Exhibit 99.1
[LOGO OMITTED]
BRANDYWINE WEST, 1521 CONCORD PIKE, SUITE 301
WILMINGTON, DE 19803
N E W S R E L E A S E
CONTACT: Elise A. Garofalo
Director of Investor Relations
302-778-8227
GRAFTECH INTERNATIONAL REPORTS SECOND QUARTER RESULTS
Wilmington, DE - July 24, 2003 - GrafTech International Ltd. (NYSE:GTI)
today announced financial results for the second quarter ended June 30, 2003.
2ND QUARTER HIGHLIGHTS
o Net income was $7 million, or $0.12 per diluted share as compared to a net
loss of $7 million, or $0.14 per diluted share in 2Q02.
o Net income was $4 million, or $0.07 per diluted share, before restructuring
charges of $1 million (before and after tax), a gain on the sale of
discontinued operations of $1 million (before and after tax) and other
income, net, of $6 million ($3 million after tax). (See attached
comparative reconciliation of earnings.)
o Net sales increased 15 percent to $181 million versus 2Q02 and 7 percent
versus 1Q03; Gross profit increased 23 percent to $43 million versus 2Q02
and 10 percent versus 1Q03.
o Higher energy costs continued to negatively impact GTI's results, by
approximately $2 million in the quarter.
o Ongoing cost savings activities resulted in SG&A and R&D reductions of $2
million in the quarter.
o Net debt (see attached reconciliation of net debt) was reduced to $695
million at June 30 versus $737 million at the end of 1Q03 after completing
over $55 million of de-leveraging actions.
o EBITDA was $35 million compared to $26 million in 2Q02 and $27 million in
1Q03 (see attached reconciliation of EBITDA.)
Craig Shular, Chief Executive Officer of GTI, commented, "Improved
profitability in the quarter was primarily due to increased net sales in our
synthetic graphite line of business, ongoing cost savings activities and
de-leveraging actions. Graphite electrode sales volume was 50,700 metric tons.
Average revenue per metric ton of graphite electrodes increased to $2,311 for
the year through June 2003, approximately 9 percent higher than in the 2002
fourth quarter. Approximately half of the increase was due to the impact of net
changes in currency exchange rates. We reaffirm our outlook of an increase in
real average graphite electrode selling price of approximately $100 per metric
ton for the year 2003 over the 2002 fourth quarter."
"We continued our cost savings activities. This quarter was the first
full quarter of operation of our newly expanded graphite electrode capacity in
Monterrey, Mexico. Our team successfully ran the facility at
its new annual capacity of 60,000 metric tons during the quarter. Also during
the quarter, we began to see the savings associated with the organizational
changes initiated in the 2003 first quarter."
"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 $162 million in
the 2003 second quarter as compared to $142 million in the 2002 second quarter.
The increase was primarily due to higher net sales of graphite electrodes,
including the benefit of net changes in currency exchange rates. The average
sales revenue per metric ton of graphite electrodes in the 2003 second quarter
was $2,347. Graphite electrode sales volume was 50.7 thousand metric tons, 4
percent higher than in the same period in 2002. Gross profit for the synthetic
line of business was $39 million in the 2003 second quarter, 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 higher energy
costs, higher freight costs and the negative impact of net changes in currency
exchange rates on costs. Gross margin was 23.8 percent as compared to 22.6
percent in the 2002 second quarter.
OTHER LINES OF BUSINESS
(AET-NATURAL GRAPHITE LINE OF BUSINESS, ADVANCED CARBON MATERIALS LINE OF
BUSINESS AND OTHER BUSINESSES)
Note that this segment has been restated for current and prior
periods to exclude GTI's composite tooling business that was sold during the
2003 second quarter, as previously announced.
Net sales for GTI's other businesses totaled $19 million for the 2003
second quarter as compared to $15 million in the 2002 second quarter. Gross
profit increased to $4 million, or 24.3 percent of net sales, as compared to $3
million, or 20.7 percent of net sales, in the 2002 second 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
GTI received additional orders for GRAFCELL(TM) advanced flexible
graphite fuel cell products from Ballard Power Systems, under its existing
supply agreement. The orders, with a sales value of $650,000, were received in
the 2003 second quarter and are in addition to an order announced in January.
These orders will be used by Ballard to fulfill its commitment to its automotive
customers for fuel cell modules. Over the next two years, three of Ballard's
customers, DaimlerChrysler, Ford and Honda, plan to place in fleet
demonstrations 150 fuel cell vehicles powered by Ballard(R) fuel cells which use
GRAFCELL(TM) products. These 150 vehicles represent the majority of the
approximately 175 fuel cell powered vehicles planned by major automakers over
the next two years.
