Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,501.65 0.00 0.00%
S&P 500 1,878.61 3.22 0.17%
NASDAQ 4,148.34 21.37 0.52%
Ticker Volume Price Price Delta
STOXX 50 3,189.81 13.84 0.44%
FTSE 100 6,703.00 28.26 0.42%
DAX 9,548.68 4.49 0.05%
Ticker Volume Price Price Delta
NIKKEI 14,404.99 -141.28 -0.97%
TOPIX 1,164.90 -8.91 -0.76%
HANG SENG 22,562.80 53.16 0.24%

GrafTech Reports Third Quarter 2012 Results



  GrafTech Reports Third Quarter 2012 Results

Business Wire

PARMA, Ohio -- October 25, 2012

GrafTech International Ltd. (NYSE:GTI) today announced financial results for
the third quarter ended September 30, 2012.

2012 Third Quarter Review

  * Net sales were $321 million, a decrease of seven percent, versus $346
    million in the third quarter of 2011.

       * Industrial Materials revenue was $260 million, a decrease of 14
         percent year-over-year.
       * Engineered Solutions revenue was $61 million, an increase of 39
         percent year-over-year.

  * EBITDA* was $65 million, a decrease of 16 percent, versus $78 million in
    the third quarter of 2011. The decline was largely driven by lower volumes
    in our Industrial Materials segment, partly offset by higher realized
    pricing for graphite electrodes and needle coke and improved performance
    in our Engineered Solutions segment.
  * Net income was $30 million or $0.22 per diluted share versus $40 million
    or $0.28 per diluted share in the third quarter of 2011.
  * Net cash provided by operating activities was $45 million versus $47
    million in the third quarter of 2011.
  * Net debt* was $604 million as compared to $597 million at the end of the
    second quarter of 2012.

Craig Shular, Chief Executive Officer of GrafTech, commented, "Despite a
challenging operating environment, our third quarter results came in ahead of
expectations due to good cost control and overhead management, along with
solid performance from our Engineered Solutions business."

Industrial Materials Segment

The Industrial Materials segment’s net sales were $260 million in the third
quarter of 2012, as compared to $302 million in the third quarter of 2011.
Lower sales volume of graphite electrodes and needle coke were partially
offset by higher realized pricing of both products.

Operating income for the Industrial Materials segment was $37 million in the
third quarter of 2012, as compared to $54 million in the third quarter of
2011. Lower volumes across the segment were partially offset by higher
realized pricing, the carryover of lower cost raw materials and favorable
currency exchange rate movement.

During the third quarter, as a result of rising raw material costs, we
announced price increases to our customers for needle coke and graphite
electrodes. In September 2012, we announced an increase of approximately 15
percent year-over-year from current pricing for normal premium grade needle
coke. In early October 2012, we also announced an eight percent increase to
the current prevailing prices for standard-sized melter graphite electrodes.
While we do not expect a material impact to 2012 results from these price
increases as our 2012 business is substantially booked, they better position
us in 2013 to manage margins amid rising costs.

Engineered Solutions Segment

Net sales for the Engineered Solutions segment were $61 million in the third
quarter of 2012 versus $43 million in the third quarter of 2011. The increase
was largely driven by continued growth in our advanced consumer electronics
products and the incremental revenue associated with acquisitions.

Operating income for the Engineered Solutions segment was $6 million in the
third quarter of 2012, or 10 percent of sales. This compares to operating
income of $3 million, or 8 percent of sales in the same period in 2011. The
increase is due to a more favorable product mix as we continue to penetrate
high-growth end markets with attractive margin profiles.

Mr. Shular commented, "Our Engineered Solutions segment continued on its
growth path, achieving record sales in the quarter. We expect to exit the year
with approximately $220 million in annual revenue for this segment,
representing a cumulative growth rate of 22 percent over the past three
years."

On August 6, 2012, GrafTech celebrated the successful landing of the Mars
Rover Curiosity. The thermal solutions that were used in the Mars Rover's heat
shield, which protected the Curiosity from the intense heat and friction
generated during descent through the Martian atmosphere, were developed and
manufactured by a subsidiary in our Engineered Solutions' segment.

During the third quarter, GrafTech purchased building and land in Northeast
Ohio for $3 million, which will be used to expand Engineered Solutions'
manufacturing capacity for our advanced consumer electronics products. This
area of our business has witnessed very strong demand and is currently running
at more than 90 percent capacity utilization.

