GrafTech Reports Second Quarter 2005 Results.WILMINGTON Wilmington. 1 City (1990 pop. 71,529), seat of New Castle co., NE Del., on the Delaware River and tributary streams, the Christina and the Brandywine; settled 1638, inc. as a city 1832. , Del. -- GrafTech International Ltd. (NYSE NYSE See: New York Stock Exchange : GTI GTI Gas Technology Institute GTI Global Taxonomy Initiative GTI Good Time Interval GTI Guelph Turfgrass Institute GTI Green Theme International GTI Gordon Training International GTI Georgia Transportation Institute GTI Group Travel Insurance ) today reported second quarter 2005 results. Second Quarter 2005 Summary
-- Net sales were $220 million, versus $213 million in the second
quarter of 2004.
-- Average graphite electrode sales revenue per metric ton
increased 14 percent, versus the second quarter of 2004,
to $2,849.
-- Graphite electrode volume for the quarter was 48.2
thousand metric tons.
-- Electronic thermal management (ETM) net sales increased 50
percent to $4.5 million. GTI now expects ETM sales of
about $20 million in 2005, representing an almost 70
percent increase over 2004.
-- Gross profit increased by approximately five percent to $57
million, versus $54 million for the second quarter of 2004,
driven primarily by higher average graphite electrode revenue
per metric ton and productivity enhancements. GTI's graphite
electrode production costs have been tracking at the lower end
of its cost guidance due primarily to productivity
improvements.
-- Net income for the quarter was $5 million, or $0.06 per
diluted share, versus net income of $18 million, or $0.16 per
diluted share, in the second quarter of 2004. Net income in
the second quarter of 2005 included a gain of $12 million
(before and after tax) from the successful reduction of the EU
antitrust fine.
-- Net income before special items was $11 million, or $0.11 per
diluted share, versus $13 million or $0.12 per diluted share,
in the second quarter of 2004. The decrease in net income was
primarily due to an increase of $3 million in interest expense
in the second quarter of 2005. (See attached reconciliation.)
-- Free cash flow before antitrust and restructuring payments was
breakeven. GTI generated positive cash flow from operations of
$5 million, despite using $17 million for working capital,
primarily for inventory. (See attached reconciliation.)
-- Received the prestigious 2005 R&D 100 Award for GTI's new
Apollo brand graphite electrode, a technological breakthrough
that enables higher steel productivity in the largest and most
demanding electric arc furnace (EAF) applications.
-- Obtained first ETM product approvals in the following market
segments:
-- Liquid crystal display (LCD) flat panel displays used in
televisions and computer monitors;
-- Wireless personal data assistant (PDA) communication
devices; and
-- Video gaming devices.
-- Received Federal Mogul's prestigious "Supplier of the Year"
award, one of only six companies recognized out of over 7,000
of their suppliers.
GTI Chief Executive Officer Craig Craig , Edward Gordon 1872-1966. British theatrical producer, director, and designer whose innovative productions and simplified stage designs influenced modern theater. Shular commented, "We continued to grow our revenues this quarter despite the much lower than anticipated operating levels of our steel customers. Graphite graphite (grăf`īt), an allotropic form of carbon, known also as plumbago and black lead. It is dark gray or black, crystalline (often in the form of slippery scales), greasy, and soft, with a metallic luster. electrode electrode, terminal through which electric current passes between metallic and nonmetallic parts of an electric circuit. In most familiar circuits current is carried by metallic conductors, but in some circuits the current passes for some distance through a shipments were slightly lower than plan as our steel customers continued working through high steel inventories. Despite these lower shipments, gross profit and gross margin percent in our synthetic Synthetic A financial instrument that is created artificially by simulating another instrument with the combined features of a collection of other assets. Notes: graphite segment continued to improve, achieving a four-year high, driven by both higher realized prices and better than anticipated productivity improvements." Mr. Shular continued, "During the quarter, we also made significant progress in commercializing new advantaged technologies. We received the prestigious 2005 R&D 100 Award for our new Apollo Apollo (əpŏl`ō), in Greek religion and mythology, one of the most important Olympian gods, concerned especially with prophecy, medicine, music and poetry, archery, and various bucolic arts, particularly the care of flocks and herds. brand graphite electrode that enables higher steel productivity in the largest and most demanding EAF EAF - Effort Adjustment Factor applications. This is the third consecutive year that GTI has received this prestigious award for commercializing new products with its advantaged technologies. We also received our first approval in the very important LCD (Liquid Crystal Display) A display technology that uses rod-shaped molecules (liquid crystals) that flow like liquid and bend light. Unenergized, the crystals direct light through two polarizing filters, allowing a natural background color to show. flat panel display A thin display screen for computer and TV usage. The first flat panels appeared on laptop computers in the mid-1980s, and the LCD technology became the standard. Stand-alone LCD screens became available for desktop computers in the mid-1990s and exceeded sales of CRTs for the first time segment. We believe the LCD television