GrafTech International Ltd. (NYSE:GTI) today announced financial
results for the second quarter ended June 30, 2015.
2015 Second Quarter
Review
- Net sales were $165 million, a decrease
of 42 percent, compared to $284 million in the same period of the
prior year. Lower shipment volumes and pricing in both business
segments primarily drove the reduction in net sales.
- Reported net loss was $(23) million, or
$(0.17) per diluted share, compared to reported net loss of $(155)
million, or $(1.14) per diluted share, in the same period of the
prior year. These reported losses include special charges1 (after
tax) of $6 million in the second quarter of 2015 and special
charges (after tax) of $149 million in the second quarter of
2014.
- Adjusted net loss*, which excludes
special charges (after tax), was $(17) million, or $(0.12) per
diluted share, compared to adjusted net loss* of $(6) million, or
$(0.05) per diluted share, in the second quarter of 2014.
- Adjusted EBITDA*, which excludes
special charges, was $13 million, compared to $28 million in the
same period of the prior year.
- Operating cash flow was $2 million,
compared to $34 million in the same period of 2014.
Joel Hawthorne, Chief Executive Officer of GrafTech, commented,
"Persistent weak demand in the global steel market has created a
very challenging environment in the Industrial Materials segment.
Graphite electrode demand has declined further as end market
weakness continues and as global electric arc furnace (EAF) steel
production has been partially displaced by Chinese steel exports.
This market dislocation has created a challenging operating
environment for our Company and the industry as a whole."
Mr. Hawthorne continued, “The previously announced capital
infusion through the issuance of $150 million of convertible
preferred stock to Brookfield will strengthen our capital structure
and provide GrafTech with increased financial flexibility to
address challenges through this difficult part of the cycle.”
Industrial Materials
Segment
Net sales for Industrial Materials decreased to $125 million in
the second quarter of 2015, compared to $207 million in the second
quarter of 2014. The decline in revenue was largely driven by lower
volumes in response to weaker customer utilization rates,
unfavorable currency exchange rate fluctuations and lower realized
graphite electrode pricing year-over-year.
The Industrial Materials segment reported operating income of $3
million in the second quarter of 2015, compared to operating income
of $1 million in the same period of the prior year. Adjusted
segment operating income*, which excludes special charges, was
approximately $4 million in the second quarter of 2015, compared to
approximately $10 million in the second quarter of 2014 and $11
million in first quarter of 2015.
Q2 Q1
Q2 2014 2015 2015
Industrial Materials net sales: $ 206,655 $ 165,037 $ 125,012
Industrial Materials adjusted operating income: 10,031 11,191 3,995
Industrial Materials adjusted operating income margin: 4.9 % 6.8 %
3.2 %
Engineered Solutions
Segment
Net sales for Engineered Solutions decreased to $40 million in
the second quarter of 2015, compared to $78 million in the second
quarter of 2014. The decline was primarily driven by lower sales of
advanced electronics technology products, which were weaker due to
competitive pressures in the consumer electronics supply chain
impacting both price and volumes. Additionally, sales of advanced
graphite materials products were lower. Net sales for the second
quarter of 2014 included $4 million of advanced graphite materials
sales to a former customer that declared bankruptcy later in
2014.
Operating loss for the Engineered Solutions segment was $(3)
million in the second quarter of 2015, compared to operating loss
of $(125) million in the year ago period. Adjusted segment
operating income*, which excludes special charges, was essentially
breakeven in the second quarter of 2015, compared to adjusted
operating income of $9 million in the second quarter of 2014 and an
operating loss of $(1) million in the first quarter of 2015.