Corporate

Total company overhead expenses were $36 million versus $35 million in the
third quarter of 2011. This compares to overhead expense in the second quarter
of 2012 of $38 million. The decline in overhead is largely driven by lower
administrative expense as a result of right sizing initiatives taken
throughout the year to proactively manage costs in a difficult operating
environment.

Other expense on a net basis was $2 million in the third quarter of 2012, as
compared to $5 million in the same period of the prior year. Interest expense
in the quarter was $6 million, versus $5 million in the third quarter of 2011.

In the third quarter, we recognized tax credits from the U.S. Federal
Government in support of our research and development efforts related to
high-tech Engineered Solutions products. The tax credits positively impacted
the quarter resulting in an effective income tax rate of 18 percent. We now
estimate our full year effective income tax rate to be in the range of 21
percent to 23 percent.

Outlook

In its October report, the International Monetary Fund (IMF)'s estimate for
global GDP growth was reduced for the third time this year to 3.3 percent in
2012. The IMF highlights that downside risks to the global economic recovery
have risen considerably. Continued uncertainty has led to low confidence
levels and a fragile outlook in both advanced and emerging economies. The
IMF's report went on to state that global manufacturing has slowed
significantly, the crisis in Europe has deepened and emerging markets continue
to lose growth momentum with no signs of significant improvement in the near
term. As a result, the IMF also cut its 2013 global GDP growth forecast to 3.6
percent.

The slowing pace of the global economic recovery has impacted steel producer
sentiment and business confidence. According to the World Steel Association
and other published reports, global steel production, excluding China, has
declined 0.4 percent in the nine months ended September 30, 2012. Steel
production in the European Union has decreased 4.6 percent during the same
period.

Despite this very challenging global economic environment, we are targeting
full year EBITDA to be in the range of $235 million to $245 million, which
would represent our Company's fourth best performance.

Mr. Shular stated, "We continue to face a difficult operating environment and
early indications for 2013 show little signs of improvement in the global
economy. We remain focused on providing our customers with superior service
and quality, and proactively managing costs within our control. As such, we
have reduced our 2012 estimate for overhead expense by an additional $5
million."

Mr. Shular concluded, "GrafTech continues to maintain a strong balance sheet
with excellent liquidity. We are targeting significant organic growth and have
invested in innovative products and solutions that will enable us to expand
into new growth markets and leverage our portfolio of 775 patents. As we
progress into the future, our team remains committed to strengthening the
business model and driving shareholder value."

In summary, based on IMF projections and other economic forecasts and factors
described above, we expect the following targeted results in 2012:

  * EBITDA in the range of $235 million to $245 million (previous guidance was
    $235 million to $255 million);
  * Overhead expense (selling and administrative, and research and development
    expenses) of approximately $155 million (previous guidance was $160
    million);
  * Interest expense of approximately $22 million;
  * Capital expenditures in the range of $120 million to $130 million;
  * Depreciation and amortization expense in the range of $80 million to $85
    million (previous guidance was approximately $85 million);
  * An effective tax rate in the range of 21 percent to 23 percent (previous
    guidance was 23 percent to 25 percent);
  * Cash flow from operations in the range of $100 million to $120 million
    (previous guidance was $90 million to $120 million); and
  * Full year fully diluted share count of approximately 140 million shares.

In conjunction with this earnings release, you are invited to listen to our
earnings call being held today 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 makes its complete financial reports that have been filed
with the SEC, including its most recent annual report on Form 10-K, as well as
its most recent investor presentation available at www.graftech.com. 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 and latest generation electronics. GrafTech
operates 19 principal manufacturing facilities on four continents and sells
products in over 70 countries. Headquartered in Parma, Ohio, GrafTech employs
3,000 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: our outlook for
2012 and 2013; future profitability, cash flow, and liquidity; future sales,
costs, debt levels, depreciation and amortization, working capital including
variations in our inventory levels, revenues, margins, and business
opportunities; scheduled maintenance; future operational performance;
strategic plans; stock repurchase plans; supply chain obligations,
opportunities and management; cost competitiveness and liquidity initiatives;
changes in production capacity, operating rates or efficiency; capital
expenditures; future prices and demand for our products; new products
including their impact on our results; product quality; the impact of acquired
businesses; investments and acquisitions that we may make in the future; the
integration of acquisitions into our operations; financing (including
factoring and supply chain financing) activities; debt levels; our customers'
operations, production levels, electrode and needle coke usage, and demand for
their products; our position in markets we serve; regional and global economic
and industry prospects and market conditions, including third party
projections and other economic forecasts and our expectations concerning their
impact on us and our customers and suppliers; competitive pressure on sales
and pricing; conditions and changes in the global financial and credit
markets; future tax rates and the effects of jurisdictional mix; the impact of
accounting changes; and currency exchange and interest rates and expenses.

