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UCAR INTERNATIONAL INC. BRANDYWINE WEST, 1521 CONCORD PIKE,
SUITE 301 WILMINGTON, DE 19803
N E W S R E L E A S E
FOR IMMEDIATE RELEASE CONTACT: Elise A. Garofalo
Director, Investor Relations
302-778-8210
UCAR REPORTS PRELIMINARY FIRST QUARTER RESULTS
Wilmington, DE - May 1, 2002 - UCAR International Inc. (NYSE:UCR) today
announced preliminary financial results for the first quarter ended March 31,
2002. Preliminary 2002 first quarter earnings per share, before previously
announced restructuring and tax charges associated with our 2002 new major cost
savings plan and a non-cash extraordinary charge, was a net loss of ($0.02) per
diluted share. The First Call consensus estimate was ($0.02) per diluted share.
GRAPHITE POWER SYSTEMS DIVISION
In the Graphite Power Systems (GPS) Division, graphite electrode sales
volume in the 2002 first quarter was 38.5 thousand metric tons, approximately 9
percent lower than in the 2001 fourth quarter. The decline was primarily due to
seasonal factors, continued weakness in demand through January and February due
to economic conditions and limited availability of finished graphite electrode
inventories to meet increased demand in March. Our graphite electrode order book
has strengthened significantly since the middle of the 2002 first quarter,
reflecting improving conditions in the steel industry, and is now 85 percent
full for the remainder of 2002. We expect to deliver an increase of
approximately 17 percent to 20 percent in graphite electrode sales volume during
the 2002 second quarter over the 2002 first quarter and to have graphite
electrode capacity utilization rates at or greater than 95 percent for the
remainder of 2002 and into 2003.
The average sales revenue per metric ton of graphite electrodes was $2,083
in the 2002 first quarter, 7 percent lower than in the 2001 fourth quarter. Of
the 7 percent, changes in currency exchange rates accounted for approximately 3
percent.
We exceeded our expectations for cost reductions. Average graphite
electrode production cost per metric ton in the 2002 first quarter was $1,638,
approximately 7 percent lower than in the 2001 first quarter and slightly lower
than in the 2001 fourth quarter despite low operating levels and low sales
volumes. Low operating levels were due to both reductions in production in
response to weakness in economic conditions that continued into the middle of
the 2002 first quarter as well as reductions in production associated with the
mothballing of our Italian graphite electrode plant as part of our cost savings
plan.
We completed the mothballing of our Italian graphite electrode plant during
the 2002 first quarter, more than two months ahead of schedule. We believe that
the accelerated mothballing as well as other actions will allow us to accelerate
achievement of our cost savings targets under our cost savings plan. We also
undertook extensive furnace maintenance, which resulted in extended production
down time, at our Brazilian graphite electrode plant in preparation for higher
operating levels during the remainder of 2002 and into 2003. We estimate that
these activities resulted in higher than anticipated graphite electrode
production costs of approximately $2 million. We expect to achieve an average
graphite electrode production cost per metric ton of $1,550 for 2002 and $1,400
by the end of 2003.
Cathode sales remained strong, and our cathode order book is virtually full
for the remainder of 2002 and into 2003.
ADVANCED ENERGY TECHNOLOGY DIVISION
In the Advanced Energy Technology (AET) Division, revenues in the 2002
first quarter were lower than expected due to weakness in the industrial end
markets served, particularly the semiconductor and automotive markets. We
believe the core businesses in this Division bottomed during the 2002 first
quarter. New product development and commercialization efforts continue to
progress successfully. During the 2002 first quarter, IBM, Hitachi and Agilent
approved and purchased eGraf(TM) thermal interface products for computer,
consumer electronic and telecommunication applications. We filed 11 new patent
applications during the 2002 first quarter, a 25 percent increase over the 2001
filing rate.
OTHER EXPENSES AND CHARGES
Selling, general and administrative expenses were $18 million in the 2002
first quarter, a decrease of approximately 14 percent from the 2001 first
quarter and 5 percent from the 2001 fourth quarter.
