Exhibit 99.1
[GRAPHIC OMITTED]
UCAR INTERNATIONAL INC. 3102 West End Avenue, Suite 1100, Nashville, TN 37203
N E W S R E L E A S E
FOR IMMEDIATE RELEASE CONTACT: Nancy M. Falls
Treasurer
615-760-7720
UCAR INTERNATIONAL REPORTS SECOND QUARTER EPS OF $0.13
BEFORE PREVIOUSLY ANNOUNCED SPECIAL CHARGES
Nashville, TN - July 19, 2001 - UCAR International Inc. (NYSE: UCR)
today announced results for the quarter ended June 30, 2001. Income before
special charges was $6 million, or $0.13 per diluted share, for the 2001 second
quarter as compared to $3 million, or $0.07 per diluted share for the 2001 first
quarter and $11 million, or $0.24 per diluted share, for the 2000 second
quarter. Net sales were $171 million in the 2001 second quarter, the same as in
the 2001 first quarter and down 14 percent as compared to the 2000 second
quarter. Gross margin was 29.9 percent for the 2001 second quarter as compared
to 28.5 percent for the 2001 first quarter and 28.1 percent for the 2000 second
quarter.
We are very pleased with our 2001 second quarter results. We continued
to reduce our production costs, improving our gross margin to 29.9 percent,
despite difficult economic conditions. Our Graphite Power Systems (GPS) Division
increased its gross margin to 29.8 percent for the 2001 second quarter from 27.4
percent in the 2001 first quarter primarily due to plant cost reductions and
productivity improvements, while our Advanced Energy Technology Division had
gross margin of 31.2 percent for the 2001 second quarter. We also achieved
continued reductions in both overhead and interest expense primarily due to our
efforts to streamline global work processes and maintain tight working capital
management to reduce net debt.
We achieved a major milestone in the 2001 second quarter with the
signing of a new exclusive development and collaboration agreement and a new
exclusive long-term supply agreement with Ballard Power Systems for natural
graphite-based materials and manufactured components for use in Ballard(R) fuel
cells and fuel cell systems, announced in June 2001.
GRAPHITE POWER SYSTEMS DIVISION
Our Graphite Power Systems Division had net sales of $137 million in
the 2001 second quarter as compared to $170 million in the 2000 second quarter.
The decrease was primarily due to lower volume of graphite electrodes sold.
Graphite electrode volume for the 2001 second quarter was 46 thousand metric
tons. Although graphite electrode volume increased seven percent as compared to
the 2001 first quarter, it was lower
than typical historical second quarter volumes. The decrease in volume in the
2001 second quarter as compared to the 2000 second quarter was primarily a
result of continued lower North American steel production and our selectivity
in selling in the U.S. market to minimize bad debt exposure. Our average sales
revenue per metric ton of graphite electrodes in the 2001 second quarter was
$2,367, essentially the same as the 2000 second quarter average of $2,374, while
the average was down $52 from the 2001 first quarter due to the weakening of
foreign currencies against the U.S. dollar. Our announced increases in local
currency selling prices have been sustained in the 2001 second quarter. Net
sales of cathodes in the 2001 second quarter were lower than in the 2000 second
quarter primarily due to the timing of shipments to customers. Our cathode
business order book remains sold out for 2001.
Gross margin in our GPS Division increased to 29.8 percent in the 2001
second quarter from 28.7 percent in the 2000 second quarter despite
significantly lower net sales and higher energy costs. The increase was due to
improvements in both our graphite electrode and cathode businesses. Our graphite
electrode business benefited from improved productivity, head-count reductions,
lower major maintenance spending and lower costs due to the weakening of local
currencies in the countries in which we have foreign manufacturing facilities as
compared to the U.S. dollar in the 2001 second quarter as compared to the 2000
second quarter. Our cathode business benefited from efficiencies as a result of
our global realignment of cathode capacity and from cost improvements. Gross
margin in our GPS Division increased to 29.8 percent in the 2001 second quarter
from 27.4 percent in the 2001 first quarter primarily due to plant cost
reductions, improvements in energy costs and lower costs due to the
strengthening of the U.S. dollar.
In addition, in the 2001 second quarter we announced our intention to
shut down our graphite electrode manufacturing operations in Clarksville and
Columbia, TN, our highest cost graphite electrode manufacturing operations. The
shutdown is part of our strategy of reducing costs and optimizing global
production capacity. We expect that the shutdown will result in annual cost
savings of $18 million beginning in 2002 and will enable us to avoid $9 million
in otherwise necessary capital expenditures. The shutdown is on schedule for
completion by the end of the 2001 third quarter.
