LIVENT: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Kind 10-Okay)

You need to learn the next dialogue and evaluation at the side of our
monetary statements and the associated notes included elsewhere on this Kind 10-Okay.
This dialogue and evaluation incorporates forward-looking statements that contain
dangers, uncertainties, and assumptions. Our precise outcomes could differ materially
from these anticipated in these forward-looking statements because of
sure elements, together with, however not restricted to, these set forth underneath "Danger
Elements" and elsewhere on this Kind 10-Okay.
OVERVIEW
We're a pure-play, absolutely built-in lithium firm, with an extended, confirmed
historical past of manufacturing efficiency lithium compounds. Our major merchandise, specifically
battery-grade lithium hydroxide, lithium carbonate, butyllithium and excessive purity
lithium metallic are essential inputs utilized in numerous efficiency purposes. Our
technique is to deal with supplying excessive efficiency lithium compounds to the
quickly rising EV and broader power storage battery markets, whereas persevering with
to keep up our place as a number one world producer of butyllithium and excessive
purity lithium metallic. With in depth world capabilities, roughly 80 years
of steady manufacturing expertise, purposes and technical experience and
deep buyer relationships, we imagine we're properly positioned to capitalize on
the accelerating pattern of electrification.
We produce lithium compounds to be used in purposes which have particular and
continuously altering efficiency necessities, together with battery-grade lithium
hydroxide to be used in excessive efficiency lithium-ion batteries. We imagine the
demand for our compounds will proceed to develop because the electrification of
transportation accelerates, and as using excessive nickel content material cathode
supplies will increase within the subsequent technology of battery know-how merchandise. We
additionally provide butyllithium, which is used within the manufacturing of polymers and
pharmaceutical merchandise, in addition to a spread of specialty lithium compounds
together with excessive purity lithium metallic, which is used within the manufacturing of
light-weight supplies for aerospace purposes and non-rechargeable batteries.
It's in these purposes that now we have established a differentiated place
out there by our capacity to constantly produce and ship
efficiency lithium compounds.
2020 Highlights
The next are the extra vital developments in our enterprise in the course of the
12 months ended December 31, 2020:
•Income of $288.2 million in 2020 decreased $100.2 million versus final 12 months
primarily on account of decrease common costs and decrease gross sales volumes, largely as a
results of COVID-19 decreasing buyer demand.
•Gross margin of $36.8 million in 2020 decreased $78.1 million versus the prior
12 months primarily on account of decrease common costs, decrease gross sales volumes and elevated
prices as a result of monetary affect of elevated third-party lithium carbonate
utilization and incremental COVID-19 associated prices to implement security protocols.
•Adjusted EBITDA of $22.3 million decreased $77.5 million in comparison with the prior
12 months quantity of $99.8 million primarily on account of decrease common costs, decrease gross sales
volumes and elevated prices as a result of monetary affect of elevated third social gathering
lithium carbonate utilization.
COVID-19 Impacts
Enterprise and Operations
In 2020, the COVID-19 pandemic negatively impacted our enterprise, operations and
monetary efficiency. Worldwide authorities efforts to include the unfold and
mitigate the affect of COVID-19 continued. We nonetheless face operational challenges
and uncertainties associated to the unprecedented world COVID-19 pandemic. The
emergency measures imposed and re-imposed by governments on companies and
people, together with quarantines, journey restrictions, social distancing,
closure of non-essential companies and colleges, do business from home necessities,
and shelter in place orders, amongst different measures have impacted and will additional
affect our workforce and operations, and people of our prospects and suppliers.
The severity of the affect on our enterprise, monetary situation and outcomes of
operations, continues to evolve and has been diversified throughout geographic areas,
and might be depending on how lengthy the pandemic continues, which is presently
unknown. The disruptions and period could also be impacted by the actions that
governments, companies and people absorb relation to the pandemic, extra
contagious variants of the virus, vaccine resistance and delays in vaccine
distribution.
We now have manufacturing operations within the U.S., Argentina, China, the United
Kingdom, and India, basic operations in Singapore, and gross sales places of work within the
U.S., China, the United Kingdom, India and Japan. All of those nations have
been affected by the COVID-19 pandemic to various levels. They've adopted
measures to include it, they usually could undertake even stricter measures sooner or later.
In China, the federal government imposed shutdown orders and journey restrictions, amongst
different measures, which have subsequently been diminished. Within the U.S., the President
declared a nationwide emergency, which was adopted by the imposition of
restrictions by governors, mayors and public officers, together with in
Pennsylvania and North Carolina the place we
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function. The federal government of Argentina, the place the Firm's major lithium brine
useful resource is situated, enacted an emergency decree ordering a nationwide obligatory
quarantine requiring the momentary closure of the Firm's native brine
operations for about two weeks. We anticipate authorities measures and
restrictions globally to have a unfavourable affect on demand for sure of our
merchandise and a unfavourable affect on the working price and the environment friendly operation
of our amenities, provide chains and logistics. We now have already skilled
disruptions and delays inside our provide chain and logistics operations in
China, Southeast Asia, Argentina and Europe. This contains issues at ports due
to nationwide quarantines, difficulties with scheduling cargo ships, extra
warehouse prices on account of cargo delays, and the restriction of actions by
vehicles inside and between nations.
We now have seen a slowdown in demand for sure of our merchandise and world
inventories stay elevated, which has had a downward stress on costs for
sure of our merchandise. Extra prospects are beginning to defend their pursuits
by diversifying amongst a number of suppliers. Some prospects are hesitant to enter
into long run agreements whereas managing their very own stock ranges in a extra
unsure market surroundings, which additional impacts costs adversely for sure
of our merchandise.
Within the first quarter of 2020, due to the numerous sensible constraints
ensuing from actions being taken by authorities world wide in response
to the COVID-19 pandemic, we elected to droop all capital growth work
globally.  There may be no assurance of the timing for when capital growth
work will resume or that it'll resume in any respect.  Any vital delay or a
failure to renew this work may have an opposed impact on our enterprise,
monetary situation and outcomes of operations.
The fabric operational challenges that administration and the Board of Administrators
are monitoring embrace the well being and security of our workers, geographic
quarantines, journey restrictions, social distancing, closure of non-essential
companies and colleges, do business from home necessities, shelter in place orders,
and the restriction of actions inside and between nations.
Liquidity, Monetary Assets, 2025 Notes Issuance and Revolving Credit score
Facility Amendments
Our working capital was impacted by the consequences of the COVID-19 pandemic throughout
2020. We anticipate this to proceed into 2021. The fast and world unfold of
COVID-19 has resulted within the disruption and momentary shutdown of the companies
of sure of our prospects, contract producers and suppliers, and limits on
entry to the manufacturing amenities of our contract producers and
suppliers. A number of of our prospects, contract producers and suppliers have
skilled disruptions to their enterprise as a result of COVID-19 pandemic. Sure
of our prospects have canceled, postponed or delayed orders. To the extent that
we aren't capable of scale back our incurrence of short-term obligations in proportion
to the anticipated discount in our money flows, this might end in an extra
discount in our working capital.
Our makes use of of money have been impacted by the consequences of COVID-19 throughout 2020. We had an
