GrafTech International Ltd. today announced financial results for the
third quarter ended September 30, 2015.
On August 17, 2015, GrafTech became an indirect wholly-owned subsidiary
of Brookfield Asset Management Inc. (NYSE:BAM) (TSX:BAM.A)
(Euronext:BAMA). In accordance with GAAP and using business combination
accounting guidelines, results for the third quarter of 2015 are
presented in two distinct periods labeled as predecessor (to reflect the
period prior to the Brookfield acquisition) and as successor (which
reflects the period following the acquisition and includes the
provisional purchase price allocation). Due to the different basis of
accounting, the predecessor and successor results are not directly
comparable, but for narrative purposes in this press release, the
predecessor and successor results have been combined for ease of
discussion and analysis.
2015 Third Quarter Review
-
Net sales* (on a combined basis) were $160 million, a
decrease of 38 percent, compared to net sales of $260 million in the
third quarter of 2014. Lower sales volume and weaker pricing in both
business segments drove the reduction in revenue.
-
Reported net loss* (on a combined basis) was $(50) million,
compared to a net loss of $(35) million in the same period of the
prior year. The net loss in the third quarter of 2015 includes $23
million of special charges1, net of tax. The third quarter
of 2014 included special charges of $22 million, net of tax.
-
Adjusted net loss* (on a combined basis), which excludes
special charges, was $(27) million, compared to adjusted net loss*
of $(13) million in the third quarter of 2014.
-
EBITDA* (on a combined basis), which excludes special
charges, was $9 million, versus $24 million in the same period of the
prior year.
-
Net cash provided by operating activities* (on a combined
basis) was $8 million, compared to $27 million in the third quarter of
2014. Rationalization and transaction-related cash outlays of
approximately $13 million negatively impacted operating cash flow in
the quarter.
Industrial Materials
Net sales for Industrial Materials (on a combined basis)
declined to $126 million, compared to $209 million in the third quarter
of 2014. The Industrial Materials segment reported essentially breakeven
operating income (on a combined basis), compared to $5 million of
operating income in the same period of the prior year. Adjusted segment
operating income* (on a combined basis), which excludes
special charges, was $3 million in the third quarter of 2015, compared
to $12 million in the third quarter of 2014 and $4 million in the second
quarter of 2015. The reduction in revenue and adjusted operating income
was largely due to lower graphite electrode shipments in response to
weak global steel customer demand and lower realized graphite electrode
pricing year-over-year.
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
Q3 2014
|
|
|
Q2 2015
|
|
|
Q3 2015
|
|
Industrial Materials net sales:
|
|
|
$
|
208,573
|
|
|
|
$
|
125,012
|
|
|
|
$
|
126,004
|
|
|
Industrial Materials adjusted operating income:
|
|
|
12,283
|
|
|
|
|
3,995
|
|
|
|
3,030
|
|
|
Industrial Materials adjusted operating income margin:
|
|
|
5.9
|
%
|
|
|
|
3.2
|
%
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Solutions
Net sales for Engineered Solutions (on a combined basis)
decreased to $34 million, compared to $52 million in the third quarter
of 2014. Operating loss (on a combined basis) for the Engineered
Solutions segment was $(8) million, compared to $(12) million in the
same period of the prior year. Adjusted segment operating loss*
(on a combined basis), which excludes special charges, was $(4) million
in the third quarter of 2015, compared to adjusted operating income of
$1 million in the third quarter of 2014 and breakeven results in the
second quarter of 2015. Weak demand for products serving the advanced
consumer electronics industry and softness in advanced graphite
materials product sales adversely impacted revenue and adjusted
operating income in the quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
Q3 2014
|
|
|
Q2 2015
|
|
|
Q3 2015
|
|
Engineered Solutions net sales:
|
|
|
$
|
51,885
|
|
|
|
$
|
40,110
|
|
|
|
$
|
34,184
|
|
|
Engineered Solutions adjusted operating income:
|
|
|
|
1,225
|
|
|
|
|
(138
|
)
|
|
|
|
(3,509
|
)
|
|
Engineered Solutions adjusted operating income margin:
|
|
|
|
2.4
|
%
|
|
|
|
(0.3
|
)%
|
|
|
|
(10.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and Administrative and Research and
Development Expense
Total company selling and administrative expense and research and
development expenses (on a combined basis), which include corporate
expenses, were $41 million in the third quarter of 2015, compared to $30
million in the third quarter of 2014. Overhead expense in the third
quarter of 2015 was negatively impacted by special charges of $21
million in the third quarter of 2015 due to accelerated stock
compensation expense and transaction costs related to the acquisition,
compared to special charges of $1 million in the prior year quarter.
