Exhibit 99.1
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data at and for the years
ended December 31, 1998, 1999, 2000, 2001 and 2002 have been derived from our
audited annual Consolidated Financial Statements, except for the data under
"Other Operating Data." The data set forth below should be read in conjunction
with "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements included
elsewhere in this Current Report on Form 8-K.
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(Dollars in millions, except per share data)
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 928 $ 818 $ 763 $ 634 $ 596
Gross profit...................................... 336 256 214 179 135
Selling, administrative and other expenses........ 99 84 84 75 76
Restructuring charges (credit) (a)................ 86 (6) 6 12 6
Impairment loss on long-lived and other assets (b) 60 35 3 80 17
Antitrust investigations and related lawsuits and
claims (c)...................................... - - - 10 -
Securities class action and stockholder derivative
lawsuits (d).................................... - 13 (1) - -
Corporate realignment and related expenses (e).... - - - 2 3
Other income (expense), net (f)................... 20 (9) 20 1 (12)
Interest expense.................................. 73 84 75 60 60
Provision for (benefit from) income taxes......... 27 1 2 14 (16)
Income (loss) from continuing operations
(a)(b)(c)(d)(e)................................. (40) 42 10 (89) (19)
Income from discontinued operations (less
applicable income taxes expense)(g)............. 3 - - 2 1
--------- ---------- --------- --------- ---------
Net income (loss) (a)(b)(c)(d)(e)(f)(g)........... (37) 42 10 (87) (18)
Basic income (loss) per common share:
Income (loss) from continuing
operations................................ $ (0.89) $ 0.94 $ 0.22 $ (1.79) $ (0.35)
Income from discontinued operations....... 0.06 - - 0.04 0.02
--------- ---------- --------- --------- ---------
Net income (loss)...................... $ (0.83) $ 0.94 $ 0.22 $ 1.75 $ (0.33)
--------- ---------- --------- --------- ---------
Weighted average common shares
outstanding (in thousands)........... 44,972 45,114 45,224 49,720 55,942
--------- ---------- --------- --------- ---------
Diluted income (loss) per common share:
Income (loss) from continuing
operations................................ $ (0.89) $ 0.91 $ 0.22 $ (1.79) $ (0.35)
Income from discontinued operations....... 0.06 - - 0.04 0.02
--------- ---------- --------- --------- ---------
Net income (loss)...................... $ (0.83) $ 0.91 $ 0.22 $ (1.75) $ (0.33)
--------- ---------- --------- --------- ---------
Weighted average common shares
outstanding (in thousands)........... 44,972 46,503 45,813 49,720 55,942
--------- ---------- --------- --------- ---------
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents......................... $ 58 $ 17 $ 47 $ 38 $ 11
Total assets...................................... 1,137 933 908 797 859
Short-term debt................................... 19 - 3 7 18
Payments due within one year on long-term debt.... 63 82 27 - -
Long-term debt carrying value..................... 722 640 705 631 699
Fair value of hedged debt obligation.............. - - - - 8
Unamortized bond premium.......................... - - - - 6
Total debt........................................ 804 722 735 638 731
Other long-term obligations....................... 266 224 209 231 258
Balance of reserve for antitrust investigations,
lawsuits and claims............................. 195 131 107 101 98
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(Dollars in millions, except per share data)
Other long term obligations (excluding the
reserve for antitrust investigations, lawsuits
and claims) (h)................................. 149 120 126 132 163
Stockholders' equity (deficit).................... (287) (293) (316) (332) (381)
Working capital................................... 198 101 99 112 115
OTHER FINANCIAL DATA:
Gross profit margin............................... 36.3% 31.3% 28.1% 28.2% 22.7%
Depreciation and amortization..................... $ 50 $ 44 $ 42 $ 35 $ 28
Capital expenditures.............................. 52 56 52 40 50
Net cash provided by (used in) operating activities
from continuing operations...................... (29) 77 92 14 (60)
Net cash provided by (used in) operating
activities from discontinued operations......... - 3 2 3 -
Net cash provided by (used in) operating
activities...................................... (29) 80 94 17 (60)