elevated use of money ensuing from logistical provide disruptions, similar to
elevated warehousing prices, greater sea delivery prices, and using air
freight somewhat than cargo ships to fulfill extra unsure buyer supply
deadlines. We additionally used money to buy extra private protecting
tools for our workers, similar to masks and gloves, and for elevated
cleansing and disinfectant prices, wipes and hand sanitizer, extra medical
personnel at our amenities, and elevated personnel transportation prices on account of
social distancing tips.
On Might 6, 2020, we entered into the First Modification to the Credit score Settlement with
FMC Lithium USA Corp., the Guarantors, the Lenders and the Agent. Amongst different
issues, the First Modification elevated our most web leverage ratio for the
fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020
from 3.5 to six.0.
On June 25, 2020, we issued $225 million in combination principal quantity of 4.125%
Convertible Senior Notes due 2025 (the "2025 Notes") in a non-public providing. On
July 7, 2020 we issued a further $20.75 million of the 2025 Notes to the
preliminary purchasers underneath the Over-Allotment Choice. Whole web proceeds obtained
together with Over-Allotment Choice have been $238.2 million. The Firm used the web
proceeds obtained to repay quantities excellent underneath its Revolving Credit score
Facility. The 2025 Notes have been issued underneath the Worldwide Capital Market
Affiliation's Inexperienced Bond framework and adopted the Inexperienced Bond Rules.
On August 3, 2020, we entered into the Second Modification with FMC Lithium USA
Corp., the Guarantors, the Lenders and the Agent. The Second Modification amended
the Credit score Settlement, as beforehand amended by the First Modification, to exchange
our most complete web leverage ratio of 6.0 for the fiscal quarters ending
September 30, 2020 and December 31, 2020 with a most first lien leverage
ratio (as outlined within the Credit score Settlement) of three.5. The utmost first lien
leverage ratio of three.5 will proceed to use for the fiscal quarter ended March
31, 2021 and for every fiscal quarter thereafter. The primary lien leverage ratio
as of any date is the ratio of economic covenant debt as of such date secured
by a lien on any asset or property of Livent or its restricted subsidiaries on a
pari passu or senior foundation with the loans and commitments underneath the Credit score
Settlement, minus unrestricted money and money equivalents on our steadiness sheet as
of such date, to Earnings Earlier than Curiosity, Taxes, Depreciation and Amortization,
as outlined within the Credit score Settlement, for the final 4 fiscal quarters ending on
or earlier than such date.
See Word 10 to our consolidated and mixed monetary statements included
inside this Kind 10-Okay for particulars on the 2025 Notes, the First Modification and the
Second Modification.
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Company Efforts
We now have responded to the COVID-19 pandemic in quite a lot of methods. We assembled a
International Pandemic Response Workforce whose world members are taken from totally different
useful areas, together with Operations, Finance, Industrial, Authorized, Human
Assets and Well being & Security. The International Pandemic Response Workforce meets on a
common foundation, and offers experiences to the Govt Management group. We now have
additionally assembled COVID-19 Response Groups at a number of of its regional areas, who
have the accountability to maintain knowledgeable of native issues similar to authorities
insurance policies and rules. These Response Groups are serving to to form the
Firm's insurance policies in response to the COVID-19 pandemic.
We now have additionally labored to establish potential new suppliers and logistics suppliers
for its operations in case of additional provide chain disruptions. This contains
suppliers of chemical compounds and packaging, and air freight firms. We now have altered
world manufacturing schedules to fulfill modifications in buyer demand. Future efforts
will proceed alongside these traces and be dictated by the particulars of the
COVID-19 pandemic. We proceed to plan for a return to extra normalized enterprise
operations as soon as the COVID-19 pandemic subsides.
Well being & Security
We're working diligently to guard the well being and well-being of its workers,
prospects and different key stakeholders. As a necessary enterprise underneath the foundations
of the governments within the nations the place we function, our plant personnel
proceed to stay on the job at their respective amenities. We now have instituted
quite a few security procedures to guard the well being of those plant personnel. This
contains temperature checks earlier than an worker enters any one among our amenities,
screening questions, using masks and gloves the place applicable, and social
distancing measures. We're now not allowing guests to any of our
amenities and all third-party contractors should endure a vigorous screening
course of. All employees who can do business from home have been requested to take action, and
enterprise journey has been considerably diminished. Communications regarding all
of those insurance policies and COVID-19 preventative measures are often distributed
to our workers.
We base our well being and security protocols on the recommendation supplied by the White
Home, the Facilities for Illness Management, the World Well being Group, and the
native authorities authorities within the nations and areas the place it operates.
We now have applied the paid sick go away insurance policies underneath the Households First
Coronavirus Response Act. These insurance policies are supplemented by our personal paid sick
and different go away insurance policies. We now have not skilled any materials worker absences
because of COVID-19. Nonetheless, if a major variety of our workers at
anyone location have been to require go away because of COVID-19, this might pose
a danger to the continued operation of the actual facility and will
doubtlessly disrupt our broader operations.
There was no large-scale rejection of our merchandise by prospects on account of
fears over the transmission of COVID-19 by our merchandise.
Authorities Applications
We proceed to guage authorities assist and tax reduction packages within the
nations the place it operates. This contains assist grants, loans, tax deferrals,
and tax credit. We deferred the deposit and cost of the employer's share of
social safety taxes for the interval March 27 by December 31, 2020,
pursuant to the CARES Act in accordance with Inside Income Service
rules on this matter. In Argentina, we postponed employer contributions to
an worker social fund for the month of March 2020. In China, we obtained a
waiver of native social safety contributions. In Singapore, we obtained sure
wage subsidies for the interval October 2019 by June 2020, and benefited from
a property tax rebate that was partially handed by by the lessor of its
rented house.
Total, the affect of the COVID-19 pandemic is unsure and continues to
evolve, and due to this fact, we can not predict the extent to which our enterprise,
outcomes of operations, monetary situation or liquidity will finally be
impacted.
2021 Outlook
We anticipate greater volumes and barely decrease common pricing throughout our lithium
merchandise in 2021 versus the prior 12 months. We additionally anticipate decrease prices, pushed in
half by the minimal impact of third-party bought lithium carbonate utilization.
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On this part, we focus on the outcomes of our operations for the 12 months ended
December 31, 2020 in comparison with the 12 months ended December 31, 2019. For a dialogue
of the 12 months ended December 31, 2019 in comparison with the 12 months ended December 31,
2018, please consult with Half II, Merchandise 7, "Administration's Dialogue and Evaluation of
Monetary Situation and Outcomes of Operations" in our Annual Report on Kind 10-Okay
for the 12 months ended December 31, 2019.
Outcomes of Operations - Years Ended December 31, 2020 and 2019
                                                                              Yr Ended December 31,
(in Thousands and thousands)                                                                2020                 2019
Income                                                                 $      288.2$    388.4
Prices and bills:
Prices of gross sales                                                                 251.4               273.5
Gross margin                                                                    36.8               114.9
Promoting, basic and administrative bills                                    44.6                40.5

