Delaware | 1-13888 | 27-2496053 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
12900 Snow Road |
Parma, Ohio 44130 |
(Address of Principal Executive Offices, including Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 9.01. | Financial Statements and Exhibits. |
99.1 | Press release of GrafTech International Ltd., dated July 29, 2014 |
99.2 | Press release of GrafTech International Ltd., dated July 29, 2014 |
GRAFTECH INTERNATIONAL LTD. | |||
Date: | July 29, 2014 | By: | /s/ Erick R. Asmussen |
Erick R. Asmussen | |||
Chief Financial Officer and Vice President |
99.1 | Press release of GrafTech International Ltd., dated July 29, 2014 |
99.2 | Press release of GrafTech International Ltd., dated July 29, 2014 |
• | Net sales were $284 million, a decrease of six percent, compared to $301 million in the same period of the prior year. |
• | Industrial Materials segment revenue declined 11 percent primarily due to weaker graphite electrode realized pricing and lower needle coke sales volume. |
• | Engineered Solutions segment revenue increased 11 percent primarily due to higher sales volumes in advanced consumer electronics and high temperature furnace applications. |
• | Preliminary earnings were a net loss of $(160) million, or $(1.18) per diluted share, versus net income of $4 million, or $0.03 per diluted share in the same period of the prior year. The preliminary net loss in the second quarter of 2014 includes an estimated $154 million, net of tax, of special charges. Excluding these charges, adjusted net loss* was $(6) million, or $(0.05) per diluted share. |
• | EBITDA* (which excludes special charges) was $28 million as compared to $40 million in the same period of the prior year. |
• | Net cash provided by operating activities was $34 million versus a net cash use of $(6) million in the second quarter of 2013. Operating cash flow in the second quarter of 2014 includes approximately $9 million of rationalization and related cash costs. |
• | Net debt* was $531 million as compared to $540 million at the end of 2013. |
($ millions except as noted) | |
Annual EBITDA* | $135 - $150 (previously $150 - $180) |
Third quarter 2014 EBITDA* | $30 - $40 |
Depreciation and amortization expense | ~ $90 |
Overhead expense (selling and administrative, and research and development expenses) | $125 - $130 |
Interest expense | ~ $36 (previously ~$37) |
Second half 2014 effective tax rate | ~ 35% |
($ millions) | |
Cash flow from operations | $125 - $140, including cash rationalization charges (previously $150 - $180) |
Capital expenditures | $85 - $95 (previously $100 - $110) |
As of December 31, 2013 | As of June 30, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 11,888 | $ | 20,728 | |||
Accounts and notes receivable, net of allowance for doubtful accounts of $6,718 as of December 31, 2013 and $8,563 as of June 30, 2014 | 199,566 | 177,541 | |||||
Inventories | 490,414 | 450,421 | |||||
Prepaid expenses and other current assets | 73,790 | 93,588 | |||||
Total current assets | 775,658 | 742,278 | |||||
Property, plant and equipment | 1,588,880 | 1,621,461 | |||||
Less: accumulated depreciation | 767,895 | 943,314 | |||||
Net property, plant and equipment | 820,985 | 678,147 | |||||
Deferred income taxes | 10,334 | 12,079 | |||||
Goodwill | 496,810 | 496,335 | |||||
Other assets | 114,061 | 110,348 | |||||