We expect to report other income, net, of approximately $2 million for the
2002 first quarter, primarily due to a currency exchange gain on euro
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denominated debt. This other income, net, essentially offsets the estimated $2
million of higher graphite electrode costs during the 2002 first quarter.
Adjusted EBITDA for the 2002 first quarter was approximately $20 million.
Interest expense was $13 million during the 2002 first quarter, a decrease
of $6 million from the 2001 first quarter due to lower interest rates and lower
average debt outstanding.
We will record an extraordinary charge in the 2002 first quarter related to
the write-off of capitalized fees associated with the term loans under our
senior secured bank credit facilities that were repaid with the proceeds of our
successful offering of $400 million of Senior Notes in February 2002.
NET DEBT AND WORKING CAPITAL
Net debt (total debt less cash, cash equivalents and short term
investments) increased during the 2002 first quarter as expected and as
previously announced. At March 31, 2002, net debt was $663 million (total debt
was $696 million, including $70 million under our revolving credit facility and
$212 million of term loans) as net cash from operations declined primarily due
to lower sales and increased working capital requirements, primarily accounts
payable. The use of cash to settle payables in the 2002 first quarter increased
primarily due to seasonal payable patterns and higher obligations related to
preparations at facilities globally to accommodate the mothballing of our
Italian graphite electrode plant. In addition, in the 2002 first quarter, we
incurred $13 million of cash costs associated with our successful offering of
Senior Notes. These costs were capitalized and will be amortized over the term
of the Senior Notes.
OTHER MATTERS
We have obtained consent from holders of the outstanding Senior Notes to
waive a provision under the related Indenture to permit an offering of
additional Senior Notes under that Indenture. We believe that market conditions
may offer the opportunity to issue additional Senior Notes at attractive rates,
enabling us to further strengthen our balance sheet by replacing bank debt with
longer term debt and providing us additional flexibility to implement our
business plans and strategies to grow sales and increase cash flow. We believe
that satisfactory progress is being made on the planned asset sales, which are
part of our 2002 new major cost savings plan, and that successful completion of
those asset sales would also strengthen our balance sheet. We maintain our
aggressive net debt goal of $500 million by the end of 2004 and have a nearer
term target of $600 million by the end of 2003 or earlier, pending planned asset
sales.
In addition, as previously announced, we are implementing interest rate
management initiatives to seek to minimize our interest expense and optimize our
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portfolio of fixed and variable interest rate obligations. In connection with
those initiatives, we recently entered into a ten year interest rate swap for a
notional amount of $200 million to effectively convert that amount of fixed rate
debt to variable rate debt. We are targeting interest expense of $60 million for
2002, essentially the same as 2001.
We have received approval from lenders under our senior secured bank credit
facilities to proceed with an offering of additional Senior Notes. The approval
is contingent upon successful completion of an offering of $100 million of
additional Senior Notes. Upon completion of the offering, the financial
covenants under our senior secured bank credit facilities will be changed to
better reflect our new debt capital structure, including a more flexible
leverage ratio based on net senior secured debt as well as an adjusted interest
coverage ratio. We expect that 50 percent of the net proceeds from the offering
would be applied to repay term loans under our senior secured bank credit
facilities and the balance would be applied to reduce the outstanding balance
under our revolving credit facility. The maximum amount available under our
revolving credit facility will be reduced from euro 250 million to euro 200
million, approximately the amount to be repaid with the proceeds from the
issuance of additional Senior Notes.
We have filed a Registration Statement on Form S-4 relating to a customary
exchange offer in connection with the Senior Notes issued in February 2002.
The additional Senior Notes have not been and will not be registered under
the Securities and Exchange Act of 1933, as amended, and may not be offered or
sold in the United States absent such registration or an applicable exemption
from the registration requirements of the Securities Act.