segment, when coupled with the plasma display panel See plasma display. television segment, is expected to grow from about eight million units, or four percent of total televisions sold in 2004, to 60 million units, or 28 percent of the total television market, by 2008. We are now positioned to participate in the anticipated rapid growth of both of these segments over the next few years." Synthetic Graphite Reporting Segment (Graphite electrodes Electrodes Tiny wires in adhesive pads that are applied to the body for ECG measurement. Mentioned in: Electrocardiography , cathodes and advanced synthetic graphite products) Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for GTI's synthetic graphite segment increased three percent in the second quarter of 2005 to $193 million as compared to $188 million in the second quarter of 2004. The increase was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to higher sales volume in the company's cathode and advanced graphite material product lines and increased average graphite electrode revenue per metric ton. Second quarter 2005 average graphite electrode revenue per metric ton increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 14 percent to $2,849 as compared to $2,507 in the second quarter of 2004. Graphite electrode sales volume was 48.2 thousand metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. as compared to 55.9 thousand metric tons in the same period in the prior year, primarily due to the company's price initiatives and the lower operating levels of its steel customers. Gross profit for the synthetic graphite segment increased six percent to $51 million as a result of higher graphite electrode prices and stronger volumes in the advanced graphite materials product line. The improvement was partially offset by increased costs, in line with the company's guidance. During the quarter, the graphite electrode gross profit represented the single best gross margin performance since 2001, contributing to GTI's total company gross profit performance. Other Reporting Segment (Natural graphite (AET AET Aetna, Inc. AET After Extra Time AET Actual Evapotranspiration AET Alliance for Environmental Technology AET Alpha-Ethyltryptamine AET Applied Extrusion Technologies, Inc. ), and carbon refractories and electrodes) Net sales for GTI's other segment increased eight percent to $27 million in the second quarter of 2005, versus $25 million in the second quarter of 2004, representing a four-year high for GTI. This increase was primarily driven by second quarter 2005 ETM (database) ETM - An active DBMS from the University of Karlsruhe. sales of $4.5 million, representing a 50 percent or $1.5 million increase over net sales of $3 million in the second quarter of 2004. Commenting on the growth of GTI's ETM product line, Mr. Shular said, "We are pleased with our market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" to date and continued revenue growth. We expect to achieve sales of approximately $20 million in 2005, representing an almost 70 percent increase over 2004." GTI received eight new approvals during the second quarter of 2005 for the use of its ETM solutions in high growth segments, including its first approvals for the use of its products in LCD flat panel displays used for televisions and computer monitors, wireless PDA (Personal Digital Assistant) A handheld computer for managing contacts, appointments and tasks. It typically includes a name and address database, calendar, to-do list and note taker, which are the functions in a personal information manager (see PIM). communication devices and video gaming video gaming n. 1. Gambling by means of interactive games of chance played on a video screen. 2. The playing of video games. devices. GTI's Advanced Energy Technology Inc. subsidiary received the prestigious "Supplier of the Year" Award from Federal-Mogul Federal-Mogul Corporation is a major automotive parts supplier based in Southfield, Michigan, USA. Currently operating under Chapter 11 reorganization, Federal-Mogul employs some 41,000 people in 24 countries. Corporation in July July: see month. 2005. GTI was one of only six companies to achieve this annual award from Federal-Mogul's global supplier network, which consists of more than 7,000 companies. The award is based on zero defects "Zero Defects" is a notional quality standard developed by Phil Crosby. Although applicable to any type of enterprise, it has been primarily adopted within industry supply chains wherever large volumes of components are being purchased (common items such as nuts and bolts are good , on-time delivery, superior customer support and cost savings recommendations. This designation DESIGNATION, wills. The expression used by a testator, instead of the name of the person or the thing he is desirous to name; for example, a legacy to. the eldest son of such a person, would be a designation of the legatee. Vide 1 Rop. Leg. ch. 2. 2. recognizes GTI as a trusted and dependable partner in supplying Federal-Mogul's needs, with a commitment to provide the highest levels of quality and service. This award exemplifies GTI's vision of enabling customer leadership faster and better than its competition. Corporate Selling, general and administrative and research and development expenses were $27 million in the second quarter of 2005, in line with the company's guidance, as compared to $28 million in the first quarter of 2005, primarily due to lower administrative expenses. In the third quarter of 2005, GTI expects a further reduction in selling, general and administrative expenses of $1 million to $2 million. Other Expense, net, was $6 million ($4 million after tax) in the second quarter of 2005, and was primarily due to $5 million associated with currency exchange losses on Euro-denominated inter-company loans. Second quarter 2004 Other Expense, net of $7 million ($5 million after tax) included $3 million of currency exchange losses, primarily associated with Euro-denominated inter-company loans, $2 million for certain environmental work and $2 million of various other costs. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was $33 million ($39 million before $6 million of Other Expense, net), about six percent higher than $31 million ($38 million before $7 million of Other Expense, net) in the second quarter of 2004. Second quarter 2005 EBITDA before Other Expense, net was 39 percent, or $9 million, higher than in the first quarter of 2005 before similar items. (See attached reconciliation.) Interest expense was $13 million in the second quarter of 2005, as compared to $10 million in the second quarter of 2004, primarily due to higher effective rates on GTI's variable interest rate debt. During the second quarter of 2005, GTI exited $285 million notional amount The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus referred to as notional. of existing interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. at a cost of approximately $5 million, thereby converting the effective rate of interest on the underlying debt back to a fixed rate. Since mid- mid- pref. Middle: midbrain. 2002, the company has saved over $60 million, including the recent exit costs, in interest expense from these initiatives. Following these transactions there remained $150 million notional amount of interest rate swaps at June June: see month. 30, 2005. Interest expense for 2005 is now expected to be approximately $51 million to $52 million, or $2 million to $3 million higher than previously anticipated, partially due to higher effective interest rates. Provision for income tax expense was $6 million in the second quarter of 2005, including a $2 million non-cash tax charge taken during the quarter related to the impact on the company from Ohio state tax reform laws passed on June 30, 2005. The effective tax rate for the quarter, excluding the $2 million charge, was approximately 37 percent, in line with the company's guidance. Although the charge represents the reduced value of existing future deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). items, the overall tax reform is designed to create an improved business climate for companies operating in Ohio, and will, among other things, phase out the corporate franchise tax over a five year period, phase out tangible Possessing a physical form that can be touched or felt. Tangible refers to that which can be seen, weighed, measured, or apprehended by the senses. A tangible object is something that is real and substantial. An automobile is an example of tangible Personal Property. personal property tax over four years, and create a new broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased , low rate business privilege A permission or right. In information security, it refers to the modes of operation that a user or a process is granted. Examples include user-level privilege, operator privilege and supervisory privilege. tax. The company is currently assessing the positive implications of these changes on its future operating activities in Ohio. Free cash flow in the second quarter of 2005 before antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). payments (see attached reconciliation) was breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations . GTI generated positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of $5 million, despite using $17 million for working capital, primarily for inventory. Free cash flow before antitrust and restructuring also included capital expenditures of $14 million, and a $3 million source of cash from the sale of certain assets in the second quarter of 2005. Other uses of cash included $5 million for the exiting of interest rate swaps. Net debt was $677 million at June 30, 2005. (See attached reconciliation.) Outlook Mr. Shular commented, "The steel industry in most of our major markets experienced a significant slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. during the second quarter. Several global steel producers announced reductions in operating levels, extended shutdowns, and, in some instances, closure of selected facilities. We believe these lower operating rates Operating rate The percentage of total production capacity of a company, industry, or country that is being used. operating rate The portion of capacity at which a business operates. for steel producers will carry into the third quarter as our customers bring their steel inventories down to more normal levels toward the end of that quarter. In addition, the third quarter is seasonally slow in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). as a result
of the traditional holiday schedules. Accordingly, for the third
quarter, we expect graphite electrode sales volume of 47 thousand metric
tons."
Mr. Shular continued, "As a result of the lower global steel production and operating levels, we anticipate virtually no graphite electrode spot business for 2005. While we have seen deferrals of some existing orders, we have not experienced cancellations. In fact, our customers have indicated their intent to take full delivery of their committed 2005 requirements. Our pricing remains firm and we now expect average graphite electrode revenue per metric ton to come in at the low end of our 2005 guidance range, excluding the impact of the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. Euro. At current exchange rates, we expect 2005 average graphite revenue
per metric ton to be approximately $2,850.