Excluding special charges in both periods, overhead declined $9 million,
or 31 percent, year-over-year to $20 million in the third quarter of
2015, due to continued cost reduction efforts.
Interest expense (on a combined basis) was $13 million, compared to $9
million in the same period of the prior year primarily resulting from
accelerated interest expense due to the prepayment of the Senior
Subordinated Notes.
Outlook
In its September 28, 2015 report, the International Monetary Fund (IMF)
reduced its global growth rate for 2015 to 3.1 percent, 0.3 percentage
points lower than in 2014, and 0.2 percentage points below its July
forecast. The report stated that the recovery in advanced economies is
expected to pick up slightly, while activity in emerging market and
developing economies is projected to slow for the fifth year in a row.
The IMF also indicated that downside risks to the outlook have risen,
particularly for emerging market and developing economies.
In its Short Range Outlook released on October 12, 2015, the World Steel
Association (WSA) forecast that global steel demand will decrease by 1.7
percent to 1,513 million tons in 2015, following growth of 0.7 percent
in 2014. In 2016, WSA forecast that world steel demand will show growth
of 0.7 percent and will reach 1,523 million tons.
Joel Hawthorne, Chief Executive Officer of GrafTech, commented, "We
continue to manage through a very challenging operating environment in
our end markets and will continue to aggressively reduce costs to
improve our competitive position. With the benefits of the investment
made by Brookfield Asset Management, we remain focused on leveraging our
core competencies that GrafTech has built over the past 129 years. We
will continue executing our strategy and positioning the company for
success as the cycle improves.”
About GrafTech
GrafTech International, an indirect wholly-owned subsidiary of
Brookfield Asset Management, 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: 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; 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; 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: litigation in relation to the recently consummated
tender offer and merger transactions; 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 that 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.
1 Special charges include rationalization and
rationalization-related charges, impairment charges, valuation
allowance, AGM customer bankruptcy, and proxy contest and transaction
expenses.
*Non-GAAP financial measures. See attached
reconciliations.
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(Dollars in thousands, except per share
data)
Unuaudited
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
|
|
As of
December 31,
2014
|
|
As of
September 30,
2015
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
17,550
|
|
|
$
|
13,461
|
|
|
Accounts and notes receivable, net of allowance for doubtful
accounts of $7,471 as of December 31, 2014 and $6,422 as of
September 30, 2015
|
|
162,919
|
|
|
111,024
|
|
|
Inventories
|
|
382,903
|
|
|
322,268
|
|
|
Prepaid expenses and other current assets
|
|
81,623
|
|
|
66,562
|
|
|
Total current assets
|
|
644,995
|
|
|
513,315
|
|
|
Property, plant and equipment
|
|
1,500,821
|
|
|
657,247
|
|
|
Less: accumulated depreciation
|
|
846,781
|
|
|
6,899
|
|
|