This press release shall not constitute an offer to sell or a solicitation
of an offer to buy, nor shall there be any sale of, the additional Senior Notes
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.
AS SET FORTH IN THE COMPANY'S FORM 10-K: EBITDA MEANS OPERATING PROFIT
(LOSS), PLUS DEPRECIATION, AMORTIZATION, CERTAIN IMPAIRMENT LOSSES ON LONG-LIVED
ASSETS AND OTHER ASSETS, CERTAIN INVENTORY WRITE-DOWNS, AND THE NON-CASH PORTION
OF RESTRUCTURING CHARGES (CREDITS); AND ADJUSTED EBITDA MEANS EBITDA, PLUS THE
CASH PORTION OF RESTRUCTURING CHARGES (CREDITS). THIS METHOD OF CALCULATING
EBITDA IS NOT THE SAME AS THE METHOD FOR CALCULATING EBITDA UNDER THE COMPANY'S
SENIOR SECURED BANK CREDIT FACILITIES OR SENIOR NOTES. EBITDA AND ADJUSTED
EBITDA SHOULD NOT BE CONSIDERED IN ISOLATION OR AS A SUBSTITUTE FOR NET INCOME,
CASH FLOWS FROM CONTINUING OPERATIONS OR OTHER CONSOLIDATED INCOME OR CASH FLOW
DATA PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES OR AS
A MEASURE OF A COMPANY'S PROFITABILITY OR LIQUIDITY.
UCAR INTERNATIONAL INC. IS ONE OF THE WORLD'S LARGEST MANUFACTURERS AND
PROVIDERS OF HIGH QUALITY NATURAL AND SYNTHETIC GRAPHITE AND CARBON BASED
PRODUCTS AND SERVICES, OFFERING ENERGY SOLUTIONS TO INDUSTRY-LEADING CUSTOMERS
WORLDWIDE ENGAGED IN THE MANUFACTURE OF STEEL, ALUMINUM, SILICON METAL,
AUTOMOTIVE PRODUCTS AND ELECTRONICS.
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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 AND SALES OF STEEL, ALUMINUM, FUEL
CELLS, ELECTRONIC DEVICES AND OTHER PRODUCTS THAT INCORPORATE OUR PRODUCTS OR
THAT ARE PRODUCED USING OUR PRODUCTS; FUTURE PRICES AND SALES OF AND DEMAND FOR
GRAPHITE ELECTRODES AND OUR OTHER PRODUCTS; FUTURE OPERATIONAL AND FINANCIAL
PERFORMANCE OF VARIOUS BUSINESSES; STRATEGIC PLANS; IMPACTS OF REGIONAL AND
GLOBAL ECONOMIC CONDITIONS; RESTRUCTURING, REALIGNMENT, STRATEGIC ALLIANCE,
SUPPLY CHAIN, TECHNOLOGY DEVELOPMENT AND COLLABORATION, INVESTMENT, ACQUISITION,
JOINT VENTURE, OPERATING, INTEGRATION, TAX PLANNING, RATIONALIZATION, FINANCIAL
AND CAPITAL PROJECTS; LEGAL MATTERS AND RELATED COSTS; CONSULTING FEES AND
RELATED PROJECTS; POTENTIAL OFFERINGS, SALES AND OTHER ACTIONS REGARDING DEBT
AND EQUITY SECURITIES OF US AND OUR SUBSIDIARIES; AND FUTURE COSTS, WORKING
CAPITAL, REVENUES, BUSINESS OPPORTUNITIES, VALUES, DEBT LEVELS, CASH FLOWS, COST
SAVINGS AND REDUCTIONS, MARGINS, EARNINGS AND GROWTH. WE HAVE NO DUTY TO UPDATE
THESE 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 GLOBAL OR REGIONAL ECONOMIC CONDITIONS AFFECTING OUR PRODUCTS MAY NOT