Q2 Q1
Q2 2014 2015 2015
Engineered Solutions net sales: $ 77,529 $ 42,174 $ 40,110
Engineered Solutions adjusted operating income (loss): 8,507 (1,285
) (138 ) Engineered Solutions adjusted operating income (loss)
margin: 11.0 % (3.0 )% (0.3 )%
Selling and Administrative and Research
and Development Expense
Total Company selling and administrative expenses and research
and development expenses, which include corporate expenses, were
$27 million for the second quarter of 2015, compared to $35 million
in the second quarter of 2014. Overhead expense in the second
quarter of 2015 was negatively impacted by special charges of $4
million, compared to $2 million of special charges in the prior
year quarter. Excluding special charges in both periods, overhead
expense declined approximately $9 million, or 29 percent,
year-over-year to $23 million in the second quarter of 2015,
benefiting from continued efforts to reduce costs.
Mr. Hawthorne commented, "We continue to aggressively reduce
costs to improve our competitive position in this challenging
operating environment."
Credit Facility
Amendment
GrafTech also announced today that it has amended its revolving
credit facility to allow for a change in control in connection
with the pending investment and tender offer by
affiliates of Brookfield Asset Management (Brookfield). In
addition, effective upon a change in control, which would be
triggered under the credit facility upon 25 percent ownership by
Brookfield, the financial covenants will be eased resulting in
increased availability under the revolving credit facility. The
size of the revolving facility will also be reduced from $400
million to $375 million.
Outlook
In its July 9, 2015 report, the International Monetary Fund
(IMF) reduced its estimate for 2015 global GDP growth to 3.3
percent. The report states that weaker than expected activity in
the first quarter, particularly in North America, drove the change
in estimate. Advanced economies’ growth prospects are anticipated
to improve throughout the year while a slowdown in growth continues
to be expected in emerging economies.
Steel customer sentiment remains negative globally. Global steel
utilization rates continue to be low given excess industry
capacity, weak end market demand and high export levels from China.
In its July 22, 2015 report, the World Steel Association (WSA)
reported that global steel production declined approximately two
percent in the six months ended 2015, as compared to the same
period in the prior year. WSA reported that the average world steel
capacity utilization rate was 72.2 percent in June 2015, 350 basis
points lower than June 2014. In the United States, steel production
declined approximately nine percent year-over-year in the six
months ended June 30, 2015. Steel production in ten of the top 15
steel producing countries, which represent a large share of EAF
production, declined approximately six percent year-to-date.
2015 Action Plan
The Company continues to execute its cost savings initiatives
and align production rates with market demand.
- The Company is on track to deliver
approximately $50 million in cash savings in 2015 following
successful execution of the previously announced cost savings
initiatives.
- Graphite electrode production rates
have been reduced to align production to lower customer demand and
reduce inventory. Graphite electrode production rates averaged
approximately 84 percent in the first half of 2015 and are expected
to decline to approximately 60 percent in the second half of
2015.
- The Company continues to realign the
production platform and optimize the product portfolio for its
advanced graphite materials business.
- Capital expenditures have been reduced
by approximately $30 million year-over-year. Current capital
expenditures are estimated to be in the range of $50 million to $55
million in 2015.
- Global headcount has been reduced by
approximately 800, more than 25 percent, since the beginning of
2014.
- The research and development function
has been redesigned to place a greater emphasis on driving
innovation to support new product development that builds on the
Company’s 129-year heritage.
Guidance
Market conditions remain challenging in both the Industrial
Materials segment and Engineered Solutions segment. Pricing in the
Industrial Materials segment will be lower year-over-year, while
volumes in this segment remain under pressure due to weak electric
arc furnace steel production in response to continued end market
weakness and temporary displacement by high Chinese steel export
levels. In the Engineered Solution segment, weak advanced consumer
electronics and oil and gas market demand for our products is
negatively impacting volumes and pricing. While the previously
announced cost initiatives are on track to deliver $50 million in
cash savings in 2015, these savings will not fully offset the
decline in pricing and volume across both business segments. In
light of these market conditions, the Company will reduce
production rates further to align with current market demand.
Based on these conditions, the Company does not expect a
significant improvement in results in the second half of 2015.
Update on Convertible Preferred Stock
Investment and Tender Offer
As previously announced, GrafTech has agreed to issue $150
million of convertible preferred stock to an affiliate of
Brookfield pursuant to an investment agreement. Closing of this
transaction is subject to customary conditions, including receipt
of required regulatory approvals, which are expected to be received
in August.