Total assets | $ | 2,217,848 | $ | 2,039,187 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 115,212 | $ | 122,428 | |||
Short-term debt | 1,161 | 142 | |||||
Accrued income and other taxes | 30,687 | 22,731 | |||||
Rationalizations | 18,421 | 3,592 | |||||
Supply chain financing liability | 9,455 | — | |||||
Other accrued liabilities | 40,939 | 38,447 | |||||
Total current liabilities | 215,875 | 187,340 | |||||
Long-term debt | 541,593 | 551,533 | |||||
Other long-term obligations | 97,947 | 95,892 | |||||
Deferred income taxes | 41,684 | 44,574 | |||||
Stockholders’ equity: | |||||||
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued | — | — | |||||
Common stock, par value $.01, 225,000,000 shares authorized, 151,929,565 shares issued as of December 31, 2013 and 152,450,629 shares issued as of June 30, 2014 | 1,519 | 1,529 | |||||
Additional paid-in capital | 1,820,451 | 1,826,771 | |||||
Accumulated other comprehensive loss | (292,624 | ) | (290,313 | ) | |||
Retained earnings | 39,625 | (131,858 | ) | ||||
Less: cost of common stock held in treasury, 16,341,311 shares as of December 31, 2013 and 16,223,318 shares as of June 30, 2014 | (247,190 | ) | (245,221 | ) | |||
Less: common stock held in employee benefit and compensation trusts, 87,206 shares as of December 31, 2013 and 89,703 shares as of June 30, 2014 | (1,032 | ) | (1,060 | ) | |||
Total stockholders’ equity | 1,320,749 | 1,159,848 | |||||
Total liabilities and stockholders’ equity | $ | 2,217,848 | $ | 2,039,187 |
For the Three Months Ended | For the Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2014 | 2013 | 2014 | ||||||||||||
Net sales | $ | 301,361 | $ | 284,184 | $ | 555,088 | $ | 564,975 | |||||||
Cost of sales | 252,440 | 266,231 | 457,617 | 521,328 | |||||||||||
Gross profit | 48,921 | 17,953 | 97,471 | 43,647 | |||||||||||
Research and development | 2,787 | 2,903 | 5,880 | 5,673 | |||||||||||
Selling and administrative expenses | 30,161 | 32,137 | 59,874 | 62,044 | |||||||||||
Rationalizations | — | 831 | — | 917 | |||||||||||
Impairment of long-lived assets | — | 126,137 | — | 126,137 | |||||||||||
Operating income (loss) | 15,973 | (144,055 | ) | 31,717 | (151,124 | ) | |||||||||
Other expense, net | 975 | (41 | ) | 1,525 | 753 | ||||||||||
Interest expense | 8,947 | 9,155 | 17,955 | 18,154 | |||||||||||
Interest income | (49 | ) | (55 | ) | (113 | ) | (113 | ) | |||||||
Income (loss) before provision for income taxes | 6,100 | (153,114 | ) | 12,350 | (169,918 | ) | |||||||||
Provision for income taxes | 1,718 | 6,853 | 3,758 | 1,566 | |||||||||||
Net income (loss) | $ | 4,382 | $ | (159,967 | ) | $ | 8,592 | $ | (171,484 | ) | |||||
Basic income (loss) per common share: | |||||||||||||||
Net income (loss) per share | $ | 0.03 | $ | (1.18 | ) | $ | 0.06 | $ | (1.26 | ) | |||||
Weighted average common shares outstanding | 134,854 | 135,963 | 134,816 | 135,713 | |||||||||||
Diluted income (loss) per common share: | |||||||||||||||
Net income (loss) per share | $ | 0.03 | $ | (1.18 | ) | $ | 0.06 | $ | (1.26 | ) | |||||
Weighted average common shares outstanding | 135,056 | 135,963 | 134,988 | 135,713 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2013 | 2014 | 2013 | 2014 | ||||||||||||
Cash flow from operating activities: | |||||||||||||||
Net income (loss) | $ | 4,382 | $ | (159,967 | ) | $ | 8,592 | $ | (171,484 | ) | |||||