ADVANCED ENERGY TECHNOLOGY DIVISION
Net sales for our Advanced Energy Technology Division were $34 million
in the 2001 second quarter, 17 percent higher than net sales of $29 million in
the 2000 second quarter. The increase in net sales was primarily due to an
increase in sales of products to customers in the aerospace and fuel cell
industries and new sales of technology, partially offset by cyclical declines in
sealing products sold to the automotive industry. Gross margin was 31.2 percent
in the 2001 second quarter, up 7.4 percentage points from 23.8 percent in the
2000 second quarter as a result of the increase in net sales and continued
improvement in cost of sales due to the restructuring of our graphite
specialties business.
Our accomplishments in the 2001 second quarter include the following:
o We entered into a new exclusive development and collaboration agreement
and a new exclusive long-term supply agreement with Ballard Power
Systems. The new agreements extend the scope and term of our prior
agreements. The scope of the new exclusive development and
collaboration agreement includes natural graphite-based materials and
components, including flow field plates and gas diffusion layers, for
use in proton exchange membrane (PEM) fuel cells and fuel cell systems
for transportation, stationary and portable applications. The
development and collaboration agreement was extended from 2002 to 2011.
Under the new supply agreement, we will be the exclusive manufacturer
and supplier of natural graphite-based materials for Ballard(R)fuel
cells and fuel cell systems. We will also be the exclusive
manufacturer of natural graphite-based components for Ballard fuel
cells and fuel cell systems, other than those components Ballard
manufactures for itself. The supply agreement was extended from 2008
to 2016. We have the right to manufacture and sell, after agreed upon
release dates, natural graphite-based materials and components for use
in PEM fuel cells to other parties in the fuel cell industry.
o Ballard Power Systems became a strategic investor in Graftech,
investing $5 million in shares of Ballard common stock for a 2.5%
equity ownership interest, to support the development and
commercialization of natural graphite-based materials and components
for PEM fuel cells.
o The rate of patent application filings continued to accelerate.
We filed 29 patent applications and were issued seven patents in the
2001 second quarter. This compares to 16 patent applications and six
issued patents in the 2000 second quarter. The new patent applications
and issued patents primarily relate to the electronic thermal
management and fuel cell industries. The 2001 second quarter activity
increased total patent applications and patent application priority
rights to more than 270 and total issued patents to 142.
o Our advanced flexible graphite line for fuel cell component
manufacturing is in the final stages of commissioning and is expected
to begin production in early August 2001.
CORPORATE
Selling, general and administrative expenses were $19 million in the
2001 second quarter as compared to $23 million in the 2000 second quarter.
Intensive management of these expenses since 1998 has reduced the quarterly run
rate from approximately $28 million at the end of 1997 to an expected quarterly
run rate of under $20 million in the second half of 2001.
Interest expense declined $2 million in the 2001 second quarter as
compared to the 2000 second quarter. The decrease was due to both lower average
debt outstanding during the period and lower interest rates.
Our effective tax rate, excluding special charges, was 45 percent for
the first half of 2001 as compared to our average effective tax rate, excluding
special charges, of 30 percent for the full year 2000, primarily due to a higher
percent of earnings in higher tax jurisdictions.
We had $6 million in income before special charges and a loss of $39
million after special charges for the 2001 second quarter as compared to $11
million of income before and after special charges for the 2000 second quarter.
In the 2001 second quarter, a $68 million, pre-tax, special charge was recorded.
$58 million ($35 million after-tax) of the special charge was recorded for
restructuring and asset impairment related to the shut down of our graphite
electrode manufacturing operations in Clarksville and Columbia, TN. $10 million
(before and after tax) of the special charge was recorded to increase our
reserve for potential liabilities and expenses for antitrust investigations and
related lawsuits and claims. After the special charges, we had a loss of $0.87
per basic share for the 2001 second quarter as compared with earnings per share
of $0.24 in the 2000 second quarter.
Net cash used in operations (before antitrust fines and net settlements
and related expenses and restructuring payments) was $9 million in the 2001
second quarter as compared to net cash generated by operations of $25 million
(before antitrust fines and net settlements and related expenses and
restructuring payments) in the 2000 second quarter. The use of cash resulted
primarily from increased working capital levels necessary for the GPS Division.
