

2.4

—

2.4

—

Income tax expense (benefit) on Corporate special charges ^(d)

(0.5)

—

(1.1)

(0.7)

Tax adjustment ^(e)

(1.0)

(0.5)

(5.7)

(0.8)

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

$

30.9

$

25.0

$

98.3

$

53.4

(1)

The company believes that the non-GAAP financial measure "Adjusted after-tax earnings" provides useful information about the company's operating results to management, investors and securities analysts. Adjusted earnings excludes the effects of corporate 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.

(2)

The weighted average common shares outstanding (GAAP) for both basic and diluted earnings per share for all periods presented 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 $0.21 for the three months ended September 30, 2018 and 2017, respectively, and $0.81 and $0.43 for the nine months ended September 30, 2018 and 2017, respectively.

Assuming adjusted weighted average shares outstanding of 143.0 million, which was the total number of shares outstanding immediately following the completion of the IPO, adjusted after-tax earnings per share would be $0.22 and $0.17 for the three months ended September 30, 2018, and 2017, respectively, and $0.69 and $0.37 for the nine months ended September 30, 2018 and 2017, respectively.

(a)     

We continually perform strategic reviews and assess the return on our business. This sometimes results 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.

(b)       

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 segments 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 Livent Standalone Adjusted EBITDA results. These elements reflect the current year operating costs to our businesses for the employment benefits provided to active employees.

(c)      

Represents legal, professional or transaction related fees primarily associated with the initial public offering and other separation related activities.

(d)       

The income tax expense (benefit) on Corporate special charges (income) is determined using the applicable rates in the taxing jurisdictions in which the corporate 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.

(e)      

The company excludes the GAAP tax provision, including discrete items, from the non-GAAP measure of income, and 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.

RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES (GAAP) TO

ADJUSTED CASH FROM OPERATIONS (NON-GAAP)

(Unaudited, in millions)

Nine Months Ended

September 30,

2018

2017

Cash provided by operating activities (GAAP)

$

62.5

$

33.9

Separation-related costs ^(a)

4.5

—

Adjusted cash from operations (Non-GAAP) ⁽¹⁾

$

67.0

$

33.9

(1)

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.

(a)      

Represents legal, professional or transaction related fees primarily associated with the initial public offering and other separation related activities.

LIVENT CORPORATION

CONDENSED COMBINED BALANCE SHEETS

(Unaudited, in millions)

September 30, 2018

December 31, 2017

Cash and cash equivalents

$

14.7

$

1.2

Trade receivables, net of allowance of $0.1 in 2018 and $0.1 in 2017

144.1

122.7

Inventories, net

47.3

49.6

Prepaid and other current assets

35.4

32.6

Total current assets

$

241.5

$

206.1

Property, plant and equipment, net

251.7

220.7

Intangible assets, net

0.1

0.1

Deferred income taxes

1.2

2.4

Other assets

71.6

66.9

Total assets

$

566.1

$

496.2

Accounts payable, trade and other

$

49.6

$

59.7

Advanced payments from customers

—

1.8

Accrued and other current liabilities

17.7

21.3

Income taxes

1.0

3.2

Total current liabilities

$

68.3

$

86.0

Long-term liabilities

18.3

24.8

Net parent investment

479.5

385.4

Total liabilities and net parent investment

$

566.1

$

496.2

LIVENT CORPORATION

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

Nine Months Ended September 30,

2018

2017

Cash provided by operating activities

$

62.5

$

33.9

Cash required by investing activities

(47.0)

(38.8)

Cash provided (required) by financing activities:

(3.1)

1.1

Cash provided (required) by financing activities

$

(3.1)

$

1.1

Effect of exchange rate changes on cash

1.1

—

Increase (decrease) in cash and cash equivalents

$

13.5

$

(3.8)

Cash and cash equivalents, beginning of year

1.2

4.0

Cash and cash equivalents, end of period

$

14.7

$

0.2