Discontinued Operations and Related Assets Held for Sale

6 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Discontinued Operations and Related Assets Held for Sale

On February 26, 2016, the Company announced that it had initiated a strategic review of its Engineered Solutions business segment to better direct its resources and simplify its operations. Any potential sale of assets was prohibited by the Revolving Facility without approval of the requisite lenders thereunder. On April 27, 2016, GrafTech and certain of its subsidiaries entered into an amendment to the Revolving Facility (see Note 8 "Debt and Liquidity") which, among other things, permits the sale of assets with the restriction that the proceeds be utilized to pay down revolver borrowings. As of June 30, 2016, the Engineered Solutions segment qualified for reporting as discontinued operations. We anticipate this intiative to be completed within the next 12 months, and as such, the assets and liabilities have all been classified as current.

We evaluated the fair value of the Engineered Solutions business segment utilizing the market approach (Level 3 measure). As a result, we incurred an impairment charge to our Engineered Solutions business segment of $105.6 million to align the carrying value with estimated fair value as of June 30, 2016. The impairment charge is based upon Management’s best estimate of fair value less cost of disposal for the ES business. The estimate reflects Management’s view of the manner in which the Engineered Solutions business will be divested, including  assumptions as to if and how it will be split, given the lines of business and asset groups that constitute the Engineered Solutions segment. Amongst other things, the split into groups influences the computation of the impairment charge.The impairment charge and resulting loss in the three months ended June 30, 2016 is not offset by expected gains on certain group(s), and as a result may or may not later be partially offset through gains depending on the outcome of the divestiture. These assumptions and estimates are subject to change until divestiture is completed and may be adjusted in the quarter that the information becomes available.

The following tables summarize the results of the Engineered Solutions business segment, reclassified as discontinued operations for the three and six months ended June 30, 2015 and 2016.

	For the Three Months Ended  June 30, 2015			For the Three Months Ended June 30, 2016
	(dollars in thousands)
Net sales	$	39,313		$	29,930
Cost of sales	37,591			24,569
Gross profit	1,722			5,361
Research and development	764			813
Selling and administrative expenses	5,544			5,314
Rationalizations	1,794			(255		)
Impairment	—			105,600
Operating loss	(6,380		)	(106,111		)
Other expense (income)	(37		)	(81		)
Interest expense	399			951
Loss from discontinued operations before income taxes	(6,742		)	(106,981		)
Benefit from income taxes on discontinued operations	1,040			843
Loss from discontinued operations	$	(5,702	)	$	(106,138	)

	For the Six Months Ended June 30, 2015			For the Six Months Ended June 30, 2016
	(dollars in thousands)
Net sales	$	84,030		$	59,019
Cost of sales	78,037			50,554
Gross profit	5,993			8,465
Research and development	1,679			1,691
Selling and administrative expenses	11,745			9,760
Rationalizations	4,210			(246		)
Impairment	—			105,600
Operating loss	(11,641		)	(108,340		)
Other expense (income)	(64		)	(72		)
Interest expense	695			1,670
Loss from discontinued operations before income taxes	(12,272		)	(109,938		)
Benefit from income taxes on discontinued operations	486			1,236
Loss from discontinued operations	$	(11,786	)	$	(108,702	)

The significant components of our Statements of Cash Flows for the Engineered Solutions business segment held for sale are as follows:

	For the Six Months Ended June 30, 2015			For the Six Months Ended June 30, 2016
	(dollars in thousands)
Depreciation and amortization	$	7,330		$	3,052
Impairment	—			105,600
Deferred income taxes	(486		)	(1,236		)
Capital expenditures	9,413			2,513

The following table summarizes the carrying value of the assets and liabilities of discontinued operations as of December 31, 2015 and June 30, 2016.

	As of December 31, 2015		As of June 30, 2016
	(dollars in thousands)
Current assets of discontinued operations:
Accounts receivable	$	20,425	$	19,030
Inventories	77,332		77,656
Prepaid expenses and other current assets	524		924
Total current assets of discontinued operations	98,281		97,610
Net property plant and equipment	86,369		86,595
Other assets	17,606		14,268
Total long-term assets of discontinued operations	103,975		100,863
Impairment upon reclassification to held for sale	—		(105,600		)
Total assets of discontinued operations	$	202,256	$	92,873
Liabilities of discontinued operations:
Accounts payable	$	9,331	$	6,499
Accrued income and other taxes	3,113		2,500
Other accrued liabilities	10,638		9,336
Total current liabilities of discontinued operations	23,082		18,335
Other long-term obligations	1,167		980
Total liabilities of discontinued operations	$	24,249	$	19,315