In addition, as previously announced, Brookfield has launched a
tender offer to acquire up to all of the outstanding shares of
GrafTech common stock at a purchase price of $5.05 per share. The
expiration date for the tender offer has been extended to August
13, 2015 at 12:00 midnight, New York City time, to allow additional
time to satisfy customary closing conditions, including receipt of
required regulatory approvals, which are expected to be received in
August. In accordance with the terms of the merger agreement and
the applicable rules and regulations of the Securities and Exchange
Commission, the tender offer expiration date may be extended in 10
day increments until October 14, 2015 until all conditions have
been satisfied or waived.
Joel Hawthorne, concluded, “Despite the current market
dislocation and overcapacity within the steel supply chain, we
believe the electric arc furnace steel market and the markets that
our Engineered Solutions segment serves remain attractive longer
term. With the benefits of the pending investment by Brookfield, we
remain focused on leveraging the core competencies that GrafTech
has built over the past 129 years and executing a strategy that
will allow GrafTech to manage through the current difficult
industry challenges.”
In conjunction with this earnings release, you are invited to
listen to our earnings call being held on July 29, 2015 at 11:00
a.m. Eastern. The call will be webcast and available at
www.GrafTech.com, in the investor relations section. The earnings
call dial-in number is 877-736-7716 for domestic and 706-501-7465
for international. A rebroadcast webcast will be available
following the call, and for 30 days thereafter, at
www.GrafTech.com, in the investor relations section. GrafTech also
makes its complete financial reports that have been filed with the
Securities and Exchange Commission (SEC) and other information
available at www.GrafTech.com. The information in our website is
not part of this release or any report we file or furnish to the
SEC. Upon request, GrafTech will provide its stockholders with a
hard copy of its complete audited financial statement, free of
charge.
GrafTech International is a global company that has been
redefining limits for more than 125 years. We offer innovative
graphite material solutions for our customers in a wide range of
industries and end markets, including steel manufacturing, advanced
energy applications and latest generation electronics. GrafTech
operates 18 principal manufacturing facilities on four continents
and sells products in over 70 countries. Headquartered in
Independence, Ohio, GrafTech employs approximately 2,400 people.
For more information, call 216-676-2000 or visit
www.GrafTech.com.
NOTE ON FORWARD-LOOKING STATEMENTS: This news release and
related discussions may contain forward-looking statements about
such matters as: the proposed issuance of convertible preferred
stock, the conditions to consummation of such issuance, the terms
of such issuance and stock, the use of proceeds and related
matters; a possible tender offer and possible merger, the
conditions to consummation thereof, the terms thereof and related
matters; the effects of such issuance, tender offer and merger
under equity award and benefit plans and agreements or our credit
agreement, senior notes or senior subordinated notes; our outlook
for 2015 or beyond; future or targeted operational and financial
performance; growth prospects and rates; the markets we serve and
our position in those markets; future or targeted profitability,
cash flow, liquidity, sales, costs and expenses, tax rates, working
capital, production rates, inventory levels, debt levels, capital
expenditures, EBITDA, cost savings and business opportunities and
positioning; strategic plans; stock repurchase or issuance plans;
inventory and supply chain management; rationalization and related
activities; the impact of rationalization, product line change,
cost and liquidity initiatives; expected or targeted changes in
production capacity or levels, operating rates or efficiency in our
operations or our competitors' or customers' operations; future
prices and demand for our products; product quality;
diversification, new products, and product improvements and their
impact on our business; the integration or impact of acquired
businesses; divestitures, asset sales, investments and acquisitions
that we may make in the future; possible debt or equity financing
or refinancing (including factoring and supply chain financing)
activities; our customers' operations, order patterns and demand
for their products; the impact of customer bankruptcies; regional
and global economic and industry market conditions, including our
expectations concerning their impact on us and our customers and
suppliers; conditions and changes in the global financial and
credit markets; legal proceedings and antitrust investigations; our
liquidity and capital resources, including our obligations under
our senior subordinated notes that mature in November 2015; a
pending proxy contest, the impacts thereof and other possible
changes in Board composition; possible changes in control of the
Company and the impacts thereof; tax rates and the effects of
jurisdictional mix; the impact of accounting changes; and currency
exchange and interest rates and changes therein.
