Delaware | 1-13888 | 27-2496053 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
Suite 300 Park Center I |
6100 Oak Tree Boulevard |
Independence, Ohio 44131 |
(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, 2015 |
GRAFTECH INTERNATIONAL LTD. | |||
Date: | July 29, 2015 | By: | /s/ Quinn J Coburn |
Quinn J Coburn | |||
Vice President and Interim Chief Financial Officer |
99.1 | Press release of GrafTech International Ltd., dated July 29, 2015 |
• | 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. |
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 | % |
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 | )% |
• | 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. |
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 153,225,065 shares 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 of December 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 of June 30, 2015 | (796 | ) | (657 | ) | |||
Total stockholders’ equity | 1,004,526 | 909,476 | |||||
Total liabilities and stockholders’ equity | $ | 1,833,805 | $ | 1,712,974 |
For the Three Months Ended | For the Six 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 |
For the Three Months Ended June 30, | For the Six Months 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 by operations: | |||||||||||||||
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 | )% |
EBITDA Reconciliation | |||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended 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 | ) | |||||
Adjusted Net Income and Earnings Per Share Reconciliation | |||||||||||||||
For the Three Months Ended June 30, 2014 | For the Three Months Ended 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 June 30, 2014 | For the Six Months Ended 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 | ) |
Net Debt Reconciliation | ||||||||
As of December 31, 2014 | As of 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 |
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