Graphite electrode inventory levels increased primarily due to transitioning
activities in connection with the shutdown of graphite electrode manufacturing
operations and raw material inventory levels increased due to additional
petroleum coke purchases in connection with the explosion at Conoco's Humberside
facility in mid-April 2001. Conoco is one of our major petroleum coke suppliers.
We continue to place a very high priority on managing our worldwide free cash
flow. Our net debt (total debt less cash, cash equivalents and short-term
investments) was $660 million at the end of the 2001 second quarter as compared
to $659 million at the end of the 2001 first quarter.
As previously announced, the European Commission has issued its
decision regarding its graphite electrode antitrust investigation. Under the
decision, the Commission has assessed a fine of Euro 50.4 million (approximately
$43 million) against UCAR resulting from the role of our former management in a
graphite electrode price fixing cartel. As a result of our significant and early
cooperation with the Commission, our fine reflects a 40 percent reduction from
the amount that otherwise would have been assessed. Seven other graphite
electrode producers were also fined under the decision, with fines ranging up to
Euro 80.2 million (approximately $69 million). As a result of the fine, we
recorded a charge of $10 million in the 2001 second quarter. The Commission's
policy is to negotiate appropriate terms of payment of antitrust fines,
including extended payment terms. Based on that policy and our recent
discussions regarding payment terms with the Commission, we believe that payment
of the fine will not interfere with the implementation of our business
strategies or compliance with financial covenants in our credit agreement. A
registration statement relating to our common stock has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
press release shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
Full quarterly financial information will be completed in connection
with the filing of our Form 10-Q in August 2001.
In conjunction with this earnings release, you are invited to listen to
our earnings conference call being held today at 11:00 a.m. EDT. The dial-in
number is 800-257-7087 for domestic callers and 303-205-0033 for international
callers. If you are unable to listen to the live call, the call will be archived
and available for replay within one day of the original broadcast on our website
at www.ucar.com under the Investor Relations section.
------------
UCAR PROVIDES NATURAL AND SYNTHETIC GRAPHITE AND CARBON PRODUCTS AND
SERVICES TO CUSTOMERS IN THE STEEL, ALUMINUM, FUEL CELL POWER GENERATION,
ELECTRONICS, SEMICONDUCTOR AND TRANSPORTATION INDUSTRIES.
NOTE: THIS NEWS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE INCLUDE
STATEMENTS ABOUT SUCH MATTERS AS FUTURE PRODUCTION OF STEEL IN ELECTRIC ARC
FURNACES, FUTURE PRICES AND SALES OF AND DEMAND FOR GRAPHITE ELECTRODES AND
OTHER PRODUCTS, FUTURE OPERATIONAL AND FINANCIAL PERFORMANCE OF VARIOUS
BUSINESSES, STRATEGIC PLANS AND PROGRAMS, IMPACTS OF REGIONAL AND GLOBAL
ECONOMIC CONDITIONS, RESTRUCTURING, REALIGNMENT, STRATEGIC ALLIANCE AND
PARTNERSHIP, SUPPLY CHAIN, TECHNOLOGY DEVELOPMENT AND COLLABORATION, JOINT
VENTURE, OPERATING, RATIONALIZATION, INTEGRATION AND CAPITAL PROJECTS, LEGAL
MATTERS AND RELATED COSTS, CONSULTING FEES AND RELATED PROJECTS, POTENTIAL
OFFERINGS AND OTHER ACTIONS REGARDING COMMON STOCK OF GRAFTECH INC., AND FUTURE
COSTS, WORKING CAPITAL, REVENUE, BUSINESS OPPORTUNITIES, VALUES, DEBT LEVELS,
CASH FLOW, COST SAVINGS AND REDUCTIONS, MARGINS AND EARNINGS. WE HAVE NO DUTY TO
UPDATE SUCH STATEMENTS. ACTUAL FUTURE EVENTS AND CIRCUMSTANCES (INCLUDING FUTURE
PERFORMANCE, RESULTS AND TRENDS) COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN
THESE STATEMENTS DUE TO VARIOUS FACTORS. THESE FACTORS INCLUDE THE POSSIBILITY