Net property, plant and equipment
|
|
654,040
|
|
|
650,348
|
|
|
Deferred income taxes
|
|
16,819
|
|
|
55,011
|
|
|
Goodwill
|
|
420,129
|
|
|
170,021
|
|
|
Other assets
|
|
97,822
|
|
|
162,474
|
|
|
Total assets
|
|
$
|
1,833,805
|
|
|
$
|
1,551,169
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
86,409
|
|
|
$
|
61,987
|
|
|
Short-term debt
|
|
188,104
|
|
|
9,600
|
|
|
Accrued income and other taxes
|
|
24,506
|
|
|
17,750
|
|
|
Rationalizations
|
|
9,563
|
|
|
5,263
|
|
|
Other accrued liabilities
|
|
43,319
|
|
|
37,072
|
|
|
Total current liabilities
|
|
351,901
|
|
|
131,672
|
|
|
Long-term debt
|
|
341,615
|
|
|
368,589
|
|
|
Other long-term obligations
|
|
107,566
|
|
|
89,643
|
|
|
Deferred income taxes
|
|
28,197
|
|
|
120,434
|
|
|
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 1,000 shares
authorized and 1,000 issued as of September 30, 2015
|
|
1,528
|
|
|
—
|
|
|
Additional paid-in capital
|
|
1,825,880
|
|
|
854,337
|
|
|
Accumulated other comprehensive loss
|
|
(336,524
|
)
|
|
(6,203
|
)
|
|
Accumulated deficit
|
|
(245,751
|
)
|
|
(7,303
|
)
|
|
Less: cost of common stock held in treasury, 15,922,729 shares as
of December 31, 2014 and 0 shares as of September 30, 2015
|
|
(239,811
|
)
|
|
—
|
|
|
Less: common stock held in employee benefit and compensation
trusts, 80,967 shares as of December 31, 2014 and 0 shares as of
September 30, 2015
|
|
(796
|
)
|
|
—
|
|
|
Total stockholders’ equity
|
|
1,004,526
|
|
|
840,831
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,833,805
|
|
|
$
|
1,551,169
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in thousands, except
per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
|
|
For the Three
Months Ended
September 30,
2014
|
|
For the Period
July 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September
30,
2015
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
260,458
|
|
|
$
|
65,598
|
|
|
$
|
94,591
|
|
|
Cost of sales
|
|
242,814
|
|
|
64,187
|
|
|
85,600
|
|
|
Gross profit
|
|
17,644
|
|
|
1,411
|
|
|
8,991
|
|
|
Research and development
|
|
2,871
|
|
|
1,211
|
|
|
660
|
|
|
Selling and administrative expenses
|
|
26,980
|
|
|
29,604
|
|
|
9,806
|
|
|
Rationalizations
|
|
10,844
|
|
|
244
|
|
|
637
|
|
|
Operating loss
|
|
(23,051
|
)
|
|
(29,648
|
)
|
|
(2,112
|
)
|
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
1,149
|
|
|
243
|
|
|
678
|
|
|
Interest expense
|
|
9,069
|
|
|
9,002
|
|
|
3,701
|
|
|
Interest income
|
|
(144
|
)
|
|
(22
|
)
|
|
(21
|
)
|
|
Loss before provision for income taxes
|
|
(33,125
|
)
|
|
(38,871
|
)
|
|
(6,470
|
)
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
1,818
|
|
|
3,353
|
|
|
833
|
|
|
Net loss
|
|
$
|
(34,943
|
)
|
|
$
|
(42,224
|
)
|
|
$
|
(7,303
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share:
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.26
|
)
|
|
$
|
(0.31
|
)
|
|
N/A
|
|
|
Weighted average common shares outstanding
|
|
136,375
|
|
|
137,433
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share:
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.26
|
)
|
|
$
|
(0.31
|
)
|
|
N/A
|
|
|
Weighted average common shares outstanding
|
|
136,375
|
|
|
137,433
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in thousands, except
per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
|
|
For the Nine
Months Ended
September 30,
2014
|
|
For the Period