ELECTRONIC THERMAL MANAGEMENT
During the 2003 second quarter, GTI received new approvals for its
thermal interface materials and heat sink and spreader components, including an
approval and order from IBM for its eGRAF(TM) HiTherm thermal interface
materials for use in IBM's new high-end Regatta Unix servers and an approval and
order from Nokia for thermal interface materials for use in a power converter
application.
Also, GTI jointly published and presented an electronic thermal
management technical paper with IBM Corporation, entitled "The Development of a
Bonded Fin Graphite/Epoxy Heat Sink for High Performance Servers." The paper
concludes that the graphite-based heat sink performs competitively with copper
at only a quarter of the weight of copper.
CORPORATE
Selling, general and administrative and research and development
expenses were $23 million in the 2003 second quarter as compared to $24 million
in the 2003 first quarter. Cost savings programs, including the redesign of
employee benefit plans and the streamlining of GTI's organizational structure,
resulted in a $2 million reduction of these costs from the 2003 first quarter
that was partially offset by higher variable compensation accruals.
Other income, net, was $6 million in the 2003 second 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 $500 million of interest rate caps.
Interest expense was $13 million in the 2003 second quarter, $1 million
lower than in the 2003 first quarter due primarily to a lower effective interest
rate.
The effective income tax rate was approximately 40 percent for the 2003
second quarter.
Net income per diluted share was $0.12 for the 2003 second quarter as
compared to a net loss per diluted share of $0.14 in the 2002 second quarter.
COST SAVINGS
GTI's cost savings program targets $30 million of cumulative recurring
annual cost savings by the end of 2003, $16 million more than in 2002. During
the 2003 second quarter, GTI realized benefits from improved productivity from
its graphite electrode manufacturing facilities, the redesign of its benefit
plans and the streamlining of its organizational structure. GTI is on target to
deliver the $16 million of incremental savings in 2003.
DE-LEVERAGING AND ASSET SALES PROGRAM
As recently announced, GTI completed several de-leveraging actions in
the 2003 second quarter to bring net debt below $700 million.
GTI sold non-strategic assets in the quarter and utilized the $18
million of net proceeds to reduce debt. GTI sold its non-strategic composite
tooling business for $15 million of net cash proceeds and recorded a gain of $1
million. GTI terminated its executive life insurance program and, in the 2003
second quarter, liquidated its split dollar life insurance policies for
executives for net cash proceeds of approximately $3 million. All active
employees of GTI now participate in the same, lower cost life insurance program.
GTI expects asset sales to total approximately $25 million (of $75 million
targeted by the end of 2004) in 2003.
In addition, in June 2003, GTI sold its $400 million notional amount of
interest rate swaps for $21 million in cash. These swaps related to the
company's outstanding senior notes and the cash proceeds will be
amortized as a benefit to interest expense over the remaining term of the senior
notes. In July 2003, GTI entered into $500 million notional amount of interest
rate swaps covering the remaining term of the senior notes. The rates of the new
swaps are similar to the original market rates of the swaps sold in June. GTI
now expects interest expense for 2003, based on current market rates, to be
approximately $50-52 million.
GTI also exchanged $20 million principal face amount of senior notes,
plus accrued interest, for approximately 3.8 million shares of common stock in
June 2003. These transactions resulted in a net gain of approximately $1 million
in the second quarter (included in other income, net). GTI exchanged an
additional $15 million principal face amount of senior notes, plus accrued
interest, for approximately 2.8 million shares in July 2003. This transaction
resulted in a net gain of approximately $1 million for the 2003 third quarter.
These transactions were based on market prices prevailing in June and July.
Consistent with its debt reduction efforts, GTI may from time to time exchange
or purchase senior notes in the open market or privately negotiated
transactions, opportunistically on terms that GTI believes to be favorable.
Net debt was $695 million at June 30, 2003 as compared to $737 million
at March 31, 2003. Net cash used in operations was $1 million, including net
cash used for working capital, mainly increased accounts receivable of $19
million due to higher net sales, and $5 million paid to the Department of
Justice.
At June 30, 2003, GTI had drawn $11 million under its Euro 200 million
($230 million at June 30, 2003 exchange rates) revolving credit facility with
the remaining $203 million (after consideration for outstanding letters of
credit) available. For the 2003 second quarter, GTI was in compliance with its
senior secured bank credit facility covenants. In addition, based on GTI's
current business plans, GTI believes that it will remain in compliance with its
senior secured bank credit facility covenants in 2003.