We have no duty to update these statements. These statements are not
predictions and historically actual future events, circumstances, performance
and trends have deviated, often significantly, from our forward-looking
statements. Actual future events, circumstances, performance and trends could
differ materially, positively or negatively, from these statements due to
various factors, including: any adjustments to our announced 2012 third
quarter results; the actual timing of the filing of our Form 10-Q with the SEC
and potential effects of delays in such filing; deteriorating economic
conditions and the possibility of lower order rates, order cancellations,
increases in past due receivables or bad debts, supply chain disruptions,
inability to reduce production input sourcing commitments consistent with
lower demand and other events that could adversely impact our revenues,
profitability, cash flow, working capital, inventory levels, and debt levels;
impacts of the delay or failure to resolve the European debt crisis or to
address the U.S. “fiscal cliff;” failure to achieve financial targets or
estimates; failure to successfully develop and commercialize new or improved
products; adverse changes in inventory levels, including raw materials and
finished goods; limitations or delays affecting capital expenditures or
scheduled maintenance; production or other business or operating suspensions,
interruptions or delays; delays or changes in investments or acquisitions or
non-consummation of proposed investments or acquisitions; failure to
successfully integrate into our business any completed investments and
acquisitions; failure to achieve expected synergies or the performance or
returns expected from any completed 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 and
impact on our stock repurchase programs; changes in our ability to comply with
financial covenants, maintain our business and implement our business plans
within our current levels of revolving and other debt financing or maintain or
obtain supply chain, local country company revolving debt and other debt
financing on acceptable terms; adverse changes in labor relations; adverse
developments in legal proceedings; non-realization of anticipated benefits
from organizational changes and restructurings; negative developments relating
to health, safety or environmental compliance, remediation or liabilities;
changes in steel and other markets we or our customers serve; political unrest
that adversely impacts us or our customers’ businesses; declines in demand;
price or margin decreases; intensified competition, including growth by
producers in developing countries; graphite electrode and needle coke
manufacturing capacity increases; adverse differences between actual graphite
electrode and needle coke 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-based coke or energy; changes in interest or currency exchange
rates; inflation or deflation; failure to satisfy conditions to government
grants; changes in government 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.

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)
                                          As of December 31,   As of September
                                          2011                 30,
                                                               2012
ASSETS
Current assets:
Cash and cash equivalents                 $   12,429           $  16,193
Accounts and notes receivable, net of
allowance for doubtful accounts of        253,151              230,096
$4,153 at December 31, 2011 and $5,227
at September 30, 2012
Inventories                               444,062              545,779
Prepaid expenses and other current        22,308               28,168         
assets
Total current assets                      731,950              820,236        
Property, plant and equipment             1,431,432            1,502,826
Less: accumulated depreciation            654,548              689,273        
Net property, plant and equipment         776,884              813,553
Deferred income taxes                     7,931                6,629
Goodwill                                  498,681              498,471
Other assets                              152,920              137,209        
Total assets                              $   2,168,366        $  2,276,098   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                          $   74,280           $  56,643
Short-term debt                           14,168               170
Accrued income and other taxes            44,330               35,062
Supply chain financing liability          29,930               26,210
Other accrued liabilities                 114,545              93,310         
Total current liabilities                 277,253              211,395        
                                                                