As steel inventory levels normalize normalize to convert a set of data by, for example, converting them to logarithms or reciprocals so that their previous non-normal distribution is converted to a normal one. , we anticipate higher steel production rates in the fourth quarter as compared to the first three quarters of 2005. Accordingly, we expect our graphite electrode sales volume for the full year 2005 to be approximately 200 thousand metric tons, or approximately five percent lower than our initial 2005 guidance. Despite these lower volumes, our continued productivity improvements are expected to drive our graphite electrode production cost increase to the lower end of our 10 to 12 percent guidance range. We have also realized efficiencies in our overhead costs overhead costs see fixed costs. , primarily in administrative expenses, such that total overhead is expected to be $107 million to $108 million, at the lower end or below our previous guidance of $108 million to $112 million. Consistent with these initiatives and our outlook for a stronger fourth quarter of 2005 and full year 2006, we expect to continue operating at higher levels, although less so in third quarter due to routine holiday maintenance shutdowns, and increase our inventory levels in the second half of 2005. As a result of lower steel operating rates and higher interest expense, partially offset by better production cost performance and overhead reductions, we expect full year 2005 earnings per share in the range of $0.43 to $0.48. We also expect our free cash flow before antitrust and restructuring payments for 2005 to be a use of $10 million versus previous guidance of a source of $25 million, primarily due to planned higher inventory levels." Mr. Shular continued, "Looking forward to 2006, we continue to work toward obtaining firm pricing for the majority of our 2006 raw material requirements before the end of the third quarter of 2005, similar to our success in obtaining firm pricing for the majority of our 2005 raw material requirements in the second half of 2004. We have secured the majority of our 2006 premium needle needle, implement of metal or other material used to carry the thread in sewing and in various forms of needlework and manufacturing. The earliest needles were merely awls or punches. coke requirements at a fixed price. Although needle coke price increases will be higher in 2006 as compared to increases experienced in 2005, our goal is to contain our overall graphite electrode production cost increases for 2006 to levels comparable with the 10 to 12 percent increase expected for the full year 2005 through identified productivity and cost reduction initiatives." Effective June 27, 2005, GTI increased prices for standard size melter graphite electrodes used in large EAF melting furnaces to $4,100 per metric ton in the Americas A·mer·i·cas , the See America. , CIS Cis (sĭs), same as Kish (1.) (1) (CompuServe Information Service) See CompuServe. (2) (Card Information S , Middle East, Africa, and Asia. In Europe, the price for standard size melter graphite electrodes is 3,100 Euro per metric ton. These prices pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to melter graphite electrodes, which represent about 70 percent of total graphite electrode industry demand. Prices in the non-melter graphite electrode segment, which represent about 30 percent of graphite electrode industry demand, continue to vary significantly due to the variety of end markets and performance requirements across those end markets and, to a lesser extent, higher availability of lower grade products. Mr. Shular concluded, "We look forward to the 2006 sales order The sales order, sometimes abbreviated as SO, is an order received by a business from a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways. book building process that we expect to begin in the latter part of the third quarter. We are entering the 2006 sales order book building process in our best position in years. Prices for melter graphite electrodes are the highest in over 15 years; we have secured supply and firm pricing on our most critical raw material, premium petroleum coke Petroleum coke (often abbreviated petcoke) is a carbonaceous solid derived from oil refinery coker units or other cracking processes.[1] Other coke has traditionally been derived from coal. ; our plant operations are running superbly, enabling our best and most consistent product quality ever; and finally, we have identified productivity initiatives to help mitigate mit·i·gate v. To moderate in force or intensity. mit  i·gation n. rising 2006 production costs.
In addition, we continue to see strong ETM sales growth and currently
expect 2006 sales of at least $30 million, as our ETM products and
solutions continue outperforming competing materials and we successfully
penetrate new, high growth markets such as flat screen televisions,
laptop computers A portable computer that has a flat LCD screen and usually weighs less than eight pounds. Often called just a "laptop," it uses batteries for mobile use and AC power for charging the batteries and desktop use. Today's high-end laptops provide all the capabilities of most desktop computers. and cell phones."