January 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September 30,
2015
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
825,433
|
|
|
$
|
437,931
|
|
|
$
|
94,591
|
|
|
Cost of sales
|
|
764,142
|
|
|
399,817
|
|
|
85,600
|
|
|
Gross profit
|
|
61,291
|
|
|
38,114
|
|
|
8,991
|
|
|
Research and development
|
|
8,544
|
|
|
5,556
|
|
|
660
|
|
|
Selling and administrative expenses
|
|
89,024
|
|
|
81,147
|
|
|
9,806
|
|
|
Rationalizations
|
|
11,761
|
|
|
4,507
|
|
|
637
|
|
|
Impairments
|
|
121,570
|
|
|
35,381
|
|
|
—
|
|
|
Operating loss
|
|
(169,608
|
)
|
|
(88,477
|
)
|
|
(2,112
|
)
|
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
1,902
|
|
|
1,335
|
|
|
678
|
|
|
Interest expense
|
|
27,223
|
|
|
27,118
|
|
|
3,701
|
|
|
Interest income
|
|
(257
|
)
|
|
(367
|
)
|
|
(21
|
)
|
|
Loss before provision for income taxes
|
|
(198,476
|
)
|
|
(116,563
|
)
|
|
(6,470
|
)
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
3,417
|
|
|
4,086
|
|
|
833
|
|
|
Net loss
|
|
$
|
(201,893
|
)
|
|
$
|
(120,649
|
)
|
|
$
|
(7,303
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic loss per common share:
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(1.48
|
)
|
|
$
|
(0.88
|
)
|
|
N/A
|
|
|
Weighted average common shares outstanding
|
|
136,007
|
|
|
137,152
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share:
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(1.48
|
)
|
|
$
|
(0.88
|
)
|
|
N/A
|
|
|
Weighted average common shares outstanding
|
|
136,007
|
|
|
137,152
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
|
|
For the Three
Months Ended
September 30,
2014
|
|
For the Period
July 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September
30,
2015
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(34,943
|
)
|
|
$
|
(42,224
|
)
|
|
$
|
(7,303
|
)
|
|
Adjustments to reconcile net loss to cash provided by operations:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
26,616
|
|
|
6,078
|
|
|
10,604
|
|
|
Inventory write-downs
|
|
8,100
|
|
|
—
|
|
|
|
|
Deferred income tax provision
|
|
(3,219
|
)
|
|
5,871
|
|
|
863
|
|
|
Post-retirement and pension plan changes
|
|
1,004
|
|
|
746
|
|
|
486
|
|
|
Stock-based compensation
|
|
1,257
|
|
|
12,729
|
|
|
—
|
|
|
Interest expense
|
|
3,634
|
|
|
6,481
|
|
|
786
|
|
|
Other charges, net
|
|
1,264
|
|
|
1,421
|
|
|
(492
|
)
|
|
Increase (decrease) in working capital*
|
|
28,861
|
|
|
15,199
|
|
|
(47
|
)
|
|
Increase in long-term assets and liabilities
|
|
(5,585
|
)
|
|
(2,199
|
)
|
|
(985
|
)
|
|
Net cash provided by operating activities
|
|
26,989
|
|
|
4,102
|
|
|
3,912
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(22,850
|
)
|
|
(6,681
|
)
|
|
(5,239
|
)
|
|
Proceeds from the sale of assets
|
|
1,556
|
|
|
8
|
|
|
542
|
|
|
Proceeds from derivative instruments
|
|
(379
|
)
|
|
(458
|
)
|
|
84
|
|
|
Net cash used in investing activities
|
|
(21,673
|
)
|
|
(7,131
|
)
|
|
(4,613
|
)
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
Short-term debt, net
|
|
1,002
|
|
|
14,005
|
|
|
(10,180
|
)
|
|
Revolving Facility borrowings
|
|
20,000
|
|
|
86,000
|
|
|
22,000
|
|
|
Revolving Facility reductions
|
|
(35,000
|
)
|
|
(33,000
|
)
|
|
(21,000
|
)
|
|
Repayment of Senior Subordinated Notes
|
|
—
|
|
|
(200,000
|
)
|
|
—
|
|
|
Issuance of Preferred Shares
|
|
—
|
|
|
150,000
|
|
|
—
|
|
|
Principal payments on long-term debt
|
|
(32
|