We have no duty to update these statements. Our expectations and
targets are not predictions of actual performance and historically
our performance has deviated, often significantly, from our
expectations and targets. Actual future events, circumstances,
performance and trends could differ materially, positively or
negatively, due to various factors, including: failure to satisfy
closing conditions in the definitive agreements relating to the
preferred stock issuance or the tender offer and merger; including
due to material adverse changes effecting the Company or its
prospects or failure to obtain regulatory approvals; litigation in
relation to such transactions; adjustments to our second quarter
2015 results in connection with preparation of, and possible delay
in the filing of, our Form 10-Q with the SEC and potential effects
thereof; failure to achieve production rate, inventory level,
product development, capital expenditure level, cost savings,
EBITDA or other targets or estimates; actual outcome of
uncertainties associated with assumptions and estimates used when
applying critical accounting policies and preparing financial
statements; failure to successfully develop and commercialize new
or improved products; adverse changes in cost, inventory or supply
chain management; limitations or delays on capital expenditures;
business interruptions, including those caused by weather, natural
disaster, or other causes; delays or changes in, or
non-consummation of, proposed asset sales, divestitures,
investments or acquisitions; failure to successfully integrate or
achieve expected savings, synergies, performance or returns
expected from any completed asset sales, divestitures, investments
or acquisitions; inability to protect our intellectual property
rights or infringement of intellectual property rights of others;
changes in market prices of our securities; changes in our ability
to obtain new or refinance existing financing on acceptable terms;
adverse changes in labor relations; adverse developments in legal
proceedings or investigations; non-realization of anticipated
benefits from, or variances in the cost or timing of,
organizational changes, rationalizations and restructurings; loss
of market share or sales due to rationalization, product line
changes, or pricing activities; negative developments relating to
health, safety or environmental compliance, remediation or
liabilities; downturns, production reductions or suspensions, or
other changes in steel, electronics and other markets we or our
customers serve; customer or supplier bankruptcy or insolvency
events; political unrest which adversely impacts us or our
customers' businesses; declines in demand; intensified competition
and price or margin decreases; graphite electrode and needle coke
manufacturing capacity increases; fluctuating market prices for our
products, including adverse differences between actual graphite
electrode prices and spot or announced prices; consolidation of
steel producers; mismatches between manufacturing capacity and
demand; significant changes in our provision for income taxes and
effective income tax rate; changes in the availability or cost of
key inputs, including petroleum, petroleum-based coke or energy;
changes in interest or currency exchange rates; inflation or
deflation; changes in Board composition or control of the Company
or changes in capital structure or share ownership, failure to
satisfy conditions to government grants; continuing uncertainty
over fiscal or monetary policies or conditions in the U.S., Europe,
China or elsewhere; changes in fiscal and monetary policy; a
protracted regional or global financial or economic crisis; and
other risks and uncertainties, including those detailed in our SEC
filings, as well as future decisions by us. This news release does
not constitute an offer or solicitation as to any securities.
References to street or analyst earnings estimates mean those
published by First Call.
*Non-GAAP financial measures. See attached reconciliations.