OUTLOOK
Mr. Shular commented on the outlook, "We continue to closely monitor the
steel and aluminum industries in light of continued uncertain global economic
conditions. However, we are encouraged by the strong order book for our graphite
electrodes and cathodes and expect to operate at capacity to meet demand. We
reaffirm our 2003 earnings guidance range of $0.21-$0.26 per diluted share
(excluding restructuring charges, gain on sale of discontinued operations and
other income, net - see attached reconciliation) and we expect our net debt at
year end 2003 to be at or below June 30, 2003 levels."
For the balance of 2003, the anticipated improvements in interest
expense, based on current market rates, are expected to be offset by the loss of
earnings from our composite tooling business that has been sold and continuing
higher energy costs.
Mr. Shular continued, "For the 2003 third quarter, we expect earnings
per diluted share to be between $0.05-$0.07 (excluding restructuring charges,
gain on sale of discontinued operations and other income/expense net). Graphite
electrode sales volume in the third quarter, which is a seasonally lower volume
quarter, particularly in Europe, is projected to be between 46,000 and 48,000
metric tons."
"Lastly, we recently announced, effective for new orders beginning
August 1, 2003, that the price for our graphite electrodes in North and South
America increased to $2,600 per metric ton. Because GTI's order book is full for
the second half of 2003, these price increases will not materially impact 2003
results."
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
800-240-2430 for domestic and 303-262-2193 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.
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, 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.
NOTE ON FORWARD-LOOKING STATEMENTS: This news release and any related
calls or discussions 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, 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 or equity securities of us or our subsidiaries; and
future asset sales, 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 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 increased production of aluminum or stable production of
graphite cathodes by competitors may not result in stable or increased demand
for or prices or sales volume of graphite cathodes; 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 contractually specified or other product development milestones
or delays in expanding or failure to expand our manufacturing capacity to meet
growth in demand for new or improved products, if any; the possibility that end
markets for our other products may not improve or may worsen; 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 cost
savings from our 2002 major cost savings plan or our other savings efforts will
not be fully realized; the possibility that the anticipated benefits from the
corporate realignment of our subsidiaries or the
refinement of our organizational structure into three lines of business may be
delayed or may not occur or that our provision for income taxes and effective
income tax rate (as distinguished from our tax payments) may fluctuate
significantly based on changes in financial performance of subsidiaries in
various countries, changes in estimates of future ability to use foreign tax
credits, changes in tax laws and other factors; the occurrence of unanticipated
events or circumstances relating to health, safety or environmental compliance
or remediation obligations or liabilities to third parties, labor relations, raw
materials, energy supplies or cost, projects described above or strategic plans;
the possibility that changes in market prices of our common stock or senior
notes may affect our plans regarding de-leveraging or debt reduction activities;
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 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 any related discussions or calls 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.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share data)
(Unaudited)
DECEMBER 31, JUNE 30,
ASSETS 2002 2003
---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 11 $ 8
Accounts and notes receivable 104 119
Inventories:
Raw materials and supplies 39 45
Work in process 102 120
Finished goods 30 29
--------- -------
171 194
Prepaid expenses and deferred income taxes 20 27
--------- -------
Total current assets 306 348
--------- -------
Property, plant and equipment 995 1,070
Less: accumulated depreciation 695 742
--------- -------
Net fixed assets 300 328
Deferred income taxes 171 187
Goodwill 17 20
Other assets 50 36
Assets of discontinued operations 15 -
--------- -------
Total assets $ 859 $ 919
========= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 105 $ 105
Short-term debt 18 23