RECAP COMPANY GUIDANCE ---------------------- Dollars in millions, except per ton data and percentages 2005E Q305E Total net sales increase vs. 2004 +5% ETM net sales guidance $20 GE average revenue per metric ton $2,850 $2,850 GE sales volume in metric tons 200,000 47,000 GE cost increase vs. 2004 +10-12% +10-12% Non GE business gross profit growth +$2 Interest expense $51-$52 $13-$14 Tax rate 36-38% Total SG&A and R&D $107-$108 $26-$27 Capital expenditures $45 Working capital use of cash $55-$60 Restructuring payments $6 $1 Antitrust payments $17 $4 Refinancing costs $4 Diluted shares 112.6 112.6 In conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with this earnings release, you are invited to listen to our earnings call being held today at 11:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The dial-in number is 800-218-4007 for domestic and 303-262-2050 for international. The conference call will be recorded and a replay will be available for 72 hours following the call by dialing 800-405-2236 for domestic and 303-590-3000 for international, pass code 11034223#. If you are unable to listen to the call or replay, the call will be archived and available for replay within two days of the original broadcast on our website at www.graftech.com under the Investor Relations Investor relations The process by which the corporation communicates with its investors. section. GrafTech International Ltd. is one of the world's largest manufacturers and providers of high quality synthetic and natural graphite and carbon based This article is about the band. For the usage of this term in biochemistry, see Carbon-based life. Carbon Based is a hard dance and freeform hardcore band from Finland. The band was formed in 1996 and has been experimenting with different styles of electronica. products and technical and research and development services, with customers in 80 countries engaged in the manufacture of steel, aluminum, silicon metal, automotive products and electronics. We manufacture graphite electrodes and cathodes, products essential to the production of electric arc furnace An electric arc furnace (EAF) is a furnace that heats charged material by means of an electric arc. Arc furnaces range in size from small units of approximately one ton capacity (used in foundries for producing cast iron products) up to about 400 ton units used for secondary steel and aluminum. We also manufacture thermal thermal /ther·mal/ (ther´m'l) pertaining to or characterized by heat. ther·mal adj. 1. Of, relating to, using, producing, or caused by heat. 2. management, fuel cell and other specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. graphite and carbon products for, and provide services to, the electronics, power generation, semiconductor, transportation, petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. and other metals markets. We are the leading manufacturer in all of our major product lines, with 13 state of the art manufacturing facilities strategically located on four continents. GRAFCELL(R), GRAFOIL(R), and eGRAF(R) are our registered 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : This news release and related discussions may contain forward-looking statements about such matters as: economic conditions; production and sales of products that incorporate or are produced using our products; prices and sales of and demand for our products; strategic plans and business projects; asset sales; deleveraging activities; operational and financial performance; costs; working capital; revenues; debt levels; cash flows; cost savings and reductions; margins; earnings and growth. We have no duty to update these statements. Actual future events, circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , performance and trends could differ materially from those set forth in these statements due to various factors, including: changes in economic conditions or product end market conditions; non-occurrence of anticipated EAF steel production capacity additions; graphite electrode manufacturing capacity increases; failure of increased EAF steel production or stable graphite electrode production to result in stable or increased graphite electrode demand, prices or sales volumes; economic or technological developments adversely affecting growth of graphite cathodes in aluminum smelting smelting, in metallurgy, any process of melting or fusion, especially to extract a metal from its ore. Smelting processes vary in detail depending on the nature of the ore and the metal involved, but they are typified in the use of the blast furnace. ; non-occurrence of anticipated aluminum smelting capacity additions; increased cathode production by competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ; failure of increased aluminum production or stable cathode production to result in stable or increased cathode demand, prices or sales volume; differences between actual graphite electrode prices and spot or announced prices; consolidation of steel and aluminum producers; absence of successful development and commercialization of new or improved products or subsequent displacement displacement, in psychology: see defense mechanism. Same as offset. See base/displacement. thereof by other products or technologies; failure to meet contractual milestones or to expand manufacturing capacity to meet growth in demand, if any; inability to protect our intellectual property rights or infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. of intellectual property rights of others; unanticipated developments in antitrust investigations or lawsuits; non-realization of price increases or adjustments; non-realization of anticipated benefits from organizational changes; significant changes in our provision for income taxes and effective income tax rate; unanticipated developments relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc health, safety or environmental compliance or remediation obligations or liabilities to third parties, labor relations, raw materials or energy; changes in market prices of our securities that affect deleveraging plans; changes in interest or currency exchange rates, competitive conditions or inflation; changes in appropriation The designation by the government or an individual of the use to which a fund of money is to be applied. The selection and setting apart of privately owned land by the government for public use, such as a military reservation or public building. of government funds or failure to satisfy conditions to government grants; changes in performance that affect financial covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the compliance or funds available for borrowing; failure to achieve earnings or other estimates; business interruptions adversely affecting our ability to supply our products; failure of a service provider to whom we outsource outsource verb To assign specific work to a 3rd party for a specific length of time at an set price and service level Managed care To use outside labor to perform functions–billing and collections, accounting, janitorial services, ER our business processes to provide those services; and other risks and uncertainties, including those detailed in our SEC filings, as well as future decisions by us. References to spot prices are based on assumptions and subject to limitations detailed in our SEC filings. This news release does not constitute an offer or solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual as to any securities. References to street or analyst earnings estimates mean those published by First Call.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share data)
(Unaudited)
At December 31, At June 30,
-----------------------------
ASSETS 2004 2005
-------------- --------------
Current Assets:
Cash and cash equivalents $ 24 $ 10
Accounts and notes receivable, net of
allowance for doubtful accounts of
$4 million at December 31, 2004
and June 30, 2005 206 170
Inventories 225 245
Prepaid expenses and other current
assets 25 25
-------------- --------------
Total current assets 480 450
Property, plant and equipment 1,131 1,091
Less: accumulated depreciation 753 728
-------------- --------------
Net property, plant and equipment 378 363
Deferred income taxes 153 139
Goodwill 23 20
Other assets 34 34
-------------- --------------
Total assets $ 1,068 $ 1,006
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 86 $ 86
Short-term debt 1 3
Accrued income and other taxes 38 10
Other accrued liabilities 99 87
-------------- --------------
Total current liabilities 224 186
-------------- --------------
Long-term debt:
Principal value 655 684
Fair value adjustment for hedge
instruments 15 14
Unamortized bond premium 2 2
-------------- --------------
Total long-term debt 672 700
-------------- --------------
Other long-term obligations 149 113
Deferred income taxes 46 41
Commitments & contingencies
Minority stockholders' equity in
consolidated entities 30 30
Stockholders' Deficit:
Preferred stock, par value $.01,
10,000,000 shares authorized, none
issued
Common stock, par value $.01,
150,000,000 shares authorized,
100,520,240 & 100,673,942 shares
issued at December 31, 2004 and
June 30, 2005, respectively 1 1
Additional paid-in capital 941 942
Accumulated other comprehensive loss (276) (295)
Accumulated deficit (627) (620)
Less: cost of common stock held in
treasury, 2,451,035 shares at
December 31, 2004 and 2,455,466
shares at June 30, 2005 (86) (86)
Less: cost of common stock held in
employee benefit and compensation
trusts, 522,732 share at December 31,
2004 and 518,301 shares at June 30,
2005 (6) (6)
-------------- --------------
Total stockholders' deficit (53) (64)
-------------- --------------
Total liabilities and stockholders'
deficit $ 1,068 $ 1,006
============== ==============
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except share and per share data)
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
Net Sales $ 213 $ 220 $ 410 $ 431
Cost of Sales 159 163 311 325
---------- ---------- ---------- ----------
Gross Profit 54 57 99 106
Research and development 2 2 4 4
Selling, administrative
and other expenses 22 25 43 51
Restructuring Charges 3 - 4 -
Antitrust investigations
and related lawsuits and
claims (12) - (11) -
Other expense, net 7 6 20 12
Interest expense 10 13 17 25
Interest income - - (1) -
---------- ---------- ---------- ----------
32 46 76 92
---------- ---------- ---------- ----------
Income before provision
for income taxes and
minority stockholders'
share of income 22 11 23 14
Provision for income taxes 4 6 5 7
Minority stockholders'
share of income - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 18 $ 5 $ 18 $ 7
========== ========== ========== ==========
Basic earnings per
common share:
Net income per share $ 0.18 $ 0.06 $ 0.18 $ 0.07
========== ========== ========== ==========
Weighted average common
shares outstanding (in
thousands) 97,375 97,644 95,621 97,605
========== ========== ========== ==========
(a) Diluted earnings per
common share:
Net Income per share $ 0.16 $ 0.06 $ 0.17 $ 0.07
========== ========== ========== ==========
Weighted average common
shares outstanding (in
thousands) 112,416 97,849 109,408 97,946
========== ========== ========== ==========
(a) Diluted earnings per share includes the effect of the company's
contingently convertible 1.625 percent Debentures on an "as
converted basis" for all periods presented in accordance with
Emerging Issue Task Issue 04-8, "The Effect of Contingent
Convertible Debt on Diluted Earnings Per Share," which was
effective for reporting periods ending after December 15, 2004.
However, the shares underlying the 1.625 percent Debenture were
excluded from the if-converted method for the three months and six
month-ended June 30, 2005 as the effect would be anti-dilutive.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2004 2005 2004 2005
---------- ---------- ---------- ----------
Cash flow from operating
activities:
Net income (loss) $ 18 $ 5 $ 18 $ 7
Adjustments to reconcile
net income (loss) to
cash used in
operations:
Depreciation and
amortization 8 9 17 18
Deferred income taxes 2 11 14 13
Antitrust
investigations and
related lawsuits and
claims - - 1 -
Restructuring charge 3 - 4 -
Loss on exchange of
common stock for
Senior Notes - - 5 -
Interest expense - 1 (3) 1
Post retirement plan
changes (3) (4) (5) (8)
Fair value
adjustments on
interest rate caps - 1 2 1
Fair value
adjustments on
Debenture redemption
make-whole option (2) (1) (1) (4)
Other charges, net 5 1 8 11
Increase in working
capital* (29) (17) (195) (43)
Long-term assets and
liabilities (1) (1) (17) (4)
---------- ---------- ---------- ----------
Net cash used in
operating activities 1 5 (152) (8)
---------- ---------- ---------- ----------
Cash flow from investing
activities:
Capital expenditures (11) (14) (21) (25)
Sale (purchase) of
derivative investments (1) 2 (1) 2
Proceeds from sale of
assets (1) 1 - 1
---------- ---------- ---------- ----------
Net cash used in
investing activities (13) (11) (22) (22)
---------- ---------- ---------- ----------
Cash flow from financing
activities:
Short-term debt
borrowings (payments),
net (2) 4 (1) 3
Revolving facility
payments - (13) - (20)
Revolving facility
borrowings - 17 - 48
Long-term debt
borrowings - (1) 225 -
Long-term debt payments - - (29) -
Termination of interest
rate swaps, net - (5) - (8)
Proceeds from exercise
of stock options 2 - 7 -
Financing costs - (1) (7) (5)
Premium on Bond
Repurchase 1 - - -
---------- ---------- ---------- ----------
Net cash provided by
financing activities 1 1 195 18
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents (11) (5) 21 (12)
Effect of exchange rate
changes on cash and cash
equivalents 1 (1) 1 (2)
Cash and cash equivalents
at beginning of period 66 16 34 24
---------- ---------- ---------- ----------
Cash and cash equivalents
at end of period $ 56 $ 10 $ 56 $ 10
========== ========== ========== ==========
Supplemental disclosures
of cash flow information:
Net cash paid during the
periods for:
Interest $ - $ - $ 18 $ 21
========== ========== ========== ==========
Income taxes $ 10 $ 11 $ 11 $ 16
========== ========== ========== ==========
Non-cash operating,
investing and financing
activities:
Exchanges of common
stock for Senior Notes
which decrease long-
term debt $ - $ - $ 35 $ -
========== ========== ========== ==========
Common stock issued to
savings and pension
plan trusts $ 8 $ 1 $ 9 $ 1
========== ========== ========== ==========
*Net change in working
capital due to the
following components:
(Increase) decrease in
current assets:
Accounts and notes
receivable $ (20) $ 2 $ (15) $ 28
Reduction in factoring
of accounts receivable (4) - (45) -
Inventories 6 (12) (6) (34)
Prepaid expenses and
other current assets (1) (2) - (2)
Payment for antitrust
investigations and
related lawsuits and
claims (6) (5) (77) (8)
Restructuring payments (1) (1) (14) (4)
Decrease in accounts
payable and accruals (3) 1 (38) (23)
---------- ---------- ---------- ----------
(Increase) in working
capital $ (29) $ (17) $ (195) $ (43)
========== ========== ========== ==========
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY
(Dollars in millions)
(Unaudited)
Three Months Ended
------------------------------------------------------------
June 30, March 31, June 30,
2004 2005 2005
----------------------------------
NET SALES:
----------
Synthetic Graphite $188 $185 $193
Other 25 26 27
----------------------------------
Total $213 $211 $220
GROSS PROFIT:
-------------
Synthetic Graphite $48 $44 $51
Other 6 5 6
----------------------------------
Total $54 $49 $57
GROSS PROFIT MARGIN:
--------------------
Synthetic Graphite 25.7% 23.7% 26.5%
Other 25.2% 18.6% 22.6%
----------------------------------
Total 25.6% 23.0% 26.0%
------------------------------------------------------------
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
-------------------------------------------------------
2Q04 2Q05
-------------
Net income (loss)
($0.16 and $0.06 per diluted share, respectively) $18 $5
Add back special items, net of tax:
-----------------------------------
Restructuring and impairment 2 -
Antitrust reserve adjustments (12) -
Other (income) expense, net 5 4
----------------------------------------------------------------------
Income (loss) excluding special items 13 9
Add back: Special tax charge - 2
----------------------------------------------------------------------
Income (loss) excluding special items and tax charge
($0.12 and $0.11 per diluted share, respectively) $13 $11
======================================================================
Income (loss) per diluted share excluding special items and tax charge
above includes 13.6 million shares underlying GTI's contingently
convertible Debentures and excludes approximately $1 million before
and after tax of contingently convertible Debenture interest expense,
as the effect would have been dilutive.
======================================================================
Net Income (Loss) and Earnings Per Share Reconciliation
-------------------------------------------------------
2004 2005E Range
-----------------
Net income (loss)
($0.17 and $0.34 to $0.40 per diluted share,
respectively) $17 $35 - $41
Add back special items, net of tax:
-----------------------------------
Restructuring and impairment (1) - -
Antitrust reserve adjustments (11) - -
Interest benefit, net, from accelerated amortization
of gains on interest rate swaps, net of tax (3) - -
Other (income) expense, net 14 8 8
----------------------------------------------------------------------
Income (loss) excluding special items 16 43 49
Add back: Special tax charge 28 2 2
----------------------------------------------------------------------
Income (loss) excluding special items and tax charge
($0.43 and $0.43 to $0.48 per diluted share,
respectively) $44 $45 - $51
======================================================================
Income (loss) per diluted share excluding special items and tax charge
above includes 13.6 million shares underlying GTI's contingently
convertible Debentures and excludes approximately $5 million ($4
million after tax) of contingently convertible Debenture interest
expense, as the effect would have been dilutive.
