Discontinued Operations and Related Assets Held for Sale

12 Months Ended

Dec. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Related Assets Held for Sale

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 7 "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 as we expect the divestiture to be complete within 12 months of the qualification.

During the second quarter of 2016, 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. The analysis was updated as of December 31,2016, resulting in an additional impairment charge of $14.3 million. 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.These assumptions and estimates are subject to change until divestiture is completed and may be adjusted in the quarter that the information becomes available.

On November 30, 2016, we completed the sale of our Fiber Materials Inc. business, which was a business line within our former Engineered Solutions business. The sale resulted in cash proceeds of $15.9 million and a loss of $0.2 million. We have the ability to realize up to $8.5 million of additional proceeds based on the earnings of the Fiber Materials business over the 24 months following the transaction. We have elected to record this contingent consideration as it is realized and as such it is not part of the gain recognized thus far on the transaction.

The following tables summarize the results of the Engineered Solutions business segment, reclassified as discontinued operations:

	For the Year Ended December 31, 2014			For the Period January 1 Through August 14, 2015			For the Period August 15 Through December 31, 2015			For the Year Ended December 31, 2016
	(dollars in thousands)
Net sales	$	260,160		$	98,024		$	55,608		$	115,336
Cost of sales	235,901			94,817			49,068			98,440
Gross profit	24,259			3,207			6,540			16,896
Research and development	5,107			2,179			1,265			3,145
Selling and administrative expenses	29,550			16,764			8,627			19,220
Rationalizations	3,679			4,492			791			(405		)
Impairment	121,570			—			—			119,907
Operating loss	(135,647		)	(20,228		)	(4,143		)	(124,971		)
Other expense (income)	(485		)	(90		)	(135		)	(66		)
Interest expense	1,320			907			918			3,258
Loss from discontinued operations     before income taxes	(136,482		)	(21,045		)	(4,926		)	(128,163		)
Benefit for income taxes on     discontinued operations	(3,626		)	(2,366		)	—			(1,189		)
Loss from discontinued operations	$	(132,856	)	$	(18,679	)	$	(4,926	)	$	(126,974	)

During 2014, GrafTech impaired certain long-lived assets and announced exiting the isomolded product line within our AGM product group resulting in the above impairment and rationalization charges.

The significant components of our Statements of Cash Flows for discontinued operations held for sale are as follows:

	For the Year Ended December 31, 2014			For the Period January 1 Through August 14, 2015			For the Period August 15 Through September 30, 2015		For the Year Ended December 31, 2016
				(dollars in thousands)
Depreciation and amortization	$	21,780		$	7,988		$	4,194	$	5,277
Impairment	121,570			—			—		119,907
Deferred income taxes	(3,626		)	(2,366		)	—		(1,189		)
Cash received from divestitures	—			—			—		15,889
Capital expenditures	24,018			10,104			4,447		4,713
Credit Facility reductions	—			—			—		(15,889		)

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

	As of December 31, 2015		As of December 31, 2016
	(dollars in thousands)
Assets of discontinued operations:
Accounts receivable	$	20,425	$	17,094
Inventories	77,332		71,816
Prepaid expenses and other current assets	524		320
Net property plant and equipment	86,369		79,048
Other assets	17,606		12,608
Total assets of discontinued operations prior to impairment	202,256		180,886
Impairment of assets held for sale	—		(119,907		)
Total assets of discontinued operations	$	202,256	$	60,979
Liabilities of discontinued operations:
Accounts payable	$	9,331	$	7,253
Accrued income and other taxes	3,113		2,326
Other accrued liabilities	10,638		10,463
Total current liabilities of discontinued operations	23,082		20,042
Other long-term obligations	1,167		850
Total liabilities of discontinued operations	$	24,249	$	20,892