IMPROVE OR MAY WORSEN; THE POSSIBILITY THAT ANTICIPATED ADDITIONS TO CAPACITY
FOR PRODUCING STEEL IN ELECTRIC ARC FURNACES OR ANTICIPATED REDUCTIONS IN
GRAPHITE ELECTRODE MANUFACTURING CAPACITY MAY NOT OCCUR; THE POSSIBILITY THAT
INCREASED PRODUCTION OF STEEL IN ELECTRIC ARC FURNACES OR REDUCTIONS IN GRAPHITE
ELECTRODE MANUFACTURING CAPACITY MAY NOT RESULT IN STABLE OR INCREASED DEMAND
FOR OR PRICES OR SALES VOLUMES OF GRAPHITE ELECTRODES; THE POSSIBILITY THAT
ECONOMIC OR TECHNOLOGICAL DEVELOPMENTS MAY ADVERSELY AFFECT GROWTH IN THE USE OF
GRAPHITE CATHODES IN LIEU OF CARBON CATHODES IN THE ALUMINUM SMELTING PROCESS;
THE POSSIBILITY OF DELAYS IN OR FAILURE TO ACHIEVE WIDESPREAD COMMERCIALIZATION
OF PROTON EXCHANGE MEMBRANE, OR "PEM," FUEL CELLS WHICH USE NATURAL GRAPHITE
MATERIALS AND COMPONENTS AND THAT MANUFACTURERS OF PEM FUEL CELLS MAY OBTAIN
THOSE MATERIALS OR COMPONENTS USED IN THEM FROM OTHER SOURCES; THE POSSIBILITY
OF DELAYS IN OR FAILURE TO ACHIEVE SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION
OF NEW OR IMPROVED ELECTRONIC THERMAL MANAGEMENT OR OTHER PRODUCTS; THE
POSSIBILITY OF DELAYS IN MEETING OR FAILURE TO MEET PRODUCT DEVELOPMENT
MILESTONES OR DELAYS IN EXPANDING OR FAILURE TO EXPAND MANUFACTURING CAPACITY;
THE POSSIBILITY THAT WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY OR
MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS; THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CIRCUMSTANCES RELATING TO ANTITRUST INVESTIGATIONS OR
LAWSUITS OR TO LAWSUITS INITIATED BY US AGAINST OUR FORMER PARENTS; THE
POSSIBILITY THAT EXPECTED SAVINGS FROM OUR VARIOUS COST REDUCTION EFFORTS WILL
NOT BE FULLY REALIZED; THE OCCURRENCE OF UNANTICIPATED EVENTS OR CIRCUMSTANCES
RELATING TO HEALTH, SAFETY OR ENVIRONMENTAL COMPLIANCE OR REMEDIATION
OBLIGATIONS, LABOR RELATIONS OR STRATEGIC PLANS OR RELATING TO RESTRUCTURING,
REALIGNMENT, STRATEGIC ALLIANCE, SUPPLY CHAIN, TECHNOLOGY DEVELOPMENT AND
COLLABORATION, INVESTMENT, ACQUISITION, OPERATING, TAX PLANNING,
RATIONALIZATION, FINANCIAL OR CAPITAL PROJECTS; CHANGES IN INTEREST OR CURRENCY
EXCHANGE RATES, IN COMPETITIVE CONDITIONS OR IN INFLATION AFFECTING OUR RAW
MATERIAL, ENERGY OR OTHER COSTS; THE POSSIBILITY OF OUR FAILURE TO SATISFY
CONDITIONS OR MILESTONES TO OUR STRATEGIC ALLIANCES WITH JILIN CARBON, PECHINEY,
BALLARD, CONOCO OR OTHERS; THE POSSIBILITY THAT CHANGES IN OUR FINANCIAL
PERFORMANCE MAY AFFECT OUR COMPLIANCE WITH FINANCIAL COVENANTS OR THE AMOUNT OF
FUNDS AVAILABLE FOR BORROWING UNDER OUR REVOLVING CREDIT FACILITY; 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.