Long-term debt                            387,624              593,453
Other long-term obligations               131,300              120,070
Deferred income taxes                     32,245               33,529
Stockholders’ equity:
Preferred stock, par value $.01,
10,000,000 shares authorized, none        —                    —
issued
Common stock, par value $.01,
225,000,000 shares authorized,
149,861,081 shares issued at December     1,499                1,506
31, 2011 and 150,623,174 shares issued
at September 30, 2012
Additional paid-in capital                1,798,161            1,810,600
Accumulated other comprehensive loss      (261,937        )    (282,658      )
(Accumulated deficit) Retained earnings   (50,757         )    38,245
Less: cost of common stock held in
treasury, 6,265,114 shares at December    (146,041        )    (249,095      )
31, 2011 and 16,375,460 shares at
September 30, 2012
Less: common stock held in employee
benefit and compensation trusts, 75,807   (981            )    (947          )
shares at December 31, 2011 and 73,598
shares at September 30, 2012
Total stockholders’ equity                1,339,944            1,317,651      
Total liabilities and stockholders’       $   2,168,366        $  2,276,098   
equity
                                                                              

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)
 
                  For the Three Months Ended         For the Nine Months Ended
                  September 30,                      September 30,
                  2011              2012             2011          2012
                                                                    
Net sales         $  345,832        $  320,716       $ 972,200     $ 877,265
Cost of sales     253,088           240,730          731,362       645,971    
Gross profit      92,744            79,986           240,838       231,294
                                                                    
Research and      2,852             2,778            8,856         9,919
development
Selling and
administrative    32,401            33,645           97,276        107,228    
expenses
Operating         57,491            43,563           134,706       114,147
income
                                                                    
Other expense     5,321             1,653            5,134         (1,376    )
(income), net
Interest          4,792             5,839            13,780        15,733
expense
Interest income   (119        )     (33         )    (363      )   (178      )
Income before
provision for     47,497            36,104           116,155       99,968
income taxes
                                                                    
Provision for     7,200             6,478            20,026        10,966     
income taxes
Net income        $  40,297         $  29,626        $ 96,129      $ 89,002   
                                                                    
Basic income
per common
share:
Net income per    $  0.28           $  0.22          $ 0.66        $ 0.64     
share
Weighted
average common    145,413           134,347          145,293       139,939
shares
outstanding
                                                                    
Diluted income
per common
share:
Net income per    $  0.28           $  0.22          $ 0.66        $ 0.63     
share
Weighted
average common    146,181           135,001          146,113       140,565
shares
outstanding
                                                                              

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)
                                                  
                   For the Three Months Ended      For the Nine Months Ended
                   September 30,                   September 30,
                   2011              2012          2011           2012
Cash flow from
operating
activities:
Net income         $  40,297         $ 29,626      $ 96,129       $ 89,002
Adjustments to
reconcile net
income to cash
provided by
operations:
Depreciation and   20,361            21,869        60,682         58,232
amortization
Deferred income    (719        )     (1,819    )   4,820          1,906
tax provision
Post-retirement
and pension plan   1,342             953           3,122          3,637
changes
Currency gains     187               (412      )   (886       )   (3,351     )
Stock-based        2,171             1,733         6,054          8,096
compensation
Interest expense   2,927             3,149         8,659          9,221
Insurance          —                 —             —              4,007
recoveries
Other charges,     (3,028      )     (2,750    )   (6,921     )   (13,393    )
net
Increase in        (16,797     )     (708      )   (139,819   )   (128,361   )
working capital*
Decrease
(increase) in      518               (6,568    )   (2,544     )   (15,390    )
long-term assets
and liabilities
Net cash
provided by        47,259            45,073        29,296         13,606
operating
activities
                                                                   
Cash flow from
investing
activities:
Capital            (40,195     )     (31,251   )   (102,018   )   (92,827    )
expenditures
Proceeds from
derivative         4,704             (114      )   7,772          6,807
instruments
Cash paid for      —                 —             (6,500     )   —
acquisition
Other              (21         )     68            428            121         
Net cash used in
investing          (35,512     )     (31,297   )   (100,318   )   (85,899    )
activities
                                                                   
Cash flow from
financing
activities:
Short-term debt
borrowings         6,592             (8,091    )   18,030         (13,989    )
(reductions),
net
Revolving
Facility           17,000            70,000        177,000        343,000
borrowings
Revolving
Facility           (32,000     )     (50,000   )   (124,000   )   (145,000   )
reductions
Principal
payments on        (62         )     (43       )   (178       )   (182       )
long-term debt
Supply chain       (1,631      )     1,091         (2,957     )   (3,719     )
financing
Proceeds from
exercise of        851               —             1,917          92
stock options
Purchase of        (28         )     (17,900   )   (683       )   (103,056   )
treasury shares
Excess tax
benefit from       402               667           1,105          531
stock-based
compensation
Other              (19         )     (518      )   (436       )   (1,073     )
Net cash (used
in) provided by    (8,895      )     (4,794    )   69,798         76,604
financing
activities
                                                                   
