Exhibit 99.1
BRANDYWINE WEST, 1521 CONCORD PIKE, SUITE 301
[GRAFTECH INTERNATIONAL LTD. LOGO]
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
GRAFTECH INTERNATIONAL REPORTS FIRST QUARTER RESULTS
Wilmington, DE - April 24, 2003 - GrafTech International Ltd. (NYSE:GTI) today
announced financial results for the first quarter ended March 31, 2003.
1ST QUARTER HIGHLIGHTS
o Net loss was $9 million, or ($0.16) per diluted share, including $12 million
($19 million before tax) or $0.21 per diluted share of previously announced
restructuring charges for organizational changes and closure and settlement
of various defined benefit plans.
o Net income before restructuring charges was $3 million, or $0.05 per diluted
share, including $2 million net of tax, or $0.04 per diluted share, of other
income, net.
o Net sales increased 27 percent to $174 million versus 1Q02 and 9 percent
versus 4Q02; Gross profit increased 30 percent to $40 million versus 1Q02
and 4 percent versus 4Q02.
o EBITDA was $27 million compared to $16 million in 1Q02 and $24 million in
4Q02; Net debt was $737 million at March 31, 2003 (see attached schedule of
EBITDA and net debt reconciliation).
o Higher than expected energy costs negatively impacted GTI's results by
approximately $2 million in the quarter. These increased costs were
partially offset by higher than expected sales volume.
o Gross margin was 22.7 percent in the synthetic graphite line of business.
This was below 4Q02 gross margin of 23.9 percent primarily due to changes
in cathode sales mix, higher energy costs and higher freight costs.
o Average graphite electrode revenue per metric ton increased $159 versus
4Q02; Graphite electrode sales volume was 47,000 metric tons.
o Cost savings plan actions for the quarter included:
o Completed expansion of low cost graphite electrode capacity in Mexico;
o Substantially completed U.S. voluntary and selective severance programs;
and
<page>
o Closed all U.S. defined benefit plans and redesigned all U.S. employee
healthcare benefits for salaried and non-union hourly workforce.
o Obtained key approvals for electronic thermal management applications at
IBM, Sony, Samsung and Chaparral Network Storage Inc.
Craig Shular, Chief Executive Officer of GTI, commented, "Sales momentum
in the first quarter was driven by higher graphite electrode prices and
increased sales volumes in our synthetic graphite and advanced carbon materials
lines of business. Average revenue per metric ton of graphite electrodes
increased to $2,272, approximately 8 percent higher than in the 2002 fourth
quarter. Approximately half of the increase was due to net changes in currency
exchange rates. We reaffirm our pricing outlook, of $100 per metric ton of real
average graphite electrode selling price increases, for the year 2003."
SYNTHETIC GRAPHITE LINE OF BUSINESS - GRAPHITE POWER SYSTEMS
(GRAPHITE ELECTRODES, CATHODES AND ADVANCED GRAPHITE MATERIALS)
The synthetic graphite line of business had net sales of $149 million in
the 2003 first quarter compared to $118 million in the 2002 first quarter. The
increase was primarily due to higher average sales revenue per metric ton and
higher sales volumes of graphite electrodes and cathodes. The average sales
revenue per metric ton of graphite electrodes in the 2003 first quarter was
$2,272. Graphite electrode sales volume was 47.0 thousand metric tons, 22
percent higher than in the same period in 2002. The increase in graphite
electrode sales volume was due to significantly stronger demand in the United
States and Europe. Cathode sales volume was 8 percent higher than in the 2002
first quarter.
Gross profit for the synthetic line of business was $34 million, 21
percent higher than in the same period in 2002. The increase in gross profit was
primarily due to higher graphite electrode net sales and improved productivity
throughout the production network. These improvements were partially offset by
increasing energy costs over the course of the 2003 first quarter, higher
freight costs and the negative impact of net changes in currency exchange rates
on costs. Gross margin was 22.7 percent in the 2003 first quarter, lower than
23.4 percent in the 2002 first quarter primarily due to changes in the cathode
sales mix and higher energy and freight costs.