1 Special charges include rationalization and rationalization
related charges, impairment charges, valuation allowance and proxy
contest and transaction expenses. See reconciliation tables for
further detail.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share
data)
(Unaudited)
As of December 31,
2014
As of
June 30,
2015
ASSETS Current assets: Cash and cash equivalents $ 17,550 $
14,505 Accounts and notes receivable, net of allowance for doubtful
accounts of$7,471 as of December 31, 2014 and $6,459 as of June 30,
2015 162,919 121,686 Inventories 382,903 375,633 Prepaid expenses
and other current assets 81,623 77,952 Total current
assets 644,995 589,776 Property, plant and equipment
1,500,821 1,477,360 Less: accumulated depreciation 846,781
842,689 Net property, plant and equipment 654,040 634,671
Deferred income taxes 16,819 17,116 Goodwill 420,129 384,432 Other
assets 97,822 86,979 Total assets $ 1,833,805
$ 1,712,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 86,409 $ 72,136 Short-term debt 188,104 199,215
Accrued income and other taxes 24,506 20,412 Rationalizations 9,563
7,399 Other accrued liabilities 43,319 31,252 Total
current liabilities 351,901 330,414 Long-term
debt 341,615 349,335 Other long-term obligations 107,566 99,512
Deferred income taxes 28,197 24,237 Stockholders’ equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none
issued — — Common stock, par value $.01, 225,000,000 shares
authorized,152,821,011 shares issued as of December 31, 2014 and
153,225,065shares issued as of June 30, 2015 1,528 1,532 Additional
paid-in capital 1,825,880 1,829,391 Accumulated other comprehensive
loss (336,524 ) (357,733 ) Retained earnings (deficit) (245,751 )
(324,176 ) Less: cost of common stock held in treasury, 15,922,729
shares as ofDecember 31, 2014 and 15,870,143 shares as of June 30,
2015 (239,811 ) (238,881 ) Less: common stock held in employee
benefit and compensation trusts,80,967 shares as of December 31,
2014 and 69,244 shares as ofJune 30, 2015 (796 ) (657 ) Total
stockholders’ equity 1,004,526 909,476 Total
liabilities and stockholders’ equity $ 1,833,805 $ 1,712,974
GRAFTECH INTERNATIONAL LTD. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share
amounts)
(Unaudited)
For the Three For the Six Months Ended
Months Ended June 30, June 30, 2014
2015 2014 2015 Net sales
$ 284,184 $ 165,122 $ 564,975 $ 372,333 Cost of sales 266,231
149,183 521,328 335,631 Gross profit
17,953 15,939 43,647 36,702 Research and development 2,903
1,914 5,673 4,345 Selling and administrative expenses 32,137 25,253
62,044 51,543 Rationalizations 831 1,769 917 4,263 Impairments
121,570 — 121,570 35,381 Operating loss
(139,488 ) (12,997 ) (146,557 ) (58,830 ) Other expense
(income), net (41 ) 699 753 1,092 Interest expense 9,155 9,195
18,154 18,116 Interest income (55 ) (273 ) (113 ) (346 ) Loss
before provision for income taxes (148,547 ) (22,618 ) (165,351 )
(77,692 ) Provision for income taxes 6,886 199
1,599 733 Net loss $ (155,433 ) $ (22,817 ) $
(166,950 ) $ (78,425 ) Basic loss per common share: Net loss
per share $ (1.14 ) $ (0.17 ) $ (1.23 ) $ (0.57 ) Weighted average
common shares outstanding 135,963 137,252 135,713 137,113
Diluted loss per common share:
Net loss per share $ (1.14 ) $ (0.17 ) $ (1.23 ) $ (0.57 ) Weighted
average common shares outstanding 135,963 137,252 135,730 137,113
GRAFTECH INTERNATIONAL LTD. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30, 2014
2015 2014 2015 Cash flow from operating
activities: Net loss $ (155,433 ) $ (22,817 ) $ (166,950 ) $
(78,425 ) Adjustments to reconcile net income to cash provided
byoperations: Depreciation and amortization 26,846 18,814 66,507
39,384 Impairment of long-lived assets and goodwill 121,570 —