THAT ANNOUNCED ADDITIONS TO CAPACITY FOR PRODUCING STEEL IN ELECTRIC ARC
FURNACES OR ANNOUNCED REDUCTIONS IN GRAPHITE ELECTRODE MANUFACTURING CAPACITY
MAY NOT OCCUR, THE POSSIBILITY THAT INCREASED PRODUCTION OF STEEL IN ELECTRIC
ARC FURNACES MAY NOT RESULT IN INCREASED DEMAND FOR OR PRICES OR SALES OF
GRAPHITE ELECTRODES, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CIRCUMSTANCES
RELATING TO PENDING ANTITRUST INVESTIGATIONS OR PENDING ANTITRUST LAWSUITS, THE
COMMENCEMENT OF NEW INVESTIGATIONS OR LAWSUITS RELATING TO THE SAME SUBJECT
MATTER OF THESE PENDING INVESTIGATIONS OR LAWSUITS, THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CIRCUMSTANCES RELATING TO LAWSUITS INITIATED BY US
AGAINST OUR FORMER PARENTS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR
CIRCUMSTANCES RELATING TO STRATEGIC PLANS OR PROGRAMS OR REALIGNMENT, STRATEGIC
ALLIANCE OR PARTNERSHIP, SUPPLY CHAIN, TECHNOLOGY DEVELOPMENT AND COLLABORATION,
RESTRUCTURING, JOINT VENTURE, OPERATING, CAPITAL, RATIONALIZATION, INTEGRATION
OR OTHER PROJECTS, CHANGES IN CURRENCY EXCHANGE RATES, CHANGES IN MARKET
INTEREST RATES, CHANGES IN THE BUSINESS, PROSPECTS, RESULTS OF OPERATIONS OR
FINANCIAL CONDITIONS OF GRAFTECH INC., CHANGES IN OUR NEED FOR OR AVAILABILITY
OF FUNDS, FAILURE TO SATISFY CONDITIONS OR MILESTONES TO OUR JOINT VENTURES,
ALLIANCE OR DEVELOPMENT PROJECTS WITH JILIN CARBON, PECHINEY, BALLARD OR CONOCO,
CHANGES IN GLOBAL OR REGIONAL ECONOMIC AND COMPETITIVE CONDITIONS, CHANGES IN
MARKET ENERGY AND PETROLEUM COSTS, TECHNOLOGICAL DEVELOPMENTS, AND OTHER RISKS
AND UNCERTAINTIES, INCLUDING THOSE DETAILED IN OUR FILINGS WITH THE SEC. THE
STATEMENTS CONTAINED IN THIS NEWS RELEASE SHALL NOT BE DEEMED TO CONSTITUTE AN
ADMISSION AS TO ANY LIABILITY IN CONNECTION WITH ANY CLAIM OR LAWSUIT. THIS NEWS
RELEASE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES. REFERENCES TO STREET OR ANALYST EARNINGS ESTIMATES MEAN
THOSE PUBLISHED BY FIRST CALL, A SERVICE OF THE THOMSON FINANCIAL NETWORK
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------ ----------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 2001 2000 2001
---- ---- ---- ----
Net sales $ 199 $ 171 $ 394 $ 342
Cost of sales 143 120 281 242
-------- -------- -------- --------
Gross profit 56 51 113 100
Research and development 2 3 5 6
Selling, administrative and other expenses 23 19 47 40
Other (income) expense, (net) (1) -- (1) --
Antitrust investigations and related lawsuits and claims -- 10 -- 10
Securities class action and stockholder derivative lawsuits (1) -- (1) --
Restructuring charge -- 58 6 58
-------- -------- -------- --------
Operating profit (loss) 33 (39) 57 (14)
Interest expense 18 16 39 35
-------- -------- -------- --------
Income (loss) before provision for income taxes 15 (55) 18 (49)
Provision for income taxes 4 (16) 4 (14)
-------- -------- -------- --------
Income (loss) of consolidated entities 11 (39) 14 (35)
Minority stockholders' share of income -- -- 1 1
-------- -------- -------- --------
Income (loss) before extraordinary item 11 (39) 13 (36)
Extraordinary item, net of tax -- -- 13 --
-------- -------- -------- --------
Net income (loss) $ 11 $ (39) $ -- $ (36)
======== ======== ======== ========
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income (loss)before extraordinary item $ 0.24 $ (0.87) $ 0.28 $ (0.80)
Extraordinary item, net of tax -- -- (0.28) --
-------- -------- -------- --------
Net income (loss) per share $ 0.24 $ (0.87) $ -- $ (0.80)
======== ======== ======== ========
Weighted average common shares outstanding
(in thousands) 45,138 45,346 45,127 45,284
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income before extraordinary item $ 0.24 $ 0.28
Extraordinary item, net of tax -- (0.28)
-------- --------
Net income per share $ 0.24 $ --
======== ========
Weighted average common shares outstanding
(in thousands) 45,734 45,959
======== ========