OTHER LINES OF BUSINESS
(AET-NATURAL GRAPHITE LINE OF BUSINESS, ADVANCED CARBON MATERIALS LINE OF
BUSINESS AND OTHER BUSINESSES)
Net sales for GTI's other businesses totaled $25 million for the 2003
first quarter as compared to $20 million in the 2002 first quarter. Gross profit
increased to $6 million, or 24.7 percent of net sales, as compared to $3
million, or 16.0 percent of net sales, in the 2002 first
<page>
quarter. Net sales and gross profit increased primarily due to higher net sales
and margins in the advanced carbon materials line of business.
FUEL CELLS AND ELECTRONIC THERMAL MANAGEMENT
Accomplishments for AET's fuel cell and electronic thermal management
growth initiatives in the 2003 first quarter include:
o eGRAF(TM) electronic thermal management product approvals were
obtained for several applications. IBM approved eGRAF for heat
spreaders for certain notebook computer applications, Sony approved
eGRAF for heat spreaders in computer and television screen
applications and Samsung SDI approved eGRAF for its new plasma
screen televisions.
o eGRAF HiTherm(TM) thermal interface materials were tested and
approved by Intel for use in applications for several Intel(R)
processors, including the Pentium(R) 4 processor.
o AET created an electronic thermal management heat sink cooling
solution for Chaparral Network Storage Inc. The annual revenue from
this solution is expected to be approximately $0.2 to $0.3 million,
beginning in the 2003 second quarter. Chaparral Network Storage,
located in Longmont, CO, is a privately held company that develops
storage networking solutions.
o As previously announced, GTI received an order valued at
approximately $500,000 from Ballard Power Systems under its existing
supply agreement. This order supports the demand for Ballard's Mark
902 fuel cell stack.
COST SAVINGS
Under its 2002 major cost savings plan, GTI has targeted $30 million of
cumulative recurring annual cost savings by the end of 2003, $16 million more
than in 2002, primarily starting in the second quarter. During the 2003 first
quarter, GTI closed its nonqualified defined benefit plan, froze its qualified
defined benefit plan, redesigned all of its U.S. employee healthcare plans,
continued outsourcing certain financial functions and initiated new work
processes and information systems to improve its global operations. GTI also
streamlined its organizational structure into three major lines of business,
reducing the U.S. salary workforce by 27 percent through both voluntary and
selective severance programs.
Mr. Shular commented, "We had strong execution in two key areas of our
cost savings plan during the first quarter. We successfully completed the
expansion of graphite electrode capacity in our facility in Monterrey, Mexico.
We are well positioned to serve our NAFTA customers with this 60,000 metric ton
facility and expect to deliver finished product from this
<page>
recent expansion by the end of the 2003 second quarter. We also completed our
organizational streamlining along our three major lines of business. Continued
execution and delivery of these cost savings are critical as we work to offset
recent increases in energy costs."
GTI recorded $19 million of restructuring charges in the 2003 first
quarter, $8 million (of the previously announced $14 million of restructuring
charges) for organizational changes and $11 million for closure and settlement
of its non-qualified defined benefit plan.
During the first quarter of 2003, GTI substantially completed the U.S.
voluntary and selective severance programs and recorded associated restructuring
costs of $8 million, before tax ($5 million, net of tax), of which approximately
half will involve cash outlays. The remaining severance costs, approximately $6
million, are expected to occur over the next 12-18 months. The fully implemented
organizational changes are expected to contribute $6 million of GTI's targeted
$16 million of incremental savings in 2003 and $12 million in each of 2004 and
2005.
Effective March 31, 2003, GTI also closed its non-qualified U.S. defined
benefit plan for the participating salaried workforce. The closure of the
non-qualified benefit plan resulted in a non-cash restructuring charge
associated with recognition of net actuarial losses of $11 million before tax
($7 million, net of tax). The closure of the plan is expected to result in
ongoing, annual cost savings of $2 million when compared to 2002.
CORPORATE
Selling, general and administrative expenses were $21 million in the
2003 first quarter, $1 million higher than in the 2002 fourth quarter.
Other income, net, was $4 million before tax ($2 million net of tax) in
the 2003 first quarter, primarily due to currency exchange benefits associated
with euro denominated intercompany loans, which were partially offset by other
expenses including an approximately $1 million mark to market cost adjustment on
$300 million of five-year interest rate caps.
Interest expense was $14 million during the 2003 first quarter compared
to $13 million in the 2002 first quarter and $15 million in the 2002 fourth
quarter.