121,570 35,381 Deferred income tax benefit (502 ) (7,920 ) (1,724 )
(4,947 ) Post-retirement and pension plan changes 2,081 990 3,093
2,252 Stock-based compensation 2,230 1,056 2,752 2,628 Interest
expense 3,826 3,935 7,471 7,699 Other charges, net 4,376 1,436
2,783 (1,321 )
Decrease in working capital*
37,081 8,404 30,416 30,395 Increase in long-term assets and
liabilities (8,265 ) (2,396 ) (10,018 ) (8,826 ) Net cash provided
by operating activities 33,810 1,502 55,900 24,220 Cash flow from
investing activities:
Capital expenditures
(24,736 ) (12,019 ) (46,464 ) (25,620 ) Proceeds from the sale of
fixed assets 628 117 2,523 638 Insurance recoveries (223 ) — 2,834
— Payments for derivative instruments 173 (201 ) (194 )
(7,804 ) Net cash used in investing activities (24,158 ) (12,103 )
(41,301 ) (32,786 ) Cash flow from financing activities: Short-term
debt (reductions) borrowings, net (25 ) 4,505 (1,019 ) 4,506
Revolving Facility borrowings 134,000 47,000 209,000 74,000
Revolving Facility reductions (140,000 ) (34,000 ) (205,000 )
(66,000 ) Principal payments on long-term debt (34 ) (34 ) (126 )
(67 ) Supply chain financing — — (9,455 ) — Proceeds from exercise
of stock options 2,731 — 2,813 — Purchase of treasury shares (294 )
(22 ) (435 ) (63 ) Refinancing fees and debt issuance costs (2,636
) (475 ) (2,636 ) (2,722 ) Other — (2,796 ) 918
(2,850 )
Net cash (used in) provided by financing
activities
(6,258 ) 14,178 (5,940 ) 6,804 Net increase (decrease) in cash and
cash equivalents 3,394 3,577 8,659 (1,762 ) Effect of exchange rate
changes on cash and cash equivalents 10 (33 ) 181 (1,283 ) Cash and
cash equivalents at beginning of period 17,324 10,961
11,888 17,550 Cash and cash equivalents at end of
period $ 20,728 $ 14,505 $ 20,728 $ 14,505
* Net change in working capital due to the following
components: Change in current assets: Accounts and notes
receivable, net $ 27,842 $ 33,818 $ 22,158 $ 34,858 Inventories
41,343 (8,704 ) 42,298 3,274 Prepaid expenses and other current
assets (13,990 ) (1,287 ) (18,660 ) 6,238
Decrease in accounts payable and
accruals
(6,790 ) (9,323 ) (284 ) (11,806 ) Rationalizations (6,496 ) (1,337
) (15,076 ) (2,183 )
Increase (decrease) in interest
payable
(4,828 ) (4,763 ) (20 ) 14
Decrease in working capital
$ 37,081 $ 8,404 $ 30,416 $ 30,395
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY AND RECONCILIATION
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
For the Six Months Ended June 30, March
31, June 30, June 30, June
30, 2014 2015 2015 2014 2015
Net sales: Industrial Materials $ 206,655 $ 165,037 $ 125,012 $
425,431 $ 290,049 Engineered Solutions 77,529 42,174
40,110 139,544 82,284 Total net sales $
284,184 $ 207,211 $ 165,122 $ 564,975 $
372,333 Segment operating income (loss): Industrial
Materials 1,060 (25,898 ) 3,094 2,660 (22,804 ) Engineered
Solutions (124,664 ) (4,393 ) (3,455 ) (119,259 ) (7,848 )
Corporate, R&D, and Other (15,884 ) (15,542 ) (12,636 ) (29,958
) (28,178 ) Total segment operating loss $ (139,488 ) $ (45,833 ) $
(12,997 ) $ (146,557 ) $ (58,830 ) Reconciling Items:
Rationalizations - Industrial Materials 832 93 89 946 182
Rationalizations - Engineered Solutions — 2,401 1,809 (28 ) 4,210
Rationalizations - Corporate, R&D, and Other — — (130 ) — (130
) Impairments - Industrial Materials — 35,381 — — 35,381
Impairments - Engineered Solutions 121,570 — —
121,570 —
Total rationalizations and impairments
122,402 37,875 1,768 122,488 39,643 Rationalization related
Industrial Materials (recorded in Cost of sales) 8,087 1,615 412
25,428 2,027
Industrial Materials (recorded in Selling
and administrative)
52 — 400 78 400 Engineered Solutions (recorded in Cost of sales)
11,601 704 1,216 12,005 1,920
Engineered Solutions (recorded in Selling