Analysis and growth bills                                                3.7                 3.3
Restructuring and different prices                                                 10.7                 6.2
Separation-related prices                                                        (1.1)                6.3
Whole prices and bills                                                       309.3               329.8

(Loss) / working revenue earlier than loss on extinguishment of debt, fairness within the web lack of the non-consolidated affiliate, curiosity expense, web taxes and revenue taxes

                                                               (21.1)               58.6
Loss on debt extinguishment                                                      0.1                   -
Fairness in web lack of unconsolidated affiliate                                   0.5                 0.8

Curiosity expense, web                                                            3.7                   -
(Loss)/revenue from operations earlier than revenue taxes                              (25.4)               57.8
Revenue tax (profit)/expense                                                    (6.5)                7.6

Web (loss)/revenue                                                       $      (18.9)$     50.2



Along with web revenue, as decided in accordance with U.S. GAAP, we
consider working efficiency utilizing sure non-GAAP measures similar to EBITDA,
which we outline as web revenue plus curiosity expense, web, revenue tax
expense/(profit), and depreciation and amortization, and Adjusted EBITDA, which
we outline as EBITDA adjusted for sure Argentina remeasurement losses/(positive aspects),
restructuring and different prices/(revenue), separation-related prices, COVID-19
associated prices and different losses/(positive aspects). Administration believes using these
non-GAAP measures permits administration and buyers to match extra simply the
monetary efficiency of its underlying enterprise from interval to interval. The
non-GAAP data supplied might not be akin to related measures
disclosed by different firms due to differing strategies utilized by different
firms in calculating EBITDA and Adjusted EBITDA. These measures shouldn't
be thought-about as an alternative to web revenue or different measures of efficiency or
liquidity reported in accordance with U.S. GAAP. The next desk reconciles
EBITDA and Adjusted EBITDA from web revenue.
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                                                     Yr Ended December 31,
(in Thousands and thousands)                                           2020                 2019
Web (loss)/revenue (GAAP)                      $       (18.9)$ 50.2
Add again:
Revenue tax (profit)/expense                           (6.5)                  7.6
Curiosity expense, web                                   3.7                     -
Depreciation and amortization                          25.0                  20.9
EBITDA (Non-GAAP)                                       3.3                  78.7
Add again:
Sure Argentina remeasurement losses (a)              6.6

7.9

Restructuring and different prices (b)                    10.7                   6.2
Separation-related prices (c)                           (1.1)                  6.3
COVID-19 associated prices (d)                              3.2                     -
Loss on debt extinguishment (e)                         0.1                     -
Different loss (f)                                         (0.5)                  0.7
Adjusted EBITDA (Non-GAAP)                    $        22.3$ 99.8