Adjustments to reconcile net income to cash provided by operations: | |||||||||||||||
Depreciation and amortization | 24,492 | 26,846 | 44,868 | 66,507 | |||||||||||
Impairment of long-lived assets | — | 126,137 | — | 126,137 | |||||||||||
Deferred income tax provision | 1,937 | (502 | ) | 277 | (1,724 | ) | |||||||||
Post-retirement and pension plan changes | 1,101 | 2,081 | 2,242 | 3,093 | |||||||||||
Stock-based compensation | 1,379 | 2,230 | 3,745 | 2,752 | |||||||||||
Interest expense | 3,486 | 3,826 | 6,919 | 7,471 | |||||||||||
Other charges, net | 1,135 | 4,376 | 1,420 | 2,783 | |||||||||||
(Increase) decrease in working capital* | (42,082 | ) | 37,048 | (51,016 | ) | 30,383 | |||||||||
Increase in long-term assets and liabilities | (2,183 | ) | (8,265 | ) | (5,401 | ) | (10,018 | ) | |||||||
Net cash (used in) provided by operating activities | (6,353 | ) | 33,810 | 11,646 | 55,900 | ||||||||||
Cash flow from investing activities: | |||||||||||||||
Capital expenditures | (25,362 | ) | (24,736 | ) | (38,518 | ) | (46,464 | ) | |||||||
Proceeds from the sale of assets | — | 628 | — | 2,523 | |||||||||||
(Payments for) proceeds from derivative instruments | (709 | ) | 173 | 1,472 | (194 | ) | |||||||||
Insurance recoveries | 284 | (223 | ) | 284 | 2,834 | ||||||||||
Net cash used in investing activities | (25,787 | ) | (24,158 | ) | (36,762 | ) | (41,301 | ) | |||||||
Cash flow from financing activities: | |||||||||||||||
Short-term debt reductions, net | 675 | (25 | ) | (5,649 | ) | (1,019 | ) | ||||||||
Revolving Facility borrowings | 45,000 | 134,000 | 111,000 | 209,000 | |||||||||||
Revolving Facility reductions | (18,000 | ) | (140,000 | ) | (70,500 | ) | (205,000 | ) | |||||||
Principal payments on long-term debt | (41 | ) | (34 | ) | (140 | ) | (126 | ) | |||||||
Supply chain financing | 5,935 | — | (8,369 | ) | (9,455 | ) | |||||||||
Proceeds from exercise of stock options | 43 | 2,731 | 175 | 2,813 | |||||||||||
Purchase of treasury shares | (528 | ) | (294 | ) | (709 | ) | (435 | ) | |||||||
Revolver facility refinancing | (2,636 | ) | — | (2,636 | ) | ||||||||||
Other | (793 | ) | — | (6,440 | ) | 918 | |||||||||
Net cash provided by (used in) financing activities | 32,291 | (6,258 | ) | 19,368 | (5,940 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | 151 | 3,394 | (5,748 | ) | 8,659 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (469 | ) | 10 | (583 | ) | 181 | |||||||||
Cash and cash equivalents at beginning of period | 11,304 | 17,324 | 17,317 | 11,888 | |||||||||||
Cash and cash equivalents at end of period | $ | 10,986 | $ | 20,728 | $ | 10,986 | $ | 20,728 | |||||||
* Net change in working capital due to the following components: | |||||||||||||||
Change in current assets: | |||||||||||||||
Accounts and notes receivable, net | $ | (19,691 | ) | $ | 27,842 | $ | 28,076 | $ | 22,158 | ||||||
Inventories | (9,595 | ) | 41,343 | (33,384 | ) | 42,298 | |||||||||
Prepaid expenses and other current assets | (15,176 | ) | (13,990 | ) | (16,362 | ) | (18,660 | ) | |||||||
Decrease in accounts payable and accruals | 6,855 | (6,823 | ) | (29,741 | ) | (317 | ) | ||||||||
Rationalizations | — | (6,496 | ) | — | (15,076 | ) | |||||||||
(Decrease) Increase in interest payable | (4,475 | ) | (4,828 | ) | 395 | (20 | ) | ||||||||
(Increase) decrease in working capital | $ | (42,082 | ) | $ | 37,048 | $ | (51,016 | ) | $ | 30,383 | |||||