)
|
|
(22
|
)
|
|
(12
|
)
|
|
Proceeds from exercise of stock options
|
|
—
|
|
|
32
|
|
|
—
|
|
|
Purchase of treasury shares
|
|
(185
|
)
|
|
—
|
|
|
—
|
|
|
Revolving Facility refinancing fees
|
|
(105
|
)
|
|
(2,346
|
)
|
|
—
|
|
|
Other
|
|
93
|
|
|
(649
|
)
|
|
(1,385
|
)
|
|
Net cash (used in) provided by financing activities
|
|
(14,227
|
)
|
|
14,020
|
|
|
(10,577
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(8,911
|
)
|
|
10,991
|
|
|
(11,278
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(939
|
)
|
|
(463
|
)
|
|
(294
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
20,728
|
|
|
14,505
|
|
|
25,033
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
10,878
|
|
|
$
|
25,033
|
|
|
$
|
13,461
|
|
|
* Net change in working capital due to the following components:
|
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
$
|
7,535
|
|
|
$
|
26,150
|
|
|
$
|
(16,927
|
)
|
|
Inventories
|
|
14,826
|
|
|
(2,110
|
)
|
|
18,436
|
|
|
Prepaid expenses and other current assets
|
|
3,100
|
|
|
(3,688
|
)
|
|
3,375
|
|
|
Decrease in accounts payable and accruals
|
|
(10,788
|
)
|
|
(6,921
|
)
|
|
(5,822
|
)
|
|
Rationalizations
|
|
9,405
|
|
|
(494
|
)
|
|
(1,642
|
)
|
|
Increase in interest payable
|
|
4,783
|
|
|
2,262
|
|
|
2,533
|
|
|
Change in working capital
|
|
$
|
28,861
|
|
|
$
|
15,199
|
|
|
$
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NON-GAAP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in
thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
Combined
|
|
|
|
For the Period
July 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September
30,
2015
|
|
Three Months
Ended
September 30,
2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
65,598
|
|
|
$
|
94,591
|
|
|
$
|
160,189
|
|
|
Cost of sales
|
|
64,187
|
|
|
85,600
|
|
|
149,787
|
|
|
Gross profit
|
|
1,411
|
|
|
8,991
|
|
|
10,402
|
|
|
Research and development
|
|
1,211
|
|
|
660
|
|
|
1,871
|
|
|
Selling and administrative expenses
|
|
29,604
|
|
|
9,806
|
|
|
39,410
|
|
|
Rationalizations
|
|
244
|
|
|
637
|
|
|
881
|
|
|
Operating loss
|
|
(29,648
|
)
|
|
(2,112
|
)
|
|
(31,760
|
)
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
243
|
|
|
678
|
|
|
921
|
|
|
Interest expense
|
|
9,002
|
|
|
3,701
|
|
|
12,703
|
|
|
Interest income
|
|
(22
|
)
|
|
(21
|
)
|
|
(43
|
)
|
|
Loss before provision for income taxes
|
|
(38,871
|
)
|
|
(6,470
|
)
|
|
(45,341
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
3,353
|
|
|
833
|
|
|
4,186
|
|
|
Net loss
|
|
$
|
(42,224
|
)
|
|
$
|
(7,303
|
)
|
|
$
|
(49,527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
Combined
|
|
|
|
For the Period
January 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September 30,
2015
|
|
For the Nine
Months Ended
September 30,
2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
437,931
|
|
|
$
|
94,591
|
|
|
$
|
532,522
|
|
|
Cost of sales
|
|
399,817
|
|
|
85,600
|
|
|
485,417
|
|
|
Gross profit
|
|
38,114
|
|
|
8,991
|
|
|
47,105
|
|
|
Research and development
|
|
5,556
|
|
|
660
|
|
|
6,216
|
|
|
Selling and administrative expenses
|
|
81,147
|
|
|
9,806
|
|
|
90,953
|
|
|
Rationalizations
|
|
4,507
|
|
|
637
|
|
|
5,144
|
|
|
Impairments
|
|
35,381
|
|
|
—
|
|
|
35,381
|
|
|
Operating loss
|
|
(88,477
|
)
|
|
(2,112
|
)
|
|
(90,589
|
)
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
1,335
|
|
|
678
|
|
|
2,013
|
|
|