____________________
(a)  Represents affect of foreign money fluctuations on tax property and liabilities
and on long-term financial property related to our capital growth as properly
as vital foreign money devaluations. The remeasurement positive aspects/(losses) are
included inside "Price of gross sales" in our consolidated assertion of operations however
are excluded from our calculation of Adjusted EBITDA due to: i.) their
nature as revenue tax associated; ii.) their affiliation with long-term capital
tasks which won't be operational till future durations; or iii.) the
severity of the devaluations and their fast affect on our operations within the
nation.
(b)  We regularly carry out strategic opinions and assess the return on our
enterprise. This generally ends in administration modifications or in a plan to
restructure the operations of our enterprise. As a part of these restructuring
plans, demolition prices and write-downs of long-lived property could happen. Additionally
contains authorized charges associated to IPO securities litigation, together with a settlement
accrual, web of insurance coverage reimbursement, of $2.0 million as of December 31,
2020.
(c) Represents authorized, skilled, transaction associated charges and different
separation-related exercise.
(d)  Represents incremental prices related to the COVID-19 pandemic recorded
in "Price of gross sales" within the consolidated assertion of operations, together with however
not restricted to, incremental quarantine associated absenteeism, incremental facility
cleansing prices, pandemic associated provides and private protecting tools for
workers, amongst different prices; offset by financial reduction supplied by international
governments.
(e)  Represents the partial write off of deferred financing prices for the
momentary discount in borrowing capability associated to the First Modification
excluded from our calculation of Adjusted EBITDA as a result of the loss is
nonrecurring.
(f)  Represents a portion of our nonrefundable pay as you go analysis and growth
prices superior to our unconsolidated affiliate within the fourth quarter 2019 and
excluded from our calculation of Adjusted EBITDA in the identical interval as a result of the
prices symbolize analysis and growth actions of the affiliate that had
not occurred as of December 31, 2019. These prices have been included with our
calculation of Adjusted EBITDA for the twelve months ended December 31, 2020
when the prices have been incurred at our unconsolidated affiliate.
Yr Ended December 31, 2020 in contrast with Yr Ended December 31, 2019
Income
Income of $288.2 million for 2020 decreased by $100.2 million versus 2019,
primarily on account of decrease common costs and decrease gross sales volumes, pushed by a
lower in buyer demand associated to COVID-19.
Gross Margin
Gross margin of $36.8 million for 2020 decreased by $78.1 million versus 2019.
The lower in gross margin was primarily on account of decrease common costs, decrease
gross sales volumes and elevated prices as a result of monetary affect of elevated
third-party lithium carbonate utilization and incremental COVID-19 prices to implement
security protocols.
Promoting, basic and administrative bills
Promoting, basic and administrative bills of $44.6 million for 2020 elevated
by $4.1 million in comparison with 2019. The rise in promoting, basic and
administrative bills was primarily on account of a nonrecurring $2.3 million
worker bonus adjustment credit score obtained from FMC within the prior 12 months, an
improve in mark-to-market loss on Livent frequent inventory held within the Livent NQSP
of $0.9 million and accelerated depreciation of $0.9 million as a result of exit of
our Shanghai workplace lease.
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Restructuring and different prices
Restructuring and different prices have been $10.7 million and $6.2 million for the
years ended December 31, 2020 and 2019, respectively. 2020 prices embrace $6.2
million of severance-related prices in comparison with $3.5 million of severance-related
prices in 2019. 2020 prices additionally embrace elevated authorized charges associated to IPO
securities litigation, together with a settlement accrual, web of insurance coverage
reimbursement, of $2.0 million as of December 31, 2020 not incurred within the prior
12 months. See Word 7 to our consolidated and mixed monetary statements of this
Kind 10-Okay for particulars.
Separation-related prices
Separation-related prices for 2020 decreased by $7.4 million in comparison with 2019.
2020 Separation-related prices consisted primarily of authorized charges associated to the
Nemaska association offset by a $2.0 million achieve on the settlement of the
Nemaska long-term provide settlement. See Word 15 to our consolidated and mixed
monetary statements of this Kind 10-Okay for particulars in regards to the Nemaska settlement.
We incurred much less authorized {and professional} charges related to the IPO and different
Separation-related actions within the present 12 months. Increased prior 12 months
Separation-related prices primarily consisted of data know-how
infrastructure and software program prices incurred by Livent as a standalone entity in
preparation for the termination of the TSA.
Curiosity expense
Curiosity expense of $3.7 million for 2020 is noncash amortization of debt
low cost and transaction prices associated to the 2025 Notes which represents the
extra curiosity over the quantity of curiosity capitalized in accordance with U.S.
GAAP for 2020. All of our curiosity was capitalized in 2019.
Revenue tax (profit)/expense
Revenue tax good thing about $(6.5) million for the 12 months ended December 31, 2020 and
revenue tax expense of $7.6 million for the 12 months ended December 31, 2019,
resulted in efficient tax price of 25.6% and 13.1%, respectively. The lower in
provision for revenue taxes was primarily on account of a discount in revenue earlier than
taxes from $57.8 million for the 12 months ended December 31, 2019 to loss earlier than
revenue taxes of $25.4 million for the 12 months ended December 31, 2020. The lower
in provision for revenue taxes was partially offset by the tax impacts related
with fluctuations in international foreign money remeasurement in Argentina. Discuss with Word
9 for additional data.
Web (loss)/revenue
Web lack of $18.9 million for 2020, in comparison with web revenue of $50.2 million in
2019, a lower of $69.1 million from 2019, was primarily on account of decrease common
costs and decrease gross sales volumes, pushed by a lower in buyer demand associated
to COVID-19 and elevated prices as a result of monetary affect of elevated
third-party lithium carbonate utilization and incremental COVID-19 prices to implement
security protocols.