Accrued income and other taxes 24 32
Other accrued liabilities 56 76
--------- -------
Total current liabilities 203 236
--------- -------
Long-term debt:
Carrying value 699 680
Fair value of hedged debt obligation 8 -
Unamortized bond premium 6 6
--------- -------
Total long-term debt 713 686
--------- -------
Other long-term obligations 258 275
Deferred income taxes 32 39
Liabilities of discontinued operations 4 3
Minority stockholders' equity in consolidated entities 30 29
Commitments & contingencies - -
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued - -
Common stock, par value $.01, 100,000,000 and 150,000,000 shares authorized, respectively at
December 31, 2002 and June 30, 2003
59,120,160 shares issued at December 31, 2002,
64,338,211 shares issued at June 30, 2003 1 1
Additional paid-in capital 636 665
Accumulated other comprehensive loss (304) (302)
Accumulated deficit (620) (622)
Less: cost of common stock held in treasury, 2,542,539 shares at December 31, 2002,
2,451,035 shares at June 30, 2003 (88) (85)
Less: common stock held in employee benefits trust, 426,400 shares at December 31, 2002
and June 30, 2003 (6) (6)
--------- -------
Total stockholders' deficit (381) (349)
--------- -------
Total liabilities and stockholders' deficit $ 859 $ 919
========= =======
GRAFTECH INTERNATIONAL LTD. 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,
-------- -------- -------- --------
2002 2003 2002 2003
---- ---- ---- ----
Net sales $ 157 $ 181 $ 291 $ 351
Cost of sales 122 138 226 269
--------- ---------- --------- ---------
Gross profit 35 43 65 82
Research and development 3 2 6 5
Selling, administrative and other expenses 19 21 37 42
Restricted stock vesting 5 - 5 -
Other (income) expense, net (12) (6) (12) (10)
Global realignment and related expenses 2 - 3 -
Restructuring charges - 1 5 20
Impairment loss on long-lived and other assets 13 - 13 -
Interest expense 17 13 30 27
--------- ---------- --------- ---------
47 31 87 84
--------- ---------- --------- ---------
Income (loss) from continuing operations before provision for income
taxes (12) 12 (22) (2)
Provision (benefit) for income taxes (5) 5 (11) 1
--------- ---------- --------- ---------
Income (loss) from continuing operations of consolidated entities
before minority interest (7) 7 (11) (3)
Less: Minority stockholders' share of income - 1 1 1
--------- ---------- --------- ---------
Income (loss) from continuing operations (7) 6 (12) (4)
--------- ---------- --------- ---------
Discontinued operations:
Income from discontinued operations (less applicable income taxes
expense) $ - $ - $ 1 $ 1
Gain on sale of discontinued operations (less applicable income tax
expense) $ - $ 1 $ - $ 1
--------- ---------- --------- ---------
Net income (loss) $ (7) $ 7 $ (11) $ (2)
========= ========== ========= =========
BASIC INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per share $ (0.14) $ 0.12 $ (0.20) $ (0.04)
========= ========== ========= =========
Weighted average common shares outstanding
(in thousands) 55,872 57,037 55,848 56,829
========= ========== ========= =========
DILUTED INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per share $ (0.14) $ 0.12 $ (0.20) $ (0.04)
========= ========== ========= =========
Weighted average common shares outstanding
(in thousands) 55,872 57,040 55,848 56,878
========= ========== ========= =========
NOTE: The consolidated statements of operations for the periods ended June 30,
2002 have 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 and six
months ended June 30, 2002 in the amount of $1 million and $4 million
respectively from extraordinary items to other (income) expense, net. The
corresponding provision for income taxes has been adjusted by $1 million for the
six months ended June 30, 2002.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
-------- -------- -------- --------
2002 2003 2002 2003
---- ---- ---- ----
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (7) $ 7 $ (11) $ (2)
Income from discontinued operations - - 1 1
Gain on sale of discontinued operation - 1 - 1
------------------------ --------------------
Income (loss) from continuing operations (7) 6 (12) (4)
Non-cash charges to net income (loss):
Depreciation and amortization 8 8 15 15
Deferred income tazes (5) (5) (13) (10)
Restructuring charges - 1 5 20
Impairment loss on long-lived and other assets 13 - 13 -
Restricted stock vesting 5 - 5 -
Write-off of capitalized bank fees, net of tax 1 - 3 -
Other non-cash charges (credits) (24) (5) (28) (20)
Working capital* 20 (8) (24) (27)
Long-term assets and liabilities - 2 - -
--------- ---------- --------- ---------
Net cash provided by (used in) operating activities from continuing
operations 11 (1) (36) (26)
Net cash provided by operating activities from discontinued operations - - - 1
--------- ---------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 11 (1) (36) (25)
