Improved Conditions and Execution Drive Strong
Finish to 2021 and Favorable 2022 Outlook
GrafTech International Ltd. (NYSE: EAF) (GrafTech or the
Company) today announced financial results for the quarter and year
ended December 31, 2021.
Fourth Quarter Highlights
- Net income of $141 million, or $0.54 per share, and adjusted
earnings per share1 of $0.50 per share
- Sales volume increased 19% compared to the fourth quarter of
2020
- Production volume increased 28% compared to the fourth quarter
of 2020
- Adjusted EBITDA1 of $183 million
- Reduced debt by $100 million
2021 Highlights
- Net income of $388 million, or $1.46 per share, and adjusted
earnings per share1,2 of $1.74
- Adjusted EBITDA1 of $670 million, for a 50% adjusted EBITDA
margin3
- Sales volume increased 24% compared to 2020
- Generated cash flow from operating activities of $443
million
- Strengthened the balance sheet further by reducing debt by $400
million
- Safety performance continued an improving trend, ending the
year at a recordable injury rate of 0.49
CEO Comments
President and Chief Executive Officer David Rintoul commented,
“Market trends continued to improve in the fourth quarter of 2021
and we expect these positive trends to continue into 2022. Our
average non-LTA graphite electrode price increased 10% sequentially
from the third quarter of 2021. We expect our first quarter average
non-LTA prices to increase an additional 17-20% over the fourth
quarter."
“During the fourth quarter, we continued to execute on our
commitment to strengthen our balance sheet, reducing our debt by
$100 million, for a total debt reduction of $400 million in
2021."
"We continued to make progress with our ESG efforts including a
number of projects throughout our manufacturing plants in an effort
to minimize our environmental footprint. EAF steel production is an
effective way to de-carbonize the steel making industry and with
our product being a mission critical component, we are proud of our
role in helping the industry and the environment."
Full Year and Fourth Quarter 2021 Financial
Performance
(dollars in thousands, except per share
amounts)
For the Year Ended
December 31,
Q4 2021
Q3 2021
Q4 2020
2021
2020
Net sales
$
363,293
$
347,348
$
338,010
$
1,345,788
$
1,224,361
Net income
$
141,480
$
119,886
125,096
388,330
434,374
Earnings per share (EPS)2
$
0.54
$
0.45
$
0.47
$
1.46
$
1.62
Cash flow from operating activities
$
100,029
$
134,256
$
146,981
443,040
$
563,646
Adjusted net income1
$
131,180
$
119,038
$
114,168
464,585
$
422,512
Adjusted earnings per share1, 2
$
0.50
$
0.45
$
0.43
1.74
$
1.58
Adjusted EBITDA1
$
182,817
$
172,175
$
175,538
$
669,940
$
658,946
Adjusted free cash flow4
$
86,857
$
125,145
$
141,594
$
456,160
$
527,571
Net sales for the year ended December 31, 2021 totaled $1.3
billion, an increase of 10% compared to $1.2 billion in the prior
year reflecting improved market conditions. Fourth quarter net
sales increased 5% from the third quarter on improved volumes and
pricing.
Net income for 2021 was $388 million, or $1.46 per share,
compared to $434 million, or $1.62 per share, in the prior year.
Fourth quarter net income was $141 million, or $0.54 per share,
compared to $125 million, or $0.47 per share in the fourth quarter
of 2020.
Adjusted EBITDA1 was $670 million in 2021, an increase from $659
million in 2020. Full year 2021 results reflect a sequential
improvement year-over-year in volumes and pricing. Adjusted EBITDA1
was $183 million in the fourth quarter of 2021 compared to $176
million in the same period of 2020.
In 2021, cash flow from operating activities was $443 million,
free cash flow4 was $385 million and adjusted free cash flow4 was
$456 million and 68% of adjusted EBITDA1 converted to adjusted free
cash flow5.
Operational and Commercial Update
Key operating metrics
For the Year Ended
December 31,
(in thousands, except
percentages)
Q4 2021
Q3 2021
Q4 2020
2021
2020
Sales volume (MT) 6
44
43
37
167
135
Production volume (MT) 7
46
39
36
165
134
Production capacity excluding St. Marys
(MT) 8, 9
52
48
52
202
202
Capacity utilization excluding St. Marys
8, 10
88
%
81
%
69
%
82
%
66
%
Total production capacity (MT) 9, 11
59
55
59
230
230
Total capacity utilization 10, 11
78
%
71
%
61
%
72
%
58
%
GrafTech reported strong sales volumes of 167 thousand MT in
2021, an increase of 24% compared to 2020, consisting of long-term
agreement (LTA) volumes of 110 thousand MT and non-LTA volumes of
57 thousand MT.
Our fourth quarter LTA average realized price was $9,400. The
average realized non-LTA price for graphite electrodes delivered
and recognized in revenue in the fourth quarter was just over
$5,000, an increase of approximately 10% over third quarter non-LTA
pricing.
We expect our first quarter average non-LTA price for graphite
electrodes delivered and recognized in revenue to be 17-20% higher
than in the fourth quarter of 2021.
We also expect cost increases in 2022, driven by recent global
inflationary pressures, particularly for third-party needle coke,
energy and freight.
Production volumes increased to 46,000 MT in the fourth quarter
and 165,000 for the full year, a 23% increase compared to 2020.
Globally, steel market capacity utilization rates continue to be
strong:
Q4 2021
Q3 2021
Q4 2020
Global (ex-China) capacity utilization
rate12
75%
74%
72%
U.S. steel market capacity utilization
rate13
83%
85%