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Liquidity and Capital Assets
Our potential success in funding our money wants will rely upon the power of
the lithium market and our continued capacity to generate money from operations
and lift capital from different sources. Our major sources of money are presently
generated from operations and borrowings underneath our revolving credit score facility.
Money and money equivalents at December 31, 2020 and December 31, 2019, have been
$11.6 million and $16.8 million, respectively. Of the money and money equivalents
steadiness at December 31, 2020, $10.6 million was held by our international
subsidiaries. The money held by international subsidiaries for everlasting reinvestment
is usually used to finance the subsidiaries' working actions and future
international investments. We now have not supplied extra revenue taxes for any
extra outdoors foundation variations inherent in our investments in subsidiaries
as a result of the investments are primarily everlasting in period or now we have
concluded that no extra tax legal responsibility will come up upon disposal. We now have
concluded the Tax Act has not altered our assertion of figuring out reinvested
earnings. See Word 9 to the consolidated and mixed monetary statements
included inside this Kind 10-Okay for extra data.
2025 Notes
On June 25, 2020, we issued $225 million in combination principal quantity of 4.125%
Convertible Senior Notes due 2025 in a non-public providing. On July 7, 2020 we
issued a further $20.75 million of the 2025 Notes to the preliminary purchasers
underneath the Over-Allotment Choice. Whole web proceeds obtained together with
Over-Allotment Choice have been $238.2 million. The Firm used the web proceeds
obtained to repay quantities excellent underneath its Revolving Credit score Facility. The
2025 Notes have been issued underneath the Worldwide Capital Market Affiliation's
Inexperienced Bond framework and adopted the Inexperienced Bond Rules. See Word 9 to the
consolidated and mixed monetary statements included inside this Kind 10-Okay
for extra particulars on the 2025 Notes.
Revolving Credit score Facility
On September 28, 2018, we entered right into a credit score settlement amongst us and all of
our U.S. subsidiaries as debtors (the "Debtors"), sure of our wholly
owned subsidiaries as guarantors, the lenders social gathering thereto (the "Lenders"),
Citibank, N.A., as administrative agent, and sure different monetary
establishments social gathering thereto, as joint lead arrangers (the "Credit score Settlement").
The Credit score Settlement offers for a $400 million senior secured revolving credit score
facility, $50 million of which is on the market for the issuance of letters of
credit score for the account of the Debtors, with an choice, topic to sure
situations and limitations, to extend the mixture quantity of the revolving
credit score commitments to $600 million (the "Revolving Credit score Facility"). The
issuance of letters of credit score and the proceeds of revolving credit score loans made
pursuant to the Revolving Credit score Facility can be found, and might be used, for
basic company functions, together with capital expenditures and permitted
acquisitions, of the Debtors and their subsidiaries. See Word 9 to the
consolidated and mixed monetary statements included inside this Kind 10-Okay
for extra data.
Quantities underneath the Revolving Credit score Facility could also be borrowed, repaid and
re-borrowed on occasion till the ultimate maturity date of the Revolving
Credit score Facility, which would be the fifth anniversary of the Revolving Credit score
Facility's efficient date. Voluntary prepayments and dedication reductions underneath
the Revolving Credit score Facility are permitted at any time with none prepayment
premium upon correct discover and topic to minimal greenback quantities.
Revolving loans underneath the Credit score Settlement will bear curiosity at a floating
price, which might be both a base price or a Eurocurrency borrowing plus
relevant margin. Base price borrowings are outlined as the best of the speed
of curiosity introduced publicly by Citibank, N.A. in New York Metropolis from time to
time as its "base price"; the federal funds efficient price plus 0.5%; or a
Eurodollar price for a one-month curiosity interval plus 1%. The Eurocurrency
borrowing might be outlined as a Eurodollar price for one, two, three or six
months. The relevant margins for the 2 varieties of loans are set by reference
to Livent's leverage ratio, calculated by dividing our debt by our money flows.
Each the debt and money flows used on this calculation are phrases outlined within the
Credit score Settlement. Every Borrower on a joint and several other foundation is required to pay
a dedication price quarterly in arrears on the common day by day unused quantity of every
Lender's revolving credit score dedication at a price equal to an relevant share
based mostly on the leverage ratio, as decided in accordance with the provisions of
the Credit score Settlement. The relevant margin and the dedication price are topic
to adjustment as supplied within the Credit score Settlement.
The Debtors' home materials subsidiaries (the "Guarantors") will assure
the obligations of the Debtors underneath the Revolving Credit score Facility. The
obligations of the Debtors and the Guarantors are secured by all the
current and future property of the Debtors and the Guarantors, together with the
Debtors' facility and actual property in Bessemer Metropolis, North Carolina, topic to
sure exceptions and exclusions as set forth within the Credit score Settlement and different
safety and collateral paperwork.
Amendments to our Revolving Credit score Facility
On Might 6, 2020, we entered into the First Modification to the Credit score Settlement (the
"First Modification") with FMC Lithium USA Corp., the Guarantors, the Lenders and
the Agent. Amongst different issues, the First Modification amended and restated the
Authentic Credit score Settlement to (i) improve our most web leverage ratio for the
fiscal quarters ending June 30, 2020, September 30, 2020 and December 31, 2020
from 3.5 to six.0, (ii) put a cap of $325 million on our total borrowings underneath
the
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Revolving Credit score Facility till March 31, 2021, (iii) amend our unfavourable
covenant on indebtedness to allow unsecured indebtedness (together with convertible
debt) as much as $350 million, (iv) amend our unfavourable covenants on investments to
allow extra investments in Minera del Altiplano S.A., our Argentine
subsidiary, (v) limit our capacity to declare or pay money dividends till
March 31, 2021 and (vi) improve the relevant margin on our borrowings by 25
foundation factors, in every case as described within the First Modification.
The foregoing description of the First Modification doesn't purport to be full
and is certified in its entirety by reference to the First Modification, together with
the amended and restated Credit score Settlement hooked up thereto, which is filed as
Exhibit 10.1 to our Quarterly Report on Kind 10-Q for the three months ended
March 31, 2020.
On August 3, 2020, we entered into the Second Modification with FMC Lithium USA
Corp., the Guarantors, the Lenders and the Agent. The Second Modification amended
the Credit score Settlement, as beforehand amended by the First Modification to exchange
our most complete web leverage ratio of 6.0 for the fiscal quarters ending
September 30, 2020 and December 31, 2020 with a most first lien leverage
ratio (as outlined within the Credit score Settlement) of three.5. The utmost first lien
leverage ratio of three.5 will proceed to use for the fiscal quarter ended March
31, 2021 and for every fiscal quarter thereafter. The primary lien leverage ratio
as of any date is the ratio of economic covenant debt as of such date secured
by a lien on any asset or property of Livent or its restricted subsidiaries on a
pari passu or senior foundation with the loans and commitments underneath the Credit score
Settlement, minus unrestricted money and money equivalents on our steadiness sheet as
of such date, to Earnings Earlier than Curiosity, Taxes, Depreciation and Amortization,
as outlined within the Credit score Settlement, for the final 4 fiscal quarters ending on
or earlier than such date.
The foregoing description of the Second Modification doesn't purport to be
full and is certified in its entirety by reference to the Second Modification
and the Credit score Settlement, which Second Modification is filed as Exhibit 10.2 to our
Quarterly Report on Kind 10-Q for the three months ended June 30, 2020.
We had $281.4 million and $154.6 million debt excellent as of December 31,
2020 and December 31, 2019, respectively. The Credit score Settlement incorporates sure
affirmative and unfavourable covenants which are binding on the Debtors and their
subsidiaries, together with, amongst others, restrictions (topic to exceptions and
{qualifications}) on the power of the Debtors and their subsidiaries to create
liens, to undertake elementary modifications, to incur debt, to promote or eliminate
property, to make investments, to make restricted funds similar to dividends,
distributions or fairness repurchases, to vary the character of their companies,
to enter into transactions with associates and to enter into sure burdensome
agreements. Amongst different restrictions, our Revolving Credit score Facility incorporates
monetary covenants relevant to Livent and its consolidated subsidiaries
associated to leverage (measured because the ratio of debt to adjusted earnings) and
curiosity protection (measured because the ratio of adjusted earnings to curiosity
expense). Our most allowable first lien leverage ratio is 3.5 as of
December 31, 2020. Our minimal allowable curiosity protection ratio is 3.5. We have been
in compliance with all covenants at December 31, 2020.
Assertion of Money Flows
Money supplied by working actions was $6.3 million and $58.1 million for the
years ended December 31, 2020 and 2019, respectively.
The lower in money supplied by working actions for 2020 as in comparison with
the money supplied by working actions for 2019 was primarily pushed by decrease
web revenue and a lower in our accounts payables, partially offset by
elevated collections of our commerce receivables in and a $23.7 million cost in
the primary quarter of 2019 to FMC associated to Separation issues.
Money required by investing actions of operations was $131.1 million and
$190.0 million for the years ended December 31, 2020 and 2019, respectively.
The lower in money required by investing actions for 2020 in comparison with 2019
is primarily as a result of Firm's election to droop all capital growth work
globally in March 2020, leading to decreased capital expenditures for
manufacturing capability of lithium carbonate and hydroxide.
Money supplied by financing actions was $119.1 million and $120.5 million for
the years ended December 31, 2020 and 2019, respectively.
For the primary half of 2020 and 2019, web money proceeds for financing actions
have been supplied primarily by web attracts on our Revolving Credit score Facility which have been
used for capital expenditures for manufacturing capability of lithium carbonate and
hydroxide. Within the second half of 2020, the Firm used the $238.2 million complete
web proceeds obtained for the 2025 Notes together with Over-Allotment Choice to
repay quantities excellent underneath its Revolving Credit score Facility.