--------- ---------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (11) (11) (20) (20)
Proceeds from sale of discontinued operations - 15 - 15
--------- ---------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (11) 4 (20) (5)
--------- ---------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Short-term debt borrowings (reductions), net 9 10 10 4
Revolving credit facility borrowings (reductions), net (70) (34) (95) 1
Long-term debt borrowings 157 - 557 -
Long-term debt reductions (75) - (387) -
Proceeds from reset of interest rate swap - 21 - 31
Purchase of interest rate caps - (1) - (5)
Sale of common stock - - 1 -
Financing costs (6) - (20) -
Dividends paid to minority shareholders - - - (4)
--------- ---------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 15 (4) 66 27
--------- ---------- --------- ---------
Net decrease in cash and cash equivalents 15 (1) 10 (3)
Effect of exchange rate changes on cash and cash equivalents 3 - 3 -
Cash and cash equivalents at beginning of period 33 9 38 11
--------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51 $ 8 $ 51 $ 8
========= ========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash paid during the periods for:
Interest expense $ 5 $ 8 $ 17 $ 33
========= ========== ========= =========
Income taxes $ 1 $ 4 $ 4 $ 5
========= ========== ========= =========
*Net change in working capital due to the following components:
(Increase) decrease in current assets:
Notes and accounts receivable $ (15) $ (19) $ (18) $ (6)
Inventories 6 - 10 (9)
Prepaid expenses and other current assets 1 (4) (2) (3)
Increase (Decrease) in accounts payable and accruals 27 17 (12) (2)
Antitrust investigations and related lawsuits and claims, net - - - (4)
Restructuring payments, net 1 (2) (2) (3)
--------- ---------- --------- ---------
WORKING CAPITAL $ 20 $ (8) $ (24) $ (27)
========= ========== ========= =========
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY
(Dollars in millions)
(Unaudited)
----------------------------------------------------
THREE MONTHS ENDED
JUNE 30, MARCH 31, JUNE 30,
2002 2003 2003
---- ---- ----
NET SALES:
Synthetic Graphite $ 142 $ 149 $ 162
Other $ 15 $ 21 $ 19
---------------------------------------------------
Total $ 157 $ 170 $ 181
COST OF SALES:
Synthetic Graphite $ 110 $ 115 $ 123
Other $ 12 $ 16 $ 15
---------------------------------------------------
Total $ 122 $ 131 $ 138
GROSS PROFIT:
Synthetic Graphite $ 32 $ 34 $ 39
Other $ 3 $ 5 $ 4
---------------------------------------------------
Total $ 35 $ 39 $ 43
GROSS PROFIT MARGIN:
Synthetic Graphite 22.6% 22.7% 23.8%
Other 20.7% 25.0% 24.3%
Combined 22.4% 23.0% 23.9%
NOTE ON SEGMENT DATA: The "Other" segment has been restated for current
and prior periods to exclude GTI's composite tooling business that was sold in
June 2003.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NET INCOME (LOSS) AND EARNINGS PER SHARE RECONCILIATION
- -------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2002 2003
- ---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) [($0.14) and $0.12 per diluted share, $(7) $ 7
respectively]
- ---------------------------------------------------------------------------------------------------------------
Adjustments:
- ---------------------------------------------------------------------------------------------------------------
Restructuring, impairment and global realignment, net of 9 1
tax
- ---------------------------------------------------------------------------------------------------------------
Gain on sale of discontinued operations - (1)
- ---
- ---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) EXCLUDING ADJUSTMENTS [$0.03 and $0.12 per
diluted share, respectively] $ 2 $ 7
-- ---
- ---------------------------------------------------------------------------------------------------------------
Other (income) expense, net, net of tax $(8) $(3)
---- ----
- ---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) EXCLUDING RESTRUCTURING, IMPAIRMENT, GLOBAL $(6) $ 4
REALIGNMENT CHARGES, GAIN ON SALE OF DISCONTINUED OPERATIONS
AND OTHER (INCOME) EXPENSE, NET [($0.11) and $0.07 per diluted
share, respectively]
- ---------------------------------------------------------------------------------------------------------------
Income (loss) excluding restructuring, impairment, global realignment
charges, gain on sale of discontinued operations and other (income) expense,
net, is a non-GAAP financial measure that GTI calculates according to the
schedule above. GTI believes that the excluded items are not primarily related
to core operational activities. GTI believes that income excluding items that
are not primarily related to core operational activities is generally viewed as
providing useful information regarding a company's operating profitability.