and administrative)
— 3 292 — 295
Corporate, R&D and Other (recorded in
Selling and administrative)
— 1,687 44 — 1,731 Total
rationalization related 19,740 4,009 2,364 37,511 6,373
Proxy contest and transaction expenses -
Corporate, R&D, and Other
2,438 1,665 3,310 2,438 4,975
Total other expenses 2,438 1,665 3,310 2,438 4,975
Segment adjusted operating income: Industrial Materials 10,031
11,191 3,995 29,112 15,186 Engineered Solutions 8,507 (1,285 ) (138
) 14,288 (1,423 ) Corporate, R&D, and Other (13,446 ) (12,190 )
(9,412 ) (27,520 ) (21,602 ) Total adjusted operating income $
5,092 $ (2,284 ) $ (5,555 ) $ 15,880 $ (7,839 ) Adjusted
operating income margin: Industrial Materials 4.9 % 6.8 % 3.2 % 6.8
% 5.2 % Engineered Solutions 11.0 % (3.0 )% (0.3 )% 10.2 % (1.7 )%
Total adjusted operating income margin 1.8 % (1.1 )%
(3.4 )% 2.8 % (2.1 )%
NOTE ON RECONCILIATION OF OPERATING INCOME DATA: Adjusted
segment operating income is a non-GAAP financial measure that
GrafTech calculates according to the schedule above, using GAAP
amounts from the Consolidated Financial Statements. GrafTech
believes that the excluded items are not primarily related to core
operational activities. GrafTech believes that adjusted segment
operating income is generally viewed as providing useful
information regarding a segment's operating profitability.
Management uses adjusted segment operating income as well as other
financial measures in connection with its decision-making
activities. Adjusted segment operating income should not be
considered in isolation or as a substitute for segment operating
income or other consolidated income data prepared in accordance
with GAAP. GrafTech's method for calculating adjusted segment
operating income may not be comparable to methods used by other
companies.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
RECONCILIATION OF OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands)
(Unaudited)
EBITDA
Reconciliation
For the Three Months Ended For the Six
Months Ended June 30, June 30, 2014
2015 2014 2015 EBITDA
$ 27,694 $ 12,940 $
60,708 $ 30,171
Adjustments
Depreciation and amortization
(22,600 ) (18,495 ) (44,828 ) (38,011 )
Rationalization related depreciation
(4,246 ) (319 ) (21,679 ) (1,372 ) Rationalizations (832 ) (1,769 )
(918 ) (4,263 ) Impairments (121,570 ) — (121,570 ) (35,381 )
Rationalizations related charges (15,496 ) (2,044 ) (15,832 )
(4,999 )
Proxy contest and transaction expenses
(2,438 ) (3,310 ) (2,438 ) (4,975 ) Operating income (139,488 )
(12,997 ) (146,557 ) (58,830 ) Other (expense) income, net 41 (699
) (753 ) (1,092 ) Interest expense (9,155 ) (9,195 ) (18,154 )
(18,116 ) Interest income 55 273 113 346 Income taxes (6,886 ) (199
) (1,599 ) (733 )
Net loss $ (155,433 )
$ (22,817 ) $ (166,950 )
$ (78,425 )
NOTE ON EBITDA RECONCILIATION: EBITDA is a non-GAAP financial
measure that GrafTech currently calculates according to the
schedule above, using historical or estimated target GAAP amounts
as indicated above. GrafTech believes that EBITDA measures are
generally accepted as providing useful information regarding a
company’s ability to incur and service debt as well as productivity
and cash generation. Management uses EBITDA measures as well as
other financial measures in connection with its decision-making
activities. EBITDA measures should not be considered in isolation
or as a substitute for net income (loss), cash flows from
operations or other consolidated income or cash flow data prepared
in accordance with GAAP. GrafTech’s method for calculating EBITDA
measures may not be comparable to methods used by other companies
and is not the same as the method for calculating EBITDA measures
under its senior secured revolving credit facility or other debt
instruments.