Different potential liquidity wants
We plan to fulfill our liquidity wants by accessible money, money generated from
operations, borrowings underneath the dedicated Revolving Credit score Facility, and different
potential working capital financing methods that could be accessible to us. At
December 31, 2020, our remaining borrowing capability underneath our Revolving Credit score
Facility, topic to assembly our debt covenants, was
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$275.0 million, together with letters of credit score utilization. The First Modification
places a cap of $325 million on our total borrowings underneath the Revolving Credit score
Facility till March 31, 2021.
We anticipate COVID-19 pandemic uncertainties and lithium market challenges to
proceed in 2021. Our web leverage ratio could improve in the course of the subsequent 12 months
as it can proceed to be decided, largely, by our capacity to handle
the timing and quantity of our capital expenditures, which is inside our management;
obtain forecasted working outcomes and to pursue different working capital
financing methods that could be accessible to us, which is much less sure and
outdoors our management. In March 2020, due to the numerous sensible
constraints ensuing from actions being taken by authorities world wide
in response to the COVID-19 pandemic, the Firm elected to droop all capital
growth work globally. Livent stays dedicated to its long-term growth
plans. The restart of its capital tasks might be pushed by improved pricing
dynamics or agency long-term commitments from prospects coupled with the absence
of COVID-19 associated restrictions.
The corporate stays centered on sustaining its monetary flexibility and can
proceed to handle its money stream and capital allocation selections to navigate
by this difficult surroundings.
We imagine that our accessible money and money from operations, along with our
borrowing availability underneath the Revolving Credit score Facility and different potential
working capital financing methods that could be accessible to us, will present
satisfactory liquidity for the following 12 months. Entry to capital and the
availability of financing on acceptable phrases sooner or later might be affected by
many elements, together with our credit standing, financial situations, the COVID-19
pandemic and the general liquidity of capital markets.

Contractual obligations and business commitments from December 31, 2020, the full of our vital dedicated contracts that we imagine will affect money stream over the following 5 years and past are as follows:

Anticipated money funds per interval

                                          Lower than 1                                               Greater than 5
(in Thousands and thousands)                                12 months             1-3 years           3-5 years            years             Whole
Lease obligations                         $    2.0$      3.8

$ 3.6$ 11.2$ 20.6
Buy obligations (1)

32.5 16.5 - - 49.0
Principal funds on debt (2) - 35.6 245.8 - 281.4

Whole $ 34.5$ 55.9$ 249.4$ 11.2$ 351.0

_________________
(1) Represents sure of our uncooked materials business contract buy
obligations which are enforceable and legally binding necessities contracts with
specified portions, pricing and timing of transactions.
(2) Represents the steadiness, as of December 31, 2020, of the Firm's Revolving
Credit score Facility which matures in 2023 and the 2025 Notes which mature in 2025.
See Word 15 to our consolidated and mixed monetary statements included in
this Kind 10-Okay for extra data.