Cash flow used in investing activities............ (31) (39) (50) (39) (50)
Cash flow provided by (used in) financing activities 62 (80) (13) 15 79
OTHER OPERATING DATA:
Ratio of earnings to fixed charges (i)............ - 1.55x 1.20x - -
Quantity of graphite electrodes sold
(thousands of metric tons).................. 211 206 217 174 180
- ----------------------
(a) For 1998, represents a charge in connection with closing graphite electrode
operations in Canada and Germany and the consolidation of certain corporate
administrative offices. These costs consisted primarily of severance,
write-offs of fixed assets and environmental and other shutdown costs. For
1999, represents a net reduction in the estimate of shutdown costs recorded
in 1998. For 2000, represents a $2 million charge in connection with the
restructuring of our advanced graphite materials business and a $4 million
charge in connection with a corporate restructuring involving a workforce
reduction. These costs consisted primarily of severance. For 2001,
represents a $7 million charge in connection with the closure of graphite
electrode manufacturing operations in Tennessee and coal calcining
operations in New York and relocation of corporate headquarters, which
consisted primarily of severance, and a $5 million charge in connection
with the mothballing of graphite electrode operations in Italy, which
consisted primarily of shutdown costs. For 2002, represents a net increase
in the estimate of costs in connection with the mothballing of our graphite
electrode operations in Italy. These costs consisted primarily of
severance.
(b) For 1998, represents impairment loss on long-lived Russian assets. For
1999, represents impairment loss on long-lived advanced graphite materials
assets. For 2000, represents impairment loss on long-lived cathode assets.
For 2001, represents a $51 million impairment loss related to long-lived
graphite electrode assets in Tennessee, a $1 million impairment loss
related to long-lived coal calcining assets in New York, a $1 million
impairment loss related to long-lived advanced graphite materials assets,
a $24 million impairment loss related to long-lived graphite electrode
assets in Italy and a $3 million impairment loss related to
available-for-sale securities. For 2002, represents a $12 million
impairment loss related to long-lived carbon electrode assets in Tennessee,
a $2 million impairment loss related to available-for-sale securities, and
a $3 million related to our joint venture with Jilin in China.
(c) Represents additional estimated potential liabilities and expenses in
connection with antitrust investigations and related lawsuits and claims.
(d) Represents estimated liabilities and expenses in connection with securities
class action and stockholder derivative lawsuits, $1 million of which was
reversed in 2000.
(e) Represents costs in connection with a corporate realignment of our
subsidiaries.
2
(f) Other income (expense), net, includes the following: (i) For 1998, $12
million represents write-off of capitalized bank fees and other costs
resulting from early extinguishment of debt in connection with a debt
refinancing; (ii) For 2000, $21 million represents write-off of
capitalized bank fees and other costs resulting from early extinguishment
of debt in connection with a debt recapitalization; (iii) For 2002, $21
million represents gains from currency translation on intercompany loans
and translation of financial statements of foreign subsidiaries which use
the dollar as their functional currency; offset, among others, by $4
million write-off of capitalized bank fees and other costs in connection
with our retirement of debt and issuance of senior notes.
(g) Income from discontinued operations (less applicable income taxes expense)
represents the income of our composite tooling business that was sold in
the 2003 second quarter.
(h) Represents pension, post-retirement and related benefits, employee
severance liabilities and miscellaneous other long-term obligations.
(i) The ratio of earnings to fixed charges has been computed by dividing (i)
earnings before income taxes, plus fixed charges (excluding capitalized
interest) and amortization of capitalized interest by (ii) fixed charges,
which consist of interest charges (including capitalized interest) plus the
portion of rental expense that includes an interest factor. Earnings were
insufficient to cover fixed charges by $11 million in 1998, by $72 million
in 2001 and by $32 million in 2002 due to, among other things,
restructuring charges and impairment losses on long-lived and other assets.