NOTE ON RECONCILIATION OF EARNINGS DATA: Income (loss) excluding the items mentioned above is a non-GAAP financial measure that GTI calculates according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the schedule above, using GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). amounts from the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . GTI believes that the excluded items are not primarily related to core operational activities. GTI believes that income (loss) 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 (loss) excluding these items as well as other financial measures in connection with its decision-making decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from activities. Income (loss) excluding these items should not be considered in isolation or as a substitute for net income (loss), income (loss) from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the or other consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: income data prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. GTI's method for calculating income (loss) excluding these items may not be comparable to methods used by other companies. NOTE ON RECONCILIATION OF EARNINGS, EBITDA, CASH FROM OPERATIONS, FREE CASH FLOW AND NET DEBT GUIDANCE DATA: Earnings, EBITDA, cash from operations, free cash flow and net debt guidance is provided on a GAAP basis assuming that interest rates for the remainder of 2005 are based on current market expectations of future LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). rates, assuming no change in currency exchange rates and excluding other (income) expense, net. GTI does not forecast changes in currency exchange rates. Changes in these rates can affect such items as net sales and cost of sales (in each case as translated into dollars) and other (income) expense, net, due to re-measurement of currency gains and losses on intercompany loans Intercompany loan Loan made by one unit of a corporation to another unit of the same corporation. or mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustments on interest rate swaps and caps. 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, such guidance is subject to the risks and uncertainties described under the Note on Forward-Looking Statements.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions)
(Unaudited)
EBITDA Reconciliation
--------------------- --------------------
2Q04 1Q05 2Q05
--------------------
Net income (loss) $18 $2 $5
Add back:
---------
Provision for income taxes 4 1 6
Interest expense 10 12 13
Interest income - - -
Antitrust investigations and related lawsuits and
claims (12) - -
Restructuring and impairment losses on long lived
and other assets 3 - -
Depreciation and amortization 8 9 9
----------------------------------------------------------------------
EBITDA $31 $24 $33
Add back: Other (Income) Expense, net 7 6 6
----------------------------------------------------------------------
EBITDA before Other (Income) Expense, net $38 $30 $39
----------------------------------------------------------------------
EBITDA before Other (Income) Expense, net, as a
percent of net sales 17.8% 14.2% 17.7%
======================================================================
MEMO : Cash portion of restructuring and
impairment losses $3 $- $-
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions)
(Unaudited)
Reconciliation of Cash Flow From
Operations to Free Cash Flow
----------------------------------------------------------------------
2004 2005E 1Q05 2Q05
---------------------------
Cash flow provided by operating
activities* ($86) $9 ($13) $5
Less:
-----
Capital expenditures (59) (45) (11) (14)
Cash flow provided by other investing
activities 3 3 - 3
----------------------------------------------------------------------
Free Cash Flow (142) (33) (24) (6)
Add back:
----------------------------------------------------------------------
Antitrust investigation and related
lawsuits and claims, net 71 17 3 5
Restructuring payments 17 6 3 1
----------------------------------------------------------------------
Free Cash Flow before antitrust and
restructuring ($54) ($10) ($18) $-
======================================================================
*Excludes the impact of a $45 million use of cash from discontinued
accounts receivable factoring.
NOTE ON EBITDA, CASH FROM OPERATIONS AND FREE CASH FLOW RECONCILIATIONS: EBITDA, cash from operations and free cash flow are non-GAAP financial measures that GTI currently calculates according to the schedules above, using GAAP amounts from the Consolidated Financial Statements. GTI believes that such non-GAAP financial measures are generally accepted as providing useful information regarding a company's ability to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and service debt and the productivity and cash generation potential of its ongoing businesses. Management uses such non-GAAP financial measures as well as other financial measures in connection with its decision-making activities. Such non-GAAP financial measures should not be considered in isolation or as a substitute for net income (loss), cash flows from continuing operations or other consolidated income or cash flow data prepared in accordance with GAAP. GTI's method for calculating such non-GAAP financial measures 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 revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility or its senior notes.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions)
(Unaudited)
Dec - 04 Mar - 05 Jun 05
Long-term debt $672 $686 $700
Short-term debt 1 0 3
----------------------------------------------------------------------
Total debt $673 $686 $703
Less:
Fair value adjustments for hedge
instruments 15 4 14
Unamortized bond premium 2 2 2
Cash and cash equivalents 24 16 10
----------------------------------------------------------------------
Net debt $632 $664 $677
======================================================================
NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP financial measure that GTI calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GTI excludes the unamortized bond premium unamortized bond premium When a bond is originally sold at a premium to par value, the difference between the par value and the proceeds from selling the bond that has not yet been subtracted from interest expense. from its sale of $150 million aggregate principal amount of additional senior notes in May 2002 at a price of 104.5 percent 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 adjustments for hedge instruments, which includes interest rate swaps that have been marked-to-market Marked-to-market An arrangement whereby the profits or losses on a futures contract are settled each day. and realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. or (losses) on interest rate swaps. Interest rate swaps (current hedge instruments) that have been marked-to-market currently represent a liability of $1 million with an offsetting non-cash adjustment recorded as a component of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. on the Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . Realized gains on interest rates swaps (terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: hedge instruments) currently represent an increase to long-term debt on the Consolidated Balance Sheet of $15 million and will be amortized into the Consolidated Statement of Operations See Income statement. as a reduction to interest expense over the remaining life of the senior notes. GTI believes that net debt is generally accepted as providing useful information regarding a company's indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . Management believes net debt provides meaningful information to investors to assist them to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. leverage. 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 revolving credit facility. GTI does not forecast the fair value adjustment for hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. instruments. |
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