Local weather Change
The potential bodily impacts of local weather change on our operations are extremely
unsure, and are particular to the geographic circumstances of areas during which we
function. These could embrace modifications in rainfall and storm patterns and
intensities, water shortages, altering sea ranges and altering temperatures.
These modifications could have a fabric opposed impact on our operations, together with
brine manufacturing and transportation of uncooked supplies.
A lot of governmental our bodies have launched or are considering legislative
and regulatory change in response to the potential impacts of local weather change.
Such laws or regulation, if enacted, doubtlessly may embrace provisions
for a "cap and commerce" system of allowances and credit or a carbon tax, amongst
different provisions. There's additionally a possible for local weather change laws and
regulation to adversely affect the price of bought power and electrical energy.
The rising issues about local weather change and associated more and more stringent
rules could present us with new or expanded enterprise alternatives. We
present options to firms pursuing various gas merchandise and
applied sciences (similar to renewable fuels, gas-to-liquids and others), emission
management applied sciences (together with mercury emissions), various transportation
automobiles and lithium-ion battery applied sciences and different related options. As
demand for, and laws mandating or incentivizing using, various
gas applied sciences that restrict or eradicate greenhouse fuel emissions will increase, we
will proceed to watch the market and provide options the place now we have
applicable know-how.
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Not too long ago Issued and Adopted Accounting Pronouncements and Regulatory Objects
See Word 3 "Not too long ago Issued and Adopted Accounting Pronouncements and Regulatory
Objects" to our consolidated and mixed monetary statements included on this
Kind 10-Okay.
Off-Steadiness Sheet Preparations
We don't have any off-balance sheet preparations which have or are moderately
prone to have a present or future impact on our monetary situation, modifications in
monetary situation, revenues or bills, outcomes of operations, liquidity,
capital expenditures or capital sources that's materials to buyers.

Important Accounting Insurance policies
Our consolidated and mixed monetary statements are ready in conformity
with U.S. GAAP. The preparation of those monetary statements requires us to
make estimates and judgments that have an effect on the reported quantities of property,
liabilities, revenues and bills. We now have described our accounting insurance policies in
Word 2 "Principal Accounting Insurance policies and Associated Monetary Data" to our
consolidated and mixed monetary statements included on this Kind 10-Okay. We
have reviewed these accounting insurance policies, figuring out those who we imagine to be
essential to the preparation and understanding of our consolidated monetary
statements. We now have reviewed these essential accounting insurance policies with the Audit
Committee of the Board of Administrators. Important accounting insurance policies are central to
our presentation of outcomes of operations and monetary situation in accordance
with U.S. GAAP and require administration to make estimates and judgments on sure
issues. We base our estimates and judgments on historic expertise, present
situations and different affordable elements.
As a result of COVID-19 pandemic, there was uncertainty and disruption within the
world economic system and monetary markets. The estimates used for, however not restricted
to, income recognition and the collectability of commerce receivables, impairment
and valuation of long-lived property, and revenue taxes may very well be impacted. We now have
assessed the affect and aren't conscious of any particular occasions or circumstances
that required an replace to our estimates and assumptions or materially affected
the carrying worth of our property or liabilities as of the date of issuance of
this Kind 10-Okay. These estimates could change as new occasions happen and extra
data is obtained. Precise outcomes may differ materially from these
estimates underneath totally different assumptions or situations.
Income recognition and commerce receivables
Sale of Items
Income from product gross sales is acknowledged when (or as) we fulfill a efficiency
obligation by transferring the promised items to a buyer, that's, when
management of the great transfers to the client. The client is then invoiced at
the agreed-upon value with cost phrases usually starting from 30 to 180 days.
In figuring out when the management of products is transferred, we sometimes assess,
amongst different issues, the switch of danger and title and the delivery phrases of the
contract. The switch of title and danger sometimes happens both upon cargo
to the client or upon receipt by the client. As such, we sometimes acknowledge
income when items are shipped based mostly on the related incoterm for the product
order, or in some areas, when supply to the client's requested vacation spot
has occurred. Once we carry out delivery and dealing with actions after the
switch of management to the client (e.g., when management transfers previous to
supply), they're thought-about success actions, and accordingly, the
prices are accrued for when the associated income is acknowledged. For FOB delivery
level phrases, income is acknowledged on the time of cargo because the buyer
positive aspects management at this cut-off date.
We file quantities billed for delivery and dealing with charges as income. Prices
incurred for delivery and dealing with are recorded as prices of gross sales. Quantities
billed for gross sales and use taxes, value-added taxes, and sure excise and different
particular transactional taxes imposed on revenue-producing transactions are
introduced on a web foundation and excluded from income within the consolidated and
mixed statements of operations. We file a legal responsibility till remitted to the
respective taxing authority.
Variable Consideration
As part of our customary enterprise observe, we could provide gross sales incentives to
our prospects, similar to quantity reductions or rebates. Variable consideration given
can differ by product. For all such contracts that embrace any variable
consideration, we estimate the quantity of variable consideration that must be
included within the transaction value using both the anticipated worth methodology or
the more than likely quantity methodology relying on the character of the variable
consideration. Variable consideration is included within the transaction value if,
in our judgment, it's possible {that a} vital future reversal of cumulative
income underneath the contract won't happen. Though figuring out the transaction
value requires vital judgment, now we have vital historic expertise
with incentives supplied to prospects and estimating the anticipated consideration
contemplating historic patterns of incentive payouts. These estimates are
re-assessed every reporting interval as required.
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Along with the variable consideration described above, in sure cases,
we could require our prospects to fulfill sure quantity thresholds inside their
contract time period. We estimate what quantity of variable consideration must be
included within the transaction value at contract inception and regularly reassess
this estimation every reporting interval to find out conditions when the minimal
quantity thresholds won't be met. Variable consideration is included within the
transaction value if, in our judgment, it's possible {that a} vital future
reversal of cumulative income underneath the contract won't happen. In these
circumstances, we apply the steerage on breakage and estimate the quantity of the
shortfall and acknowledge it over the remaining efficiency obligations within the
contract.
Proper of Return
We warrant to our prospects that our merchandise conform to mutually agreed product
specs. This providing is accounted for for granted of return and the
transaction value is adjusted for an estimate of anticipated returns.
Contract Asset and Contract Legal responsibility Balances
We fulfill our obligations by transferring items and providers in change for
consideration from prospects. The timing of efficiency generally differs from
the timing the related consideration is obtained from the client, thus
ensuing within the recognition of a contract legal responsibility. We acknowledge a contract
legal responsibility if the client's cost of consideration is obtained previous to
completion of our associated efficiency obligation.
We periodically enter into prepayment preparations with prospects and obtain
advance funds for product to be delivered in future durations. These advance
funds are recorded as deferred income and labeled as "Advance funds
from prospects" on the consolidated steadiness sheet. Income related to
advance funds is acknowledged as shipments are made and title, possession and
management move to the client.
Commerce Receivables
Commerce receivables encompass quantities owed from buyer gross sales and are recorded
when income is acknowledged. The allowance for commerce receivables represents our
greatest estimate of the possible losses related to potential buyer
defaults. In growing our allowance for commerce receivables, we use a two stage
course of which incorporates calculating a basic system to develop an allowance to
appropriately deal with the uncertainty surrounding assortment danger of our whole
portfolio and particular allowances for patrons the place the danger of assortment has
been moderately recognized both on account of liquidity constraints or disputes over
contractual phrases and situations.
Our methodology of calculating the overall system consists of estimating the
recoverability of commerce receivables based mostly on historic expertise, present
assortment developments, and exterior enterprise elements similar to financial elements,
together with regional chapter charges, and political elements. Our evaluation of
commerce receivable assortment danger is carried out quarterly, and the allowance is
adjusted accordingly.