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES SEGMENT DATA SUMMARY AND RECONCILIATION (Dollars in thousands) (Preliminary and Unaudited) | ||||||||||||||||
For the three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2013 | 2014 | 2013 | 2014 | |||||||||||||
Net sales: | ||||||||||||||||
Industrial Materials | $ | 231,339 | $ | 206,655 | $ | 440,116 | $ | 425,431 | ||||||||
Engineered Solutions | 70,022 | 77,529 | 114,972 | 139,544 | ||||||||||||
Total net sales | $ | 301,361 | $ | 284,184 | $ | 555,088 | $ | 564,975 | ||||||||
Segment operating income: | ||||||||||||||||
Industrial Materials | 7,530 | (11,366 | ) | 23,608 | (20,790 | ) | ||||||||||
Engineered Solutions | 8,443 | (132,689 | ) | 8,109 | (130,334 | ) | ||||||||||
Total segment operating income | $ | 15,973 | $ | (144,055 | ) | $ | 31,717 | $ | (151,124 | ) | ||||||
Reconciling Items: | ||||||||||||||||
Rationalizations - Industrial Materials | — | 832 | — | 946 | ||||||||||||
Rationalizations - Engineered Solutions | — | — | — | (28 | ) | |||||||||||
Impairments - Engineered Solutions | — | 126,137 | — | 126,137 | ||||||||||||
Total Rationalizations and impairments | — | 126,969 | — | 127,055 | ||||||||||||
Rationalization and impairment related | ||||||||||||||||
Industrial Materials (recorded in Cost of sales) | 8,087 | — | 25,428 | |||||||||||||
Industrial Materials (recorded in Selling and Administrative) | — | 53 | — | 78 | ||||||||||||
Engineered Solutions (recorded in Cost of sales) | 11,601 | — | 12,005 | |||||||||||||
Engineered Solutions (recorded in Selling and Administrative) | — | — | — | — | ||||||||||||
Total Rationalization and impairment related | — | 19,741 | — | 37,511 | ||||||||||||
Proxy contest expenses - allocated to Industrial Materials | — | 1,888 | — | 1,888 | ||||||||||||
Proxy contest expenses - allocated to Engineered Solutions | — | 550 | — | 550 | ||||||||||||
Total proxy contest expenses | — | 2,438 | — | 2,438 | ||||||||||||
Segment adjusted operating income: | ||||||||||||||||
Industrial Materials | 7,530 | (506 | ) | 23,608 | 7,550 | |||||||||||
Engineered Solutions | 8,443 | 5,599 | 8,109 | 8,330 | ||||||||||||
Total adjusted segment operating income | $ | 15,973 | $ | 5,093 | $ | 31,717 | $ | 15,880 | ||||||||
Adjusted operating income margin: | ||||||||||||||||
Industrial Materials | 3.3 | % | (0.2 | )% | 5.4 | % | 1.8 | % | ||||||||
Engineered Solutions | 12.1 | % | 7.2 | % | 7.1 | % | 6.0 | % | ||||||||
Total adjusted operating income margin | 5.3 | % | 1.8 | % | 5.7 | % | 2.8 | % |
EBITDA Reconciliation | ||||||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | Third Quarter Target | Full Year Target | |||||||||||||||||
2013 | 2014 | 2013 | 2014 | 2014 | 2014 | |||||||||||||||
EBITDA | $ | 40,465 | $ | 27,694 | $ | 76,585 | $ | 60,707 | $30,000 - $40,000 | $135,000 - $150,000 | ||||||||||
Adjustments | ||||||||||||||||||||
Depreciation and amortization | (24,492 | ) | (22,600 | ) | (44,868 | ) | (44,828 | ) | (22,000) | (90,000) | ||||||||||
Rationalization related depreciation | — | (4,246 | ) | — | (21,679 | ) | — | (21,679) | ||||||||||||
Rationalizations | — | (832 | ) | — | (917 | ) | (4,000) | (4,917) | ||||||||||||
Impairments | — | (126,137 | ) | — | (126,137 | ) | — | (126,137) | ||||||||||||
Rationalizations and impairments - other related charges | — | (15,496 | ) | — | (15,832 | ) | (10,000) | (25,829) | ||||||||||||