The effective income tax rate was about 30 percent for the 2003 first
quarter. The effective rate for the 2003 first quarter was lower than the
anticipated income tax rate of 40 percent primarily because of a lower effective
tax rate associated with the restructuring charges.
Net loss per diluted share was ($0.16) for the 2003 first quarter as
compared to net loss per diluted share of ($0.06) in the 2002 first quarter.
<page>
Net debt at March 31, 2003 was $737 million as compared to $706 million
at December 31, 2002. Cash flow from operations was a use of $23 million. GTI
paid $25 million of interest, net of a $7 million cash benefit from its $450
million notional amount of interest rate swaps. In addition, in March 2003, GTI
sold the $450 million notional amount of interest rate swaps for $10 million in
cash. GTI subsequently entered into $350 million notional amount of interest
rate swaps covering the remaining term of its senior notes.
At March 31, 2003, GTI had drawn $45 million under its Euro 200 million
revolving credit facility with the remaining $158 million (after consideration
for outstanding letters of credit) fully available. For the 2003 first quarter,
GTI was in compliance with its senior secured bank credit facility covenants. In
addition, based on GTI's current business plans for 2003, GTI believes that it
will remain in compliance with its senior secured bank credit facility
covenants.
OUTLOOK
Mr. Shular commented on outlook, stating, "We are working very hard to
improve cash flow as we return to profitability. We are encouraged by the strong
order book for our graphite electrodes and cathodes and expect to operate at
capacity to meet demand. However, we continue to closely monitor the steel and
aluminum industries in light of overall global economic conditions. Demand in
our other end markets, including semiconductor, electronics and aerospace,
remains weak. We reaffirm our 2003 earnings guidance range of $0.21-$0.26 per
diluted share excluding restructuring charges. The higher energy costs we saw in
the first quarter will carry forward into the second quarter; however, we
anticipate reductions in the second half of 2003. "
"For the 2003 second quarter, we expect earnings per share to be in the
range of $0.04-$0.06 excluding restructuring charges. Graphite electrode sales
volume is expected to be between 48,000-50,000 metric tons. We expect average
graphite electrode revenue per metric ton to be approximately $2,300. Completion
of organizational changes for our new lines of business should result in reduced
overhead costs of approximately $2 million per quarter, beginning in the 2003
second quarter."
"On the new business development front, we continue to be very active in
the electronic thermal management product approval process and look forward to
reporting on key commercial wins for revenue growth."
GrafTech International Ltd. 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,
<page>
aluminum, silicon metal, automotive products and electronics. We have 13
manufacturing facilities in 7 countries and are the leading manufacturer in all
of our major product lines. We produce graphite electrodes that are consumed
primarily in the production of steel in electric arc furnaces, the steel making
technology used by all "mini-mills," and for refining steel in ladle furnaces.
We also produce carbon electrodes that are consumed in the manufacture of
silicon metal and cathodes that are used in the production of aluminum. In
addition, we develop and manufacture natural graphite for use in materials and
components for proton exchange membrane fuel cells and fuel cell systems and
thermal interface products for computer, communications and other applications.
GRAFCELL(TM), GRAFOIL(R), and eGRAF(TM) are our trademarks. For additional
information on GrafTech International, call 302-778-8227 or visit our website at
www.graftech.com. For additional information on our subsidiary, Advanced Energy
Technology Inc., call 216-529-3777. For additional information on our High Tech
High Temp business unit, call 216-676-2100 or visit its website at www.HT2.com.
In conjunction with this earnings release, you are invited to listen to
our earnings call being held today at 11:00 a.m. EDT. The dial-in number is
800-366-7417 for domestic and 303-262-2192 for international. 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.graftech.com under the Investor Relations section.