Impairments and valuation of long-lived property
Our long-lived property primarily embrace property, plant and tools and
intangible property. The Firm has no goodwill or indefinite-lived intangible
property as of December 31, 2020.
We check for impairment every time occasions or circumstances point out that the web
e-book worth of our property, plant and tools might not be recoverable from the
estimated undiscounted anticipated future money flows anticipated to outcome from their
use and eventual disposition. In circumstances the place the estimated undiscounted anticipated
future money flows are lower than web e-book worth, an impairment loss is acknowledged
equal to the quantity by which the web e-book worth exceeds the estimated honest worth
of property, which relies on discounted money flows on the lowest degree
determinable. The estimated money flows mirror our assumptions about promoting
costs, volumes, prices and market situations over an affordable time frame.
Revenue taxes
We now have recorded a valuation allowance to cut back deferred tax property in sure
jurisdictions to the quantity that we imagine is extra doubtless than to not be
realized. In assessing the necessity for this allowance, now we have thought-about a quantity
of things together with future taxable revenue, the jurisdictions during which such
revenue is earned and our ongoing tax planning methods. Within the occasion that we
decide that we might not be capable of understand all or a part of our web deferred
tax property sooner or later, an adjustment to the deferred tax property can be
charged to revenue within the interval such dedication was made. Equally, ought to
we conclude that we might be capable of understand sure deferred tax property within the
future in extra of the web recorded quantity, an adjustment to the deferred tax
property would improve revenue within the interval such dedication was made.
Moreover, we file revenue tax returns in the US and numerous state
and international jurisdictions, as a part of a FMC authorized entity for the interval ended
February 28, 2019. Sure revenue tax returns for FMC entities taxable within the
U.S. and vital international jurisdictions are open for examination and
adjustment. We assess our revenue tax positions and file a legal responsibility for all
years open to examination based mostly upon our analysis of the info, circumstances
and knowledge accessible on the reporting date.
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For these tax positions the place it's extra doubtless than not {that a} tax profit will
be sustained, now we have recorded the most important quantity of tax profit with a better
than 50% probability of being realized upon final settlement with a taxing
authority that has full information of all related data. We regulate these
liabilities, if crucial, upon the completion of tax audits or modifications in tax
regulation.
See Word 9 to our consolidated and mixed monetary statements included in
this Kind 10-Okay for added dialogue surrounding revenue taxes.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our earnings, money flows and monetary place are uncovered to market dangers
regarding fluctuations in commodity costs, rates of interest and international
foreign money change charges. Our coverage is to reduce publicity to our money stream
over time brought on by modifications in curiosity and foreign money change charges. To
accomplish this, now we have applied a managed program of danger administration
consisting of applicable by-product contracts entered into with main monetary
establishments.
The evaluation beneath presents the sensitivity of the market worth of our monetary
devices to chose modifications in market charges and costs. The vary of modifications
chosen displays our view of modifications which are moderately potential over a one-year
interval. Market worth estimates are based mostly on the current worth of projected
future money flows contemplating the market charges and costs chosen.
As of December 31, 2020 and 2019, we had no open by-product money stream hedge
contracts. Livent's 2021 hedge plan might be outlined when administration projections
are finalized and authorised.
Overseas Forex Alternate Price Danger
Our worldwide operations expose us to foreign money danger from gross sales, purchases,
bills and intercompany loans denominated in currencies aside from the U.S.
greenback, our useful foreign money. The first currencies for which now we have
change price publicity are the Euro, the British pound, the Chinese language yuan, the
Argentine peso, and the Japanese yen. Overseas foreign money debt and international change
ahead contracts are used the place we do enterprise, thereby decreasing our web asset
publicity. Overseas change ahead contracts are additionally used to hedge agency and
extremely anticipated international foreign money money flows. We presently don't hedge
international foreign money dangers related to the Argentine peso as a result of restricted
availability and the excessive price of appropriate by-product devices.
To investigate the consequences of adjusting international foreign money charges, we carry out a
sensitivity evaluation during which we assume an instantaneous 10% change within the
international foreign money change charges from their ranges at December 31, 2019 with all
different variables (together with rates of interest) held fixed. As of December 31,
2020 and 2019, we had no open by-product money stream hedge contracts.
Curiosity Price Danger
One of many methods that we will use to handle rate of interest publicity is to
enter into rate of interest swap agreements. In these agreements, we conform to
change, at specified intervals, the distinction between mounted and variable
curiosity quantities calculated on an agreed-upon notional principal quantity. As of
December 31, 2020 and 2019, we had no rate of interest swap agreements.
Our debt portfolio at December 31, 2020 consists of fixed-rate and
variable-rate debt; consisting of borrowings underneath our 2025 Notes and Revolving
Credit score Facility. Modifications in rates of interest have an effect on totally different parts of our
variable-rate debt portfolio in numerous methods.
Primarily based on the variable-rate debt in our debt portfolio at December 31, 2020, a
one share level improve or lower in rates of interest would have elevated
or decreased, respectively, gross curiosity expense by $1.0 million for the 12 months
ended December 31, 2020.