Proxy contest expenses | — | (2,438 | ) | (2,438 | ) | — | (2,438) | |||||||||||||
Operating income | 15,973 | (144,055 | ) | 31,717 | (151,124 | ) | (6,000) - 4,000 | (136,000) - (121,000) | ||||||||||||
Other (expense) income, net | (975 | ) | 41 | (1,525 | ) | (753 | ) | (1,000) | (2,000) | |||||||||||
Interest expense | (8,947 | ) | (9,155 | ) | (17,955 | ) | (18,154 | ) | (9,000) | (36,000) | ||||||||||
Interest income | 49 | 55 | 113 | 113 | — | — | ||||||||||||||
Income taxes | (1,718 | ) | (6,853 | ) | (3,758 | ) | (1,566 | ) | 2,000 - 500 | 0 - (4,000) | ||||||||||
Net income (loss) | $ | 4,382 | $ | (159,967 | ) | $ | 8,592 | $ | (171,484 | ) | $(14,000) - $(5,500) | $(174,000) - $(163,000) | ||||||||
Adjusted Net Income and Earnings Per Share Reconciliation | |||||||||||||||
For the Three Months Ended June 30, 2013 | For the Three Months Ended June 30, 2014 | ||||||||||||||
Income (Loss) | EPS | Income (Loss) | EPS | ||||||||||||
Total Company | |||||||||||||||
Net income (loss) | $ | 4,382 | $ | 0.03 | $ | (159,967 | ) | $ | (1.18 | ) | |||||
Rationalizations, net of tax | — | — | 562 | — | |||||||||||
Impairment of long-lived assets, net of tax | — | — | 79,506 | 0.58 | |||||||||||
Rationalization and impairment related, net of tax | — | — | 12,956 | 0.10 | |||||||||||
Valuation allowance | — | — | 58,929 | 0.44 | |||||||||||
Proxy contest expenses, net of tax | — | — | 1,521 | 0.01 | |||||||||||
Adjusted net income (loss) | $ | 4,382 | $ | 0.03 | $ | (6,493 | ) | $ | (0.05 | ) | |||||
For the Six Months Ended June 30, 2013 | For the Six Months Ended June 30, 2014 | ||||||||||||||
Income (Loss) | EPS | Income (Loss) | EPS | ||||||||||||
Total Company | |||||||||||||||
Net income (loss) | $ | 8,592 | $ | 0.06 | $ | (171,484 | ) | $ | (1.26 | ) | |||||
Rationalizations, net of tax | — | — | 636 | — | |||||||||||
Rationalization and impairment related, net of tax | — | — | 79,506 | 0.59 | |||||||||||
Rationalization related, net of tax | — | — | 25,257 | 0.19 | |||||||||||
Valuation allowance | — | — | 58,929 | 0.43 | |||||||||||
Proxy contest expenses, net of tax | — | — | 1,521 | $ | 0.01 | ||||||||||
Adjusted net income (loss) | $ | 8,592 | $ | 0.06 | $ | (5,635 | ) | $ | (0.04 | ) |
Net Debt Reconciliation | ||||||||
As of December 31, 2013 | As of June 30, 2014 | |||||||
Long-term debt | $ | 541,593 | $ | 551,533 | ||||
Short-term debt | 1,161 | 142 | ||||||
Supply chain financing | 9,455 | — | ||||||
Total debt | 552,209 | 551,675 | ||||||
Less: | ||||||||
Cash and cash equivalents | 11,888 | 20,728 | ||||||
Net Debt | $ | 540,321 | $ | 530,947 |
• | GrafTech records an estimated non-cash impairment charge of $126 million due to recent changes in the competitive environment impacting the Engineered Solutions segment's advanced graphite materials business |
• | New initiatives to rationalize Engineered Solutions product line expected to generate $18 million in annual cost savings at a total cost of approximately $24 million |
• | Continued review across all aspects of business underway for additional cost savings |
• | Industrial Materials rationalization plan substantially complete, on target to achieve $75 million in annual savings |
• | Cumulative impact of announced initiatives expected to generate over $90 million in annual cost savings when fully implemented |
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