Management uses income excluding these items as well as other financial measures
in connection with its decision-making activities. Income excluding these items
should not be considered in isolation or as a substitute for net income, income
from continuing operations or other consolidated income data prepared in
accordance with GAAP. GTI's method for calculating income excluding these items
may not be comparable to methods used by other companies.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
2003 ESTIMATED NET INCOME (LOSS) AND EARNINGS PER SHARE RECONCILIATION
- ----------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
ACTUAL SIX MONTHS ESTIMATED YEAR
ENDED JUNE 30, ENDED DECEMBER
2003 31, 2003
- ---------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) [($0.04) actual and $0.09-$0.14 estimated
range per diluted share, respectively] $(2) $6-9
- ---------------------------------------------------------------------------------------------------------------
Adjustments:
- ---------------------------------------------------------------------------------------------------------------
Restructuring 13 13
- ---------------------------------------------------------------------------------------------------------------
Gain on sale of discontinued operations (1) (1)
--- ---
- ---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) EXCLUDING ADJUSTMENTS [$0.17 actual and
$0.30-$0.35 estimated range per diluted share, respectively] $10 $18-21
=== ======
- ---------------------------------------------------------------------------------------------------------------
Other (income) expense, net, net of tax $(5) $(5)
---- ----
- ---------------------------------------------------------------------------------------------------------------
INCOME (LOSS) EXCLUDING RESTRUCTURING CHARGES, GAIN ON SALE
OF DISCONTINUED OPERATIONS AND OTHER (INCOME) EXPENSE, NET $5 $13-16
[$0.08 actual and $0.21-0.26 estimated range per diluted
share, respectively]
- ---------------------------------------------------------------------------------------------------------------
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, impairment losses,
gain on sale of discontinued operations and other (income) expense, net. 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.
Some of these items are recorded in other (income) expense, net. Other items
included in other (income) expense, net are non-operational items that are
non-recurring or otherwise not reasonably predictable. GTI expects to record
restructuring charges of about $6 million, before tax, over the next 12-18
months; however, it cannot forecast the amount for any specific quarter or year.
To the extent that an item, that would be excluded, has been recorded in a prior
period and that prior period is included in a forecast period, the recorded item
is reflected for the entire forecast period at the same amount at which it was
recorded in the prior period. In addition, earnings and EBITDA guidance is
subject to the risks and uncertainties described under the Note on
Forward-Looking Statements.
The schedule above assumes weighted average outstanding shares of 60.5
million for the year ended December 31, 2003 and 64.3 million for the 2003 third
and fourth quarters.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
(UNAUDITED)
EBITDA RECONCILIATION
------------------------------------------------------------
Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003
------------------------------------------------------------
Net income (loss) (4) (7) (5) (2) (9) 7
ADD BACK:
Extraordinary item, net of tax - - - - - -
Minority stockholders' share of income 1 - 1 - - 1
Provision for (benefit from) income taxes (6) (5) (3) - (4) 5
Depreciation and amortization 7 8 7 7 7 8
Interest expense 13 17 15 15 14 13
Restructuring & impairment losses on long lived and other assets 5 13 1 4 19 1
- --------------------------------------------------------------------------------------------------------------------------------
EBITDA 16 26 16 24 27 35
================================================================================================================================
EBITDA as a Percent of net sales 11.6% 16.1% 10.4% 15.0% 15.5% 18.8%
MEMO : Cash portion of restructuring and impairment losses $ 5 - - $ 1 $ 4 $ 1
MEMO : Other (income) expense, net, included above - $(12) $ 2 $(2) $(4) $(6)
MEMO : Gain on sale of discontinued operations - - - - - $ 1
---------------------------------------------------
1998 1999 2000 2001 2002
---------------------------------------------------
Net income (loss) (37) 42 10 (87) (18)
ADD BACK:
Extraordinary item, net of tax 7 - 13 - -
Minority stockholders' share of income 2 3 3 2 2
Provision for (benefit from) income taxes 32 1 10 15 (14)
Depreciation and amortization 51 45 43 36 29
Interest expense 73 84 75 60 60
Restructuring & 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 and impairment losses $57 $ - $ 6 $ 8 $ 6
MEMO : Other (income) expense, net, included above $ 8 $(9) $(1) $ 1 $(12)
NOTE ON EBITDA RECONCILIATION: Extraordinary items relating to
capitalized debt fees for 2002 have been reclassified into other (income)
expense, net, in accordance with new accounting standards.
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.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
(UNAUDITED)
Net Debt Reconciliation
-------------------------------
DEC-02 MAR-03 JUN-03
-------------------------------
Long term debt 713 742 686
Short term debt 18 12 23
- --------------------------------------------------------------------------
Total debt 731 754 709
LESS:
Fair value of hedged debt obligation 8 2 0
Unamortized bond premium 6 6 6
Cash and cash equivalents 11 9 8
- --------------------------------------------------------------------------
Net debt 706 737 695
==========================================================================
NOTE ON NET DEBT RECONCILATION: 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.