<page>
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)
(Unaudited)
<table>
<caption>
DECEMBER 31, MARCH 31,
ASSETS 2002 2003
---- ----
<s> <c> <c>
CURRENT ASSETS:
Cash and cash equivalents $ 11 $ 9
Notes and accounts receivable 108 99
Inventories:
Raw materials and supplies 40 42
Work in process 103 115
Finished goods 30 30
------------ -----------
173 187
Prepaid expenses and deferred income taxes 21 23
------------ -----------
Total current assets 313 318
------------ -----------
Property, plant and equipment 1,008 1,038
Less: accumulated depreciation 700 719
------------ -----------
Net fixed assets 308 319
Deferred income taxes 171 182
Goodwill 17 19
Other assets 50 42
------------ -----------
Total assets $ 859 $ 880
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 106 $ 83
Short-term debt 18 12
Accrued income and other taxes 24 31
Other accrued liabilities 57 73
------------ -----------
Total current liabilities 205 199
------------ -----------
Long-term debt:
Carrying value 699 734
Fair value of hedged debt obligation 8 2
Unamortized bond premium 6 6
------------ -----------
Total long-term debt 713 742
------------ -----------
Other long-term obligations 258 262
Deferred income taxes 34 37
Minority stockholders' equity in consolidated entities 30 27
Commitments & contingencies - -
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued - -
Common stock, par value $.01, 100,000,000 shares authorized,
59,120,160 shares issued at December 31, 2002,
59,748,717 shares issued at March 31, 2003 1 1
Additional paid-in capital 636 639
Accumulated other comprehensive loss (304) (304)
Accumulated deficit (620) (629)
Less: cost of common stock held in treasury, 2,542,539 shares at December 31, 2002,
and March 31, 2003 (88) (88)
Less: common stock held in employee benefits trust, 426,400 shares at December 31, 2002
and March 31, 2003 (6) (6)
------------ -----------
Total stockholders' deficit (381) (387)
------------ -----------
Total liabilities and stockholders' deficit $ 859 $ 880
============ ===========
</table>
<page>
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
(Unaudited)
<table>
<caption>
Three Months Ended
------------------
March 31, December 31, March 31,
--------- ------------ ---------
2002 2002 2003
---- ---- ----
<s> <c> <c> <c>
Net sales $ 138 $ 160 $ 174
Cost of sales 107 121 134
---------- ---------- ----------
Gross profit 31 39 40
Research and development 3 4 3
Selling, administrative and other expenses 18 20 21
Other (income) expense, net - (2) (4)
Global realignment and related expenses 1 - -
Restructuring charges 5 1 19
Impairment loss on long-lived and other assets - 3 -
Interest expense 13 15 14
---------- ---------- ----------
40 41 53
---------- ---------- ----------
Loss before provision for income taxes & minority interest (9) (2) (13)
Provision (benefit) for income taxes (6) - (4)
---------- ---------- ----------
Loss of consolidated entities before minority interest (3) (2) (9)
Less: Minority stockholders' share of income 1 - -
---------- ---------- ----------
Net loss (4) (2) (9)
========== ========== ==========
BASIC LOSS PER COMMON SHARE:
Net loss per share $ (0.06) $ (0.04) $ (0.16)
========== ========== ==========
Weighted average common shares outstanding
(in thousands) 55,823 56,144 56,621
========== ========== ==========
DILUTED LOSS PER COMMON SHARE:
Net loss per share $ (0.06) $ (0.04) $ (0.16)
========== ========== ==========
Weighted average common shares outstanding
(in thousands) 55,823 56,144 56,621
========== ========== ==========
</table>
NOTE: The consolidated statements of operations for the period ended March 31,
2002 has been restated to conform with SFAS No. 145, "Rescission of FASB
Statements No.4, 44 and 64, Amendments of FASB Statement No.13, and Technical
Corrections." The effect of the adoption of SFAS No. 145 is to reclassify
certain write-offs of capitalized bank charges for the three months ended March
31, 2002 in the amount of $3 million from extraordinary items to other (income)
expense, net. The corresponding provision for income taxes has been adjusted by
$1 million for the three months ended March 31, 2002.
<page>
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions, except per share data)
(Unaudited)
<table>
<caption>
Three Months Ended
------------------
March 31, December 31, March 31,
--------- ------------ ---------
2002 2002 2003
---- ---- ----
<s> <c> <c> <c>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (4) $ (2) $ (9)
Non-cash charges (credits) to net loss:
Depreciation and amortization 7 7 7
Deferred income taxes (8) 1 (5)
Restructuring charges 5 1 19
Impairment loss on long-lived and other assets - 3 -
Other non-cash charges (credits) 1 (7) (14)
Working capital* (45) 15 (19)
Long-term assets and liabilities (3) (2) (2)
------- --------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (47) 16 (23)
------- --------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (9) (18) (9)
------- --------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (9) (18) (9)
------- --------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Short-term debt borrowings (reductions), net 1 3 (6)
Revolving credit facility borrowings (reductions), net (25) (8) 35
Long-term debt borrowings 400 - -
Long-term debt reductions (312) - -
Purchase of interest rate caps - - (4)
Proceeds from reset of interest rate swap - - 10
Sale of common stock 1 - -
Financing costs (14) - -
Dividends paid to minority stockholders - (1) (4)
------- --------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 51 (6) 31
------- --------- --------
Net decrease in cash and cash equivalents (5) (8) (1)
Effect of exchange rate changes on cash and cash equivalents - 1 -
Cash and cash equivalents at beginning of period 38 18 11
------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33 $ 11 $ 10
======= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash paid during the periods for:
Interest expense $ 12 $ 2 $ 25
======= ========= ========
Income taxes $ 3 $ 1 $ 1
======= ========= ========
*Net change in working capital due to the following components:
(Increase) decrease in current assets:
Notes and accounts receivable $ (3) $ - $ 13
Inventories 4 - (9)
Prepaid expenses and other current assets (3) - 1
Increase (decrease) in accounts payable and accruals (40) 16 (19)
Antitrust investigations and related lawsuits and claims, net - (1) (4)
Restructuring payments (3) - (1)
------- --------- --------
WORKING CAPITAL $ (45) $ 15 $ (19)
======= ========= ========
</table>
<page>
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY
(Dollars in millions)
(Unaudited)
THREE MONTHS ENDED
------------------
MARCH 31, DECEMBER 31, MARCH 31,
2002 2002 2003
---- ---- ----
NET SALES:
Synthetic Graphite $ 118 $ 142 $ 149
Other $ 20 $ 18 $ 25
----- ----- -----
Total $ 138 $ 160 $ 174
COST OF SALES:
Synthetic Graphite $ 90 $ 108 $ 115
Other $ 17 $ 13 $ 19
----- ----- -----
Total $ 107 $ 121 $ 134
GROSS PROFIT:
Synthetic Graphite $ 28 $ 34 $ 34
Other $ 3 $ 5 $ 6
----- ----- -----
Total $ 31 $ 39 $ 40
GROSS PROFIT MARGIN:
Synthetic Graphite 23.4% 23.9% 22.7%
Other 16.0% 24.8% 24.7%
Combined 22.3% 24.0% 23.0%
NOTE TO SEGMENT DATA: The synthetic graphite line of business includes
graphite electrodes, cathodes and advanced graphite materials. GTI's other
businesses include, among others, its natural graphite line of business, which
is conducted by Advanced Energy Technology Inc. (AET), and its advanced carbon
materials line of business.
NOTE ON RECONCILIATION OF EARNINGS AND EBITDA GUIDANCE DATA: Earnings
guidance is provided on a GAAP basis assuming no change in interest rates or
currency exchange rates and excluding restructuring charges and impairment
losses. EBITDA guidance is provided based on the same assumptions. GTI does not
forecast changes in interest or currency rates. Changes in these rates can
affect such items as net sales and cost of sales (in each case as translated
into dollars), interest expense due to variable interest rates on a portion of
GTI's debt, and other (income) expense, net due to translation of currency gains
and losses on intercompany loans or mark-to-market cost adjustments on interest
rate caps. GTI expects to record restructuring charges of about $6 million which
are expected to occur over the next 12-18 months, it cannot forecast the amount
for any specific quarter or year. In addition, earnings and
<page>
EBITDA guidance is subject to the risks and uncertainties described under the
Note on Forward-Looking Statements.
<page>
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions)
(Unaudited)
<table>
<caption>
---------------------------------------------------
EBITDA Reconciliation Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003
- --------------------- ---------------------------------------------------
<s> <c> <c> <c> <c> <c>
Loss before provisions for income taxes & minority interest $ (9) $ (12) $ (7) $ (2) $(13)
ADD BACK:
Depreciation 7 8 7 7 7
Interest expense 13 17 15 15 14
Restructuring charges & impairment losses on long lived
and other assets 5 13 1 4 19
- ------------------------------------------------------------------------------------------------------------------------
EBITDA $ 16 $ 26 $ 16 $ 24 $ 27
========================================================================================================================
EBITDA as a percent of net sales 11.6% 16.1% 10.4% 15.0% 15.5%
MEMO : Cash portion of restructuring charges & impairment losses $ 5 $ - $ - $ 1 $ 4
MEMO : Other (income) expense, net included above $ - $(12) $ 2 $(2) $(4)
---------------------------------------------------
1998 1999 2000 2001 2002
---------------------------------------------------
Income (loss) before provisions for income taxes & minority interest $ 4 $ 46 $ 36 $(70) $(30)
ADD BACK:
Depreciation 51 45 43 36 29
Interest expense 73 84 75 60 60
Restructuring charges & impairment losses on long lived
and other assets 146 29 9 92 23
- ------------------------------------------------------------------------------------------------------------------------
EBITDA $274 $204 $163 $118 $ 82
========================================================================================================================
EBITDA as a percent of net sales 28.9% 24.5% 21.0% 18.0% 13.4%
MEMO : Cash portion of restructuring charges & impairment losses $ 57 $ - $ 6 $ 8 $ 6
MEMO : Other (income) expense, net included above $ 8 $ (9) $ - $ 1 $(12)
</table>
EBITDA is a non-GAAP financial measure that GTI currently calculates
according to the schedule above. GTI believes that EBITDA is generally accepted
as providing useful information regarding a company's ability to incur and
service debt. GTI also believes that EBITDA provides useful information about
the productivity and cash generation potential of its ongoing businesses.
Management uses EBITDA as well as other financial measures in connection with
its decision-making activities. 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 GAAP. GTI's
method for calculating EBITDA may not be comparable to methods used by other
companies and is not the same as the method for calculating EBITDA under its
senior secured bank credit facilities or its senior notes.
<page>
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions)
(Unaudited)
Net Debt Reconciliation
- -----------------------
-------------------------------
DEC-02 MAR-03
-------------------------------
Long term debt $713 $742
Short Term debt 18 12
================================================================================
Total debt 731 754
LESS:
Fair value of hedged debt obligation 8 2
Unamortized bond premium 6 6
Cash and cash equivalents 11 9
- --------------------------------------------------------------------------------
Net debt $706 $737
================================================================================
Net debt is a non-GAAP financial measure that GTI calculates according
to the schedule above. GTI excludes the unamortized bond premium from its sale
of $150 million aggregate principal amount of additional senior notes in May
2002 at a price of 104.5% of principal amount. The premium received in excess of
principal amount is amortized to reduce interest expense over the term of the
senior notes. GTI also excludes the fair value of hedged obligations (which are
interest rate swaps that have been marked-to-market) because they currently
represent an asset with an offsetting non-cash obligation recorded as a
component of long-term debt on the consolidated balance sheet. GTI believes that
net debt is generally accepted as providing useful information regarding a
company's indebtedness. Management believes net debt provides meaningful
information to investors to assist them to analyze liquidity. 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. GTI'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 bank credit facilities.
NOTE ON FORWARD-LOOKING STATEMENTS: This news release and our earnings
call may contain 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;
interest rate management activities; restructuring, realignment, strategic
alliance, supply chain, technology development and collaboration, investment,
acquisition, joint venture, operating,
<page>
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 demand for or prices
or sales volumes of graphite electrodes may not increase or may decline; 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 that anticipated additions to
aluminum smelting capacity using graphite cathodes may not occur or that
increased production of graphite cathodes by competitors may occur; the
possibility that demand for or prices or sales volume of graphite cathodes may
not increase or may decline; 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 or 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
our 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 the lawsuit initiated by us against our
former parents; the possibility that expected cost savings or benefits from
organizational changes may be delayed or may not be realized; the occurrence of
unanticipated events or circumstances relating to health, safety or
environmental liabilities or compliance or remediation obligations, labor
relations, strategic plans or projects identified above; changes in interest or
currency exchange rates, in competitive conditions or in inflation affecting our
raw material, energy or other costs; the possibility of failure to satisfy
conditions or milestones to, or occurrence of breach of terms of our strategic
alliances with Pechiney, Ballard, ConocoPhillips 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, as well as future decisions by us. Except as otherwise
specifically noted, references to future cost savings are based on economic and
industry conditions underlying our current business plan (and assume annual
graphite electrode production and sales of 180 thousand metric tons and no
change in currency exchange rates) and are subject to the criteria, standards
and limitations detailed in our filings with the SEC. The statements in this
news release or made during our earnings call 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.