GRAFTECH INTERNATIONAL LTD. AND
SUBSIDIARIES RECONCILIATION OF OTHER NON-GAAP FINANCIAL
MEASURES
(Dollars in thousands)
(Unaudited)
Adjusted Net
Income and Earnings Per Share Reconciliation
For the Three Months For the Three Months
Ended Ended June 30, 2014 June 30, 2015
Income(Loss)
EPS
Income(Loss)
EPS Total Company Net loss $ (155,433 ) $ (1.14 ) $
(22,817 ) $ (0.17 ) Rationalizations, net of tax 562 — 1,045 0.01
Impairment, net of tax 74,972 0.55 — — Rationalization related, net
of tax 12,956 0.10 1,652 0.01 Valuation allowance 58,929 0.43 1,304
0.01 Proxy contest and transaction expenses, net of tax 1,521
0.01 2,079 0.02
Adjusted net loss
$ (6,493 ) $ (0.05 ) $ (16,737 ) $ (0.12 )
For the
Six Months Ended For the Six Months Ended June 30,
2014 June 30, 2015
Income(Loss)
EPS
Income(Loss)
EPS Total Company Net loss $ (166,950 ) $ (1.23 ) $
(78,425 ) $ (0.57 ) Rationalizations, net of tax 636 — 2,669 0.02
Impairment, net of tax 74,972 0.55 30,901 0.23 Rationalization
related, net of tax 25,257 0.20 4,254 0.03 Valuation allowance
58,929 0.43 7,384 0.05 Proxy contest and transaction expenses, net
of tax 1,521 0.01 3,124 0.02
Adjusted net loss
$ (5,635 ) $ (0.04 ) $ (30,093 ) $ (0.22 )
NOTE ON RECONCILIATION OF EARNINGS DATA: Adjusted net income and
adjusted earnings per share are non-GAAP financial measures that
GrafTech calculates according to the schedule above, using GAAP
amounts. GrafTech believes that the excluded items are not
primarily related to core operational activities. GrafTech believes
that adjusted net income and adjusted earnings per share are
generally viewed as providing useful information regarding a
company's operating profitability. Management uses adjusted net
income and adjusted earnings per share as well as other financial
measures in connection with its decision-making activities.
Adjusted net income and adjusted earnings per share should not be
considered in isolation or as a substitute for net income or other
consolidated income data prepared in accordance with GAAP.
GrafTech's method for calculating adjusted net income and adjusted
earnings per share may not be comparable to methods used by other
companies.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
RECONCILIATION OF OTHER NON-GAAP FINANCIAL MEASURES
(Dollars in thousands)
(Unaudited)
Net Debt
Reconciliation
As of As of December 31, 2014
June 30, 2015 Long-term debt $ 341,615 $ 349,335
Short-term debt 188,104 199,215 Total debt 529,719 548,550
Less: Cash and cash equivalents 17,550 14,505
Net
Debt $ 512,169 $ 534,045
NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP
financial measure that GrafTech calculates according to the
schedule above, using GAAP amounts from the Consolidated Financial
Statements. GrafTech believes that net debt is generally accepted
as providing useful information regarding a company’s indebtedness
and that net debt provides meaningful information to investors to
assist them to analyze leverage. Management uses net debt as well
as other financial measures in connection with its decision-making
activities. Net debt should not be considered in isolation or as a
substitute for total debt or total debt and other long-term
obligations calculated in accordance with GAAP. GrafTech’s method
for calculating net debt may not be comparable to methods used by
other companies and is not the same as the method for calculating
net debt under its senior secured revolving credit facility or
other debt instruments.
GTI-G
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version on businesswire.com: http://www.businesswire.com/news/home/20150729005827/en/
GrafTech International Ltd.Kelly Taylor, 216-676-2000Director,
Investor Relations