3
The following quarterly selected consolidated financial data have been
derived from the quarterly unaudited Consolidated Financial Statements. The data
set forth below should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere in this Current Report
on Form 8-K.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(Dollars in millions, except per share data)
2001:
Net sales.............................. $ 167 $ 165 $ 153 $ 149
Gross profit........................... 48 50 42 39
Income (loss) from continuing
operations.......................... 3 (40) 4 (56)
Income from discontinued operations
(less applicable income tax expense) - 1 - 1
------- --------- -------- ------
Net income (loss) (a)(b)............... 3 (39) 4 (55)
Basic income (loss) per common share:
Income (loss) from continuing
operations.......................... $ 0.07 $ (0.88) $ 0.07 $ (1.00)
Income from discontinued operations.... - 0.01 - 0.02
------- --------- -------- ------
Net income (loss) per share............ $ 0.07 $ (0.87) $ 0.07 $ (0.98)
------- --------- -------- ------
Diluted income (loss) per common share:
Income (loss) from continuing
operations.......................... $ 0.07 $ (0.88) $ 0.07 $ (1.00)
Income from discontinued operations.... - 0.01 - 0.02
------- --------- -------- ------
Net income (loss) per share............ $ 0.07 $ (0.87) $ 0.07 $ (0.98)
------- --------- -------- ------
2002:
Net sales.............................. $ 133 $ 157 $ 150 $ 156
Gross profit........................... 30 35 33 37
Income (loss) from continuing
operations.......................... (5) (7) (5) (2)
Income from discontinued operations
(less applicable income taxes
expense)............................ 1 - - -
------- --------- -------- ------
Net income (loss) (c)(d)(e)(f)......... $ (4) $ (7) $ (5) $ (2)
======= ========= ======== ======
Basic income (loss) per common share:
Income (loss) from continuing
operations.......................... $ (0.08) $ (0.15) $ (0.09) $ (0.04)
Income discontinued operations......... 0.02 0.01 0.01 -
------- --------- -------- ------
Net income (loss) per share............ $ (0.06) $ (0.14) $ (0.08) $ (0.04)
------- --------- -------- ------
Diluted income (loss) per common share:
Income (loss) from continuing
operations.......................... $ (0.08) $ (0.15) $ (0.09) $ (0.04)
Income from discontinued operations.... 0.02 0.01 0.01 -
------- --------- -------- ------
Net income (loss) per share............ $ (0.06) $ (0.14) $ (0.08) $ (0.04)
======= ========= ======== ======
- ----------------------
(a) The 2001 second quarter includes a restructuring charge of $5 million
related to U.S. graphite electrode operations, a charge of $53 million
related to the impairment of long-lived U.S. graphite electrode and
coal calcining assets, and a charge of $10 million related to antitrust
investigations and related lawsuits and claims.
4
(b) The 2001 fourth quarter includes a restructuring charge of $7 million
related primarily to Italian graphite electrode assets, a charge of $24
million related to the impairment of long-lived Italian graphite
electrode assets, a $3 million charge related to the impairment of
available-for-sale securities, and a $29 million charge related to
adjustments made in connection with the capitalization of foreign tax
credits to investment in affiliates as well as settlement of audits and
adjustments to reserves.
(c) The 2002 first quarter includes a restructuring charge of $5 million
related primarily to the mothballing of Italian graphite electrode
operations.
(d) The 2002 second quarter includes a $12 million charge related to the
impairment of long-lived U.S. carbon electrode assets and a $1 million
charge related to impairment of available-for-sale securities.
(e) The 2002 third quarter includes a $1 million charge related to the
impairment of available-for-sale securities.
(f) The 2002 fourth quarter includes a $3 million charge related to the
impairment of our joint venture with Jilin in China and an additional
$1 million restructuring charge related to the mothballing of Italian
graphite electrode operations.
5