Interest expense
|
|
27,118
|
|
|
3,701
|
|
|
30,819
|
|
|
Interest income
|
|
(367
|
)
|
|
(21
|
)
|
|
(388
|
)
|
|
Loss before provision for income taxes
|
|
(116,563
|
)
|
|
(6,470
|
)
|
|
(123,033
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
4,086
|
|
|
833
|
|
|
4,919
|
|
|
Net loss
|
|
$
|
(120,649
|
)
|
|
$
|
(7,303
|
)
|
|
$
|
(127,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NON-GAAP
STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
Successor
|
|
Combined
|
|
|
|
For the Period
July 1, 2015
Through
August
14, 2015
|
|
For the Period
August 15, 2015
Through
September
30,
2015
|
|
For the Three
Months Ended
September 30,
2015
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(42,224
|
)
|
|
$
|
(7,303
|
)
|
|
$
|
(49,527
|
)
|
|
Adjustments to reconcile net loss to cash provided by operations:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
6,078
|
|
|
10,604
|
|
|
16,682
|
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Inventory write-downs
|
|
—
|
|
|
|
|
—
|
|
|
Deferred income tax provision
|
|
5,871
|
|
|
863
|
|
|
6,734
|
|
|
Post-retirement and pension plan changes
|
|
746
|
|
|
486
|
|
|
1,232
|
|
|
Stock-based compensation
|
|
12,729
|
|
|
—
|
|
|
12,729
|
|
|
Interest expense
|
|
6,481
|
|
|
786
|
|
|
7,267
|
|
|
Other charges, net
|
|
1,421
|
|
|
(492
|
)
|
|
929
|
|
|
Increase (decrease) in working capital*
|
|
15,199
|
|
|
(47
|
)
|
|
15,152
|
|
|
Increase in long-term assets and liabilities
|
|
(2,199
|
)
|
|
(985
|
)
|
|
(3,184
|
)
|
|
Net cash provided by operating activities
|
|
4,102
|
|
|
3,912
|
|
|
8,014
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
(6,681
|
)
|
|
(5,239
|
)
|
|
(11,920
|
)
|
|
Proceeds from the sale of assets
|
|
8
|
|
|
542
|
|
|
550
|
|
|
Proceeds from derivative instruments
|
|
(458
|
)
|
|
84
|
|
|
(374
|
)
|
|
Net cash used in investing activities
|
|
(7,131
|
)
|
|
(4,613
|
)
|
|
(11,744
|
)
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
Short-term debt, net
|
|
14,005
|
|
|
(10,180
|
)
|
|
3,825
|
|
|
Revolving Facility borrowings
|
|
86,000
|
|
|
22,000
|
|
|
108,000
|
|
|
Revolving Facility reductions
|
|
(33,000
|
)
|
|
(21,000
|
)
|
|
(54,000
|
)
|
|
Repayment of Senior Subordinated Notes
|
|
(200,000
|
)
|
|
—
|
|
|
(200,000
|
)
|
|
Issuance of Preferred Shares
|
|
150,000
|
|
|
—
|
|
|
150,000
|
|
|
Supply chain financing
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
|
Proceeds from exercise of stock options
|
|
32
|
|
|
—
|
|
|
32
|
|
|
Purchase of treasury shares
|
|
—
|
|
|
|
|
—
|
|
|
Revolving Facility refinancing fees
|
|
(2,346
|
)
|
|
—
|
|
|
(2,346
|
)
|
|
Other
|
|
(649
|
)
|
|
(1,385
|
)
|
|
(2,034
|
)
|
|
Net cash provided by (used in) financing activities
|
|
14,020
|
|
|
(10,565
|
)
|
|
3,455
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
10,991
|
|
|
(11,266
|
)
|
|
(275
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(463
|
)
|
|
(294
|
)
|
|
(757
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
14,505
|
|
|
25,033
|
|
|
39,538
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
25,033
|
|
|
$
|
13,473
|
|
|
$
|
38,506
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
$
|
26,150
|
|
|
$
|
(16,927
|
)
|
|
$
|
9,223
|
|
|
Inventories
|
|
(2,110
|
)
|
|
18,436
|
|
|
16,326
|
|
|
Prepaid expenses and other current assets
|
|
(3,688
|
)
|
|
3,375
|
|
|
(313
|
)
|
|