Net (decrease)
increase in cash   2,852             8,982         (1,224     )   4,311
and cash
equivalents
Effect of
exchange rate
changes on cash    (808        )     74            (532       )   (547       )
and cash
equivalents
Cash and cash
equivalents at     9,296             7,137         13,096         12,429      
beginning of
period
Cash and cash
equivalents at     $  11,340         $ 16,193      $ 11,340       $ 16,193    
end of period
* Net change in
working capital
due to the
following
components:
Change in
current assets:
Accounts and
notes              $  (7,815   )     $ (11,476 )   $ (54,914  )   $ 25,614
receivable, net
Inventories        (22,377     )     8,543         (76,207    )   (96,309    )
Prepaid expenses
and other          980               3,294         (5,350     )   (3,215     )
current assets
Increase
(decrease) in
accounts           12,374            (1,131    )   (3,259     )   (54,373    )
payables and
accruals
Increase
(decrease) in      41                62            (89        )   (78        )
interest payable
Increase in        $  (16,797  )     $ (708    )   $ (139,819 )   $ (128,361 )
working capital
                                                                              

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

SEGMENT DATA SUMMARY

(Dollars in thousands)

(Unaudited)
 
              For the Three Months Ended         For the Nine Months Ended
              September 30,                      September 30,
              2011              2012             2011              2012
Net sales:
Industrial    $  302,355        $  260,180       $  835,591        $ 715,461
Materials
Engineered    43,477            60,536           136,609           161,804    
Solutions
Total net     $  345,832        $  320,716       $  972,200        $ 877,265  
sales
                                                                    
Segment
operating
income:
Industrial    54,130            37,301           120,465           104,103
Materials
Engineered    3,361             6,262            14,241            10,044     
Solutions
Total
segment       $  57,491         $  43,563        $  134,706        $ 114,147  
operating
income
                                                                    
Operating
income
margin:
Industrial    17.9        %     14.3        %    14.4        %     14.6      %
Materials
Engineered    7.7         %     10.3        %    10.4        %     6.2       %
Solutions
Total
operating     16.6        %     13.6        %    13.9        %     13.0      %
income
margin
                                                                              

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Dollars in thousands)

(Unaudited)
 
EBITDA Reconciliation
                For the Three Months Ended         For the Nine Months Ended
                September 30,                      September 30,
                2011              2012             2011            2012
Net sales       $  345,832        $  320,716       $  972,200      $ 877,265  
Net income      $  40,297         $  29,626        $  96,129       $ 89,002
Add:
Income taxes    7,200             6,478            20,026          10,966
Other
(income)        5,321             1,653            5,134           (1,376    )
expense, net
Interest        4,792             5,839            13,780          15,733
expense
Interest        (119        )     (33         )    (363        )   (178      )
income
Depreciation
and             20,122            21,869           59,965          58,232     
amortization
EBITDA          $  77,613         $  65,432        $  194,671      $ 172,379  
                                                                              

NOTE ON EBITDA RECONCILIATION: EBITDA is a non-GAAP financial measure that
GrafTech currently calculates according to the schedule above, using GAAP
amounts from the Consolidated Financial Statements. GrafTech believes that
EBITDA measures are generally accepted as providing useful information
regarding a company’s ability to incur and service debt. GrafTech also
believes that EBITDA measures provide useful information about the
productivity and cash generation potential of its ongoing businesses.
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.

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Dollars in thousands)

(Unaudited)
 
Net Debt Reconciliation
                            As of June 30,   As of September 30,
                            2012             2012
                                              
Long-term debt              $  570,758       $      593,453
Short-term debt             8,270            170
Supply chain financing      25,119           26,210
Total debt                  604,147          619,833
Less:
Cash and cash equivalents   7,137            16,193
Net Debt                    $  597,010       $      603,640
                                                     

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 excludes cash and cash
equivalents from net debt. 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.

GTI-G

Contact:

GrafTech
Kelly Taylor, 216-676-2000
Director, Investor Relations
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement