Delaware | 1-13888 | 27-2496053 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
Suite 300 Park Center I |
6100 Oak Tree Boulevard |
Independence, Ohio 44131 |
(Address of Principal Executive Offices, including Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 9.01. | Financial Statements and Exhibits. |
99.1 | Press release of GrafTech International Ltd., dated April 29, 2015 |
GRAFTECH INTERNATIONAL LTD. | |||
Date: | April 29, 2015 | By: | /s/ Erick R. Asmussen |
Erick R. Asmussen | |||
Chief Financial Officer and Vice President |
99.1 | Press release of GrafTech International Ltd., dated April 29, 2015 |
• | Net sales were $207 million, a decrease of 26 percent, compared to $281 million in the same period of the prior year. Lower shipment volumes and pricing in both business segments primarily drove the reduction in sales. Currency fluctuations negatively impacted sales in the quarter by approximately five percentage points. |
• | Reported net loss was $(56) million, or $(0.41) per diluted share, compared to reported net loss of $(12) million, or $(0.08) per diluted share, in the same period of the prior year. These included special charges1 (after tax) of $43 million in the first quarter of 2015 and special charges (after tax) of $13 million in the first quarter of 2014. |
• | Adjusted net loss*, which excludes special charges, was $(13) million, or $(0.10) per diluted share, in the first quarter of 2015, as compared to adjusted net income* of $1 million, or $0.01 per diluted share, in the first quarter of 2014. |
• | Adjusted EBITDA*, which excludes special charges, was $17 million, as compared to $33 million in the same period of the prior year. |
• | Operating cash flow was $23 million in the first quarter of 2015, as compared to $22 million in the same period of 2014. |
• | The Company also today announced a letter of intent with an affiliate of Brookfield Asset Management (Brookfield) for a $150 million preferred equity investment in GrafTech. Brookfield is a global alternative asset manager with more than $200 billion of assets under management that has a long history and successful track record in steel, mining and |
Q1 | Q4 | Q1 | ||||||||||
2014 | 2014 | 2015 | ||||||||||
Industrial Materials net sales: | $ | 218,776 | $ | 206,099 | $ | 165,037 | ||||||
Industrial Materials adjusted operating income: | 19,080 | 21,981 | 11,191 | |||||||||
Industrial Materials adjusted operating income margin: | 8.7 | % | 10.7 | % | 6.8 | % |
Q1 | Q4 | Q1 | ||||||||||
2014 | 2014 | 2015 | ||||||||||
Engineered Solutions net sales: | $ | 62,015 | $ | 53,772 | $ | 42,174 | ||||||
Engineered Solutions adjusted operating income (loss): | 5,781 | 3,834 | (1,285 | ) | ||||||||
Engineered Solutions adjusted operating income (loss) margin: | 9.3 | % | 7.1 | % | (3.0 | )% |
• | First half 2015 EBITDA* target of $30 million to $40 million (previous guidance was $45 million to $55 million) and |
• | First half 2015 operating cash flow of approximately $30 million to $40 million (after approximately $10 million to $15 million of cash rationalization charges) (previous guidance was $40 million to $50 million and approximately $15 million to $20 million of cash rationalization charges). |
• | Delivering approximately $50 million in cash savings in 2015 following successful execution of the Company's previously announced cost savings initiatives. |
• | Reducing graphite electrode operating rates further to align production to lower customer demand and to continue to reduce inventory. |
• | Implementing a furlough at the U.S. graphite electrode manufacturing facility in response to weakening North American demand. |
• | Realigning the advanced graphite materials production platform to include relocation and consolidation of production processes to optimize efficiencies and reduce costs. |
• | Reducing staffing in the advanced electronics technology division by approximately ten percent. |
• | Continuing to streamline overhead costs. |
• | Aggressively managing working capital requirements and reducing inventory by approximately $50 million in 2015. |
• | Reducing planned capital expenditures by an additional $5 million, a total year-over-year reduction of approximately $25 million. Current capital expenditures are estimated to be in the range of $55 million to $65 million in 2015. |
• | Selling excess property for an estimated $10 million. |
As of December 31, 2014 | As of March 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,550 | $ | 10,961 | |||
Accounts and notes receivable, net of allowance for doubtful accounts of $7,471 as of December 31, 2014 and $6,582 as of March 31, 2015 | 162,919 | 155,108 | |||||
Inventories | 382,903 | 364,152 | |||||
Prepaid expenses and other current assets | 81,623 | 70,475 | |||||
Total current assets | 644,995 | 600,696 | |||||
Property, plant and equipment | 1,500,821 | 1,453,080 | |||||
Less: accumulated depreciation | 846,781 | 819,741 | |||||
Net property, plant and equipment | 654,040 | 633,339 | |||||
Deferred income taxes | 16,819 | 14,819 | |||||
Goodwill | 420,129 | 384,436 | |||||
Other assets | 97,822 | 92,373 | |||||
Total assets | $ | 1,833,805 | $ | 1,725,663 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 86,409 | $ | 79,756 | |||
Short-term debt | 188,104 | 191,446 | |||||
Accrued income and other taxes | 24,506 | 17,321 | |||||
Rationalizations | 9,563 | 8,632 | |||||
Other accrued liabilities | 43,319 | 41,946 | |||||
Total current liabilities | 351,901 | 339,101 | |||||
Long-term debt | 341,615 | 336,321 | |||||
Other long-term obligations | 107,566 | 100,983 | |||||
Deferred income taxes | 28,197 | 26,507 | |||||
Stockholders’ equity: | |||||||
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued | — | — | |||||
Common stock, par value $.01, 225,000,000 shares authorized, 152,821,011 shares issued as of December 31, 2014 and 153,050,285 shares issued as of March 31, 2015 | 1,528 | 1,535 | |||||
Additional paid-in capital | 1,825,880 | 1,827,672 | |||||
Accumulated other comprehensive loss | (336,524 | ) | (365,290 | ) | |||
Retained earnings (deficit) | (245,751 | ) | (301,359 | ) | |||
Less: cost of common stock held in treasury, 15,922,729 shares as of December 31, 2014 and 15,877,371 shares as of March 31, 2015 | (239,811 | ) | (239,107 | ) | |||
Less: common stock held in employee benefit and compensation trusts, 80,967 shares as of December 31, 2014 and 72,679 shares as of March 31, 2015 | (796 | ) | (700 | ) | |||
Total stockholders’ equity | 1,004,526 | 922,751 | |||||
Total liabilities and stockholders’ equity | $ | 1,833,805 | $ | 1,725,663 |
For the Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2015 | |||||||
Net sales | $ | 280,791 | $ | 207,211 | ||||
Cost of sales | 255,097 | 186,448 | ||||||
Gross profit | 25,694 | 20,763 | ||||||
Research and development | 2,770 | 2,431 | ||||||
Selling and administrative expenses | 29,907 | 26,290 | ||||||
Rationalizations | 86 | 2,494 | ||||||
Impairments | — | 35,381 | ||||||
Operating loss | (7,069 | ) | (45,833 | ) | ||||
Other expense (income), net | 794 | 393 | ||||||
Interest expense | 8,999 | 8,921 | ||||||
Interest income | (58 | ) | (73 | ) | ||||
Loss before provision for income taxes | (16,804 | ) | (55,074 | ) | ||||
(Benefit) provision for income taxes | (5,287 | ) | 534 | |||||
Net loss | $ | (11,517 | ) | $ | (55,608 | ) | ||
Basic loss per common share: | ||||||||
Net loss per share | $ | (0.08 | ) | $ | (0.41 | ) | ||
Weighted average common shares outstanding | 135,730 | 136,981 | ||||||
Diluted loss income per common share: | ||||||||