Decrease in accounts payable and accruals
|
|
(6,921
|
)
|
|
(5,822
|
)
|
|
(12,743
|
)
|
|
Rationalizations
|
|
(494
|
)
|
|
(1,642
|
)
|
|
(2,136
|
)
|
|
Increase in interest payable
|
|
2,262
|
|
|
2,533
|
|
|
4,795
|
|
|
Increase (decrease) in working capital
|
|
$
|
15,199
|
|
|
$
|
(47
|
)
|
|
$
|
15,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY AND RECONCILIATION
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Combined
|
|
|
|
Combined
|
|
|
|
For the Three
Months
Ended
September
30,
2014
|
|
For the Three
Months
Ended
June 30,
2015
|
|
For the Three
Months
Ended
September
30,
2015
|
|
For the Nine
Months
Ended
September
30,
2014
|
|
For the Nine
Months
Ended
September
30,
2015
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Materials
|
|
$
|
208,573
|
|
|
$
|
125,012
|
|
|
$
|
126,004
|
|
|
$
|
634,004
|
|
|
$
|
416,052
|
|
|
Engineered Solutions
|
|
51,885
|
|
|
40,110
|
|
|
34,184
|
|
|
191,429
|
|
|
116,468
|
|
|
Total net sales
|
|
$
|
260,458
|
|
|
$
|
165,122
|
|
|
$
|
160,188
|
|
|
$
|
825,433
|
|
|
$
|
532,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Materials
|
|
5,082
|
|
|
3,094
|
|
|
(480
|
)
|
|
7,742
|
|
|
(23,285
|
)
|
|
Engineered Solutions
|
|
(12,445
|
)
|
|
(3,455
|
)
|
|
(8,070
|
)
|
|
(131,704
|
)
|
|
(15,918
|
)
|
|
Corporate, R&D, and Other
|
|
(15,688
|
)
|
|
(12,636
|
)
|
|
(23,208
|
)
|
|
(45,646
|
)
|
|
(51,387
|
)
|
|
Total segment operating loss
|
|
$
|
(23,051
|
)
|
|
$
|
(12,997
|
)
|
|
$
|
(31,758
|
)
|
|
$
|
(169,608
|
)
|
|
$
|
(90,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rationalization and Rationalization Related and Impairment Charges
|
|
|
|
Industrial Materials
|
|
7,201
|
|
|
901
|
|
|
272
|
|
|
33,652
|
|
|
38,263
|
|
|
Engineered Solutions
|
|
8,841
|
|
|
3,317
|
|
|
2,040
|
|
|
142,387
|
|
|
8,465
|
|
|
Corporate, R&D, and Other
|
|
2,960
|
|
|
(86
|
)
|
|
135
|
|
|
2,960
|
|
|
1,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proxy contest and transaction expenses
|
|
|
|
|
|
|
|
|
|
Industrial Materials
|
|
—
|
|
|
—
|
|
|
3,238
|
|
|
—
|
|
|
3,238
|
|
|
Engineered Solutions
|
|
4,829
|
|
|
—
|
|
|
2,521
|
|
|
4,829
|
|
|
2,521
|
|
|
Corporate, R&D, and Other
|
|
—
|
|
|
3,310
|
|
|
15,425
|
|
|
2,438
|
|
|
20,400
|
|
|
Total Reconciling Items
|
|
23,831
|
|
|
7,442
|
|
|
23,631
|
|
|
186,266
|
|
|
74,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted operating income:
|
|
|
|
|
|
|
|
|
|
Industrial Materials
|
|
12,283
|
|
|
3,995
|
|
|
3,030
|
|
|
41,394
|
|
|
18,216
|
|
|
Engineered Solutions
|
|
1,225
|
|
|
(138
|
)
|
|
(3,509
|
)
|
|
15,512
|
|
|
(4,932
|
)
|
|
Corporate, R&D, and Other
|
|
(12,728
|
)
|
|
(9,412
|
)
|
|
(7,648
|
)
|
|
(40,248
|
)
|
|
(29,251
|
)
|
|
Total adjusted operating income
|
|
$
|
780
|
|
|
$
|
(5,555
|
)
|
|
$
|
(8,127
|
)
|
|
$
|
16,658
|
|
|
$
|
(15,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating income margin:
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Materials
|
|
5.9
|
%
|
|
3.2
|
%
|
|
2.4
|
%
|
|
6.5
|
%
|
|
4.4
|
%
|
|
Engineered Solutions
|
|
2.4
|
%
|
|
(0.3
|
) %
|
|
(10.3
|
) %
|
|
8.1
|
%
|
|
(4.2
|
)%
|
|
Total adjusted operating income margin
|
|
0.3
|
%
|
|
(3.4
|
) %
|
|
(5.1
|
) %
|
|
2.0
|
%
|
|
(3.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
Combined
|
|
|
|
For the Three
Months
Ended
September
30,
2014
|
|
For the Three
Months
Ended
September
30,
2015
|
|
For the Nine