Net loss per share | $ | (0.08 | ) | $ | (0.41 | ) | ||
Weighted average common shares outstanding | 135,730 | 136,981 |
For the Three Months Ended March 31, | ||||||||
2014 | 2015 | |||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (11,517 | ) | $ | (55,608 | ) | ||
Adjustments to reconcile net income to cash provided by operations: | ||||||||
Depreciation and amortization | 39,661 | 20,570 | ||||||
Impairment of long-lived assets and goodwill | — | 35,381 | ||||||
Deferred income tax benefit | (1,222 | ) | 2,973 | |||||
Post-retirement and pension plan changes | 1,012 | 1,262 | ||||||
Stock-based compensation | 522 | 1,572 | ||||||
Interest expense | 3,645 | 3,764 | ||||||
Other charges, net | (1,593 | ) | (2,757 | ) | ||||
(Increase) decrease in working capital* | (6,665 | ) | 21,991 | |||||
Increase in long-term assets and liabilities | (1,753 | ) | (6,430 | ) | ||||
Net cash provided by operating activities | 22,090 | 22,718 | ||||||
Cash flow from investing activities: | ||||||||
Capital expenditures | (21,728 | ) | (13,601 | ) | ||||
Proceeds from the sale of fixed assets | 1,895 | 521 | ||||||
Insurance recoveries | 3,057 | — | ||||||
Payments for derivative instruments | (367 | ) | (7,603 | ) | ||||
Net cash used in investing activities | (17,143 | ) | (20,683 | ) | ||||
Cash flow from financing activities: | ||||||||
Short-term debt (reductions) borrowings, net | (994 | ) | 1 | |||||
Revolving Facility borrowings | 75,000 | 27,000 | ||||||
Revolving Facility reductions | (65,000 | ) | (32,000 | ) | ||||
Principal payments on long-term debt | (92 | ) | (33 | ) | ||||
Supply chain financing | (9,455 | ) | — | |||||
Proceeds from exercise of stock options | 82 | — | ||||||
Purchase of treasury shares | (141 | ) | (41 | ) | ||||
Refinancing fees and debt issuance costs | — | (2,247 | ) | |||||
Other | 918 | (54 | ) | |||||
Net cash used in financing activities | 318 | (7,374 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 5,265 | (5,339 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 171 | (1,250 | ) | |||||
Cash and cash equivalents at beginning of period | 11,888 | 17,550 | ||||||
Cash and cash equivalents at end of period | $ | 17,324 | $ | 10,961 | ||||
* Net change in working capital due to the following components: | ||||||||
Change in current assets: | ||||||||
Accounts and notes receivable, net | $ | (5,684 | ) | $ | 1,040 | |||
Inventories | 955 | 11,978 | ||||||
Prepaid expenses and other current assets | (4,670 | ) | 7,525 | |||||
Increase (decrease) in accounts payable and accruals | 6,506 | (2,483 | ) | |||||
Rationalizations | (8,580 | ) | (846 | ) | ||||
Increase in interest payable | 4,808 | 4,777 | ||||||
(Increase) decrease in working capital | $ | (6,665 | ) | $ | 21,991 | |||
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES SEGMENT DATA SUMMARY AND RECONCILIATION (Dollars in thousands) (Unaudited) | ||||||||||||
For the Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2014 | 2014 | 2015 | ||||||||||
Net sales: | ||||||||||||
Industrial Materials | $ | 218,776 | $ | 206,099 | $ | 165,037 | ||||||
Engineered Solutions | 62,015 | 53,772 | 42,174 | |||||||||
Total net sales | $ | 280,791 | $ | 259,871 | $ | 207,211 | ||||||
Segment operating income (loss): | ||||||||||||
Industrial Materials | 1,600 | (58,002 | ) | (25,898 | ) | |||||||
Engineered Solutions | 5,406 | (6,568 | ) | (4,393 | ) | |||||||
Corporate, R&D, and Other | (14,075 | ) | (21,442 | ) | (15,542 | ) | ||||||
Total segment operating loss | $ | (7,069 | ) | $ | (86,012 | ) | $ | (45,833 | ) | |||
Reconciling Items: | ||||||||||||
Rationalizations - Industrial Materials | 114 | (161 | ) | 93 | ||||||||
Rationalizations - Engineered Solutions | (28 | ) | 39 | 2,401 | ||||||||
Rationalizations - Corporate, R&D, and Other | — | (14 | ) | — | ||||||||
Impairments - Industrial Materials | — | 75,650 | 35,381 | |||||||||
Total rationalizations and impairments | 86 | 75,514 | 37,875 | |||||||||
Rationalization related | ||||||||||||
Industrial Materials (recorded in Cost of sales) | 17,341 | 1,017 | 1,615 | |||||||||
Industrial Materials (recorded in Selling and administrative) | 25 | (8 | ) | — | ||||||||
Engineered Solutions (recorded in Cost of sales) | 403 | 1,039 | 704 | |||||||||
Engineered Solutions (recorded in Selling and administrative) | — | 121 | 3 | |||||||||
Corporate, R&D and Other (recorded in Selling and administrative) | — | 3,345 | 1,687 | |||||||||
Total rationalization related | 17,769 | 5,514 | 4,009 | |||||||||
Mark-to-market Pension Adjustment | ||||||||||||
Industrial Materials | — | 3,485 | — | |||||||||
Engineered Solutions | — | 9,203 | — | |||||||||
Corporate, R&D, and Other | — | 6,314 | — | |||||||||
Total Mark-to-market Pension Adjustment | — | 19,002 | — | |||||||||
Proxy contest expenses - Corporate, R&D, and Other | — | — | 1,665 | |||||||||
Total other expenses | — | — | 1,665 | |||||||||
Segment adjusted operating income: | ||||||||||||
Industrial Materials | 19,080 | 21,981 | 11,191 | |||||||||
Engineered Solutions | 5,781 | 3,834 | (1,285 | ) | ||||||||
Corporate, R&D, and Other | (14,075 | ) | (11,797 | ) | (12,190 | ) | ||||||
Total adjusted operating income | $ | 10,786 | $ | 14,018 | $ | (2,284 | ) | |||||
Adjusted operating income margin: | ||||||||||||
Industrial Materials | 8.7 | % | 10.7 | % | 6.8 | % | ||||||
Engineered Solutions | 9.3 | % | 7.1 | % | (3.0 | )% | ||||||
Total adjusted operating income margin | 3.8 | % | 5.4 | % | (1.1 | )% |
EBITDA Reconciliation | |||||||||||
For the Three Months Ended March 31, | First Half Target | ||||||||||
2014 | 2015 | 2015 | |||||||||
EBITDA | $ | 33,015 | $ | 17,232 | $30,000 - $40,000 | ||||||
Adjustments | |||||||||||
Depreciation and amortization | (22,228 | ) | (19,516 | ) | (39,000) | ||||||
Rationalization related depreciation | (17,433 | ) | (1,053 | ) | (1,000) | ||||||
Rationalizations | (86 | ) | (2,495 | ) | (8,000) | ||||||
Impairments | — | (35,381 | ) | (35,000) | |||||||
Rationalizations related charges | (337 | ) | (2,955 | ) | (4,000) | ||||||
Proxy contest expenses | — | (1,665 | ) | (2,000) | |||||||
Operating income | (7,069 | ) | (45,833 | ) | (59,000) - (49,000) | ||||||
Other (expense) income, net | (794 | ) | (393 | ) | (1,000) | ||||||
Interest expense | (8,999 | ) | (8,921 | ) | (18,000) | ||||||
Interest income | 58 | 73 | — | ||||||||
Income taxes | 5,287 | (534 | ) | (2,000) | |||||||
Net loss | $ | (11,517 | ) | $ | (55,608 | ) | $(80,000) - $(70,000) | ||||
Adjusted Net Income and Earnings Per Share Reconciliation | |||||||||||||||
For the Three Months Ended March 31, 2014 | For the Three Months Ended March 31, 2015 | ||||||||||||||
Income (Loss) | EPS | Income (Loss) | EPS | ||||||||||||
Total Company | |||||||||||||||
Net loss | $ | (11,517 | ) | $ | (0.08 | ) | $ | (55,608 | ) | $ | (0.41 | ) | |||
Rationalizations, net of tax | 74 | — | 1,624 | 0.01 | |||||||||||
Impairment, net of tax | — | — | 30,901 | 0.23 | |||||||||||
Rationalization related, net of tax | 12,301 | 0.09 | 2,601 | 0.02 | |||||||||||
Valuation allowance | — | — | 6,080 | 0.04 | |||||||||||
Proxy contest expenses, net of tax | — | — | 1,046 | 0.01 | |||||||||||
Adjusted net income (loss) | $ | 858 | $ | 0.01 | $ | (13,356 | ) | $ | (0.10 | ) |
Net Debt Reconciliation | ||||||||
As of December 31, 2014 | As of March 31, 2015 | |||||||
Long-term debt | $ | 341,615 | $ | 336,321 | ||||
Short-term debt | 188,104 | 191,446 | ||||||
Total debt | 529,719 | 527,767 | ||||||
Less: | ||||||||
Cash and cash equivalents | 17,550 | 10,961 | ||||||
Net Debt | $ | 512,169 | $ | 516,806 |
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