Months
Ended
September
30,
2014
|
|
For the Nine
Months
Ended
September
30,
2015
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
23,749
|
|
|
$
|
8,555
|
|
|
$
|
84,458
|
|
|
$
|
38,727
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
(22,971
|
)
|
|
(16,682
|
)
|
|
(67,799
|
)
|
|
(54,693
|
)
|
|
Rationalization related depreciation
|
|
(3,645
|
)
|
|
—
|
|
|
(25,324
|
)
|
|
(1,373
|
)
|
|
Rationalizations
|
|
(10,843
|
)
|
|
(881
|
)
|
|
(11,761
|
)
|
|
(5,143
|
)
|
|
Impairments
|
|
—
|
|
|
—
|
|
|
(121,570
|
)
|
|
(35,381
|
)
|
|
Rationalizations related charges
|
|
(4,512
|
)
|
|
(1,568
|
)
|
|
(20,345
|
)
|
|
(6,567
|
)
|
|
Advanced graphite materials customer bad debt and inventory charge
|
|
(4,829
|
)
|
|
—
|
|
|
(4,829
|
)
|
|
—
|
|
|
Proxy contest and transaction expenses
|
|
—
|
|
|
(21,184
|
)
|
|
(2,438
|
)
|
|
(26,159
|
)
|
|
Operating income
|
|
(23,051
|
)
|
|
(31,760
|
)
|
|
(169,608
|
)
|
|
(90,589
|
)
|
|
Other (expense) income, net
|
|
(1,149
|
)
|
|
(921
|
)
|
|
(1,902
|
)
|
|
(2,013
|
)
|
|
Interest expense
|
|
(9,069
|
)
|
|
(12,703
|
)
|
|
(27,223
|
)
|
|
(30,819
|
)
|
|
Interest income
|
|
144
|
|
|
43
|
|
|
257
|
|
|
388
|
|
|
Income taxes
|
|
(1,818
|
)
|
|
(4,186
|
)
|
|
(3,417
|
)
|
|
(4,919
|
)
|
|
Net loss
|
|
$
|
(34,943
|
)
|
|
$
|
(49,527
|
)
|
|
$
|
(201,893
|
)
|
|
$
|
(127,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
Combined
|
|
|
|
For the Three Months Ended
September 30, 2014
|
|
For the Three Months Ended
September 30, 2015
|
|
|
|
Income
(Loss)
|
|
EPS
|
|
Income
(Loss)
|
|
EPS
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(34,943
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(49,527
|
)
|
|
N/A
|
|
Rationalizations, net of tax
|
|
7,123
|
|
|
0.05
|
|
|
640
|
|
|
N/A
|
|
Rationalization related, net of tax
|
|
5,088
|
|
|
0.05
|
|
|
1,048
|
|
|
N/A
|
|
Valuation allowance
|
|
6,786
|
|
|
0.05
|
|
|
7,825
|
|
|
N/A
|
|
Advanced graphite materials customer bad debt and inventory
charge, net of tax
|
|
3,062
|
|
|
0.02
|
|
|
—
|
|
|
N/A
|
|
Proxy contest and transaction expenses, net of tax
|
|
—
|
|
|
—
|
|
|
13,311
|
|
|
N/A
|
|
Adjusted net loss
|
|
$
|
(12,884
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(26,703
|
)
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
For the Nine Months Ended
September 30, 2014
|
|
For the Nine Months Ended
September 30, 2015
|
|
|
|
Income
(Loss)
|
|
EPS
|
|
Income
(Loss)
|
|
EPS
|
|
Total Company
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(201,893
|
)
|
|
$
|
(1.48
|
)
|
|
$
|
(127,952
|
)
|
|
N/A
|
|
Rationalizations, net of tax
|
|
7,760
|
|
|
0.06
|
|
|
3,308
|
|
|
N/A
|
|
Impairment, net of tax
|
|
76,544
|
|
|
0.56
|
|
|
30,902
|
|
|
N/A
|
|
Rationalization related, net of tax
|
|
30,346
|
|
|
0.22
|
|
|
5,301
|
|
|
N/A
|
|
Valuation allowance
|
|
65,715
|
|
|
0.49
|
|
|
15,209
|
|
|
N/A
|
|
Advanced graphite materials customer bad debt and inventory
charge, net of tax
|
|
3,062
|
|
|
0.02
|
|
|
—
|
|
|
N/A
|
|
Proxy contest and transaction expenses, net of tax
|
|
1,521
|
|
|
0.01
|
|
|
16,435
|
|
|
N/A
|
|
Adjusted net loss
|
|
$
|
(16,945
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(56,797
|
)
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
GTI-G
View source version on businesswire.com: http://www.businesswire.com/news/home/20151104006835/en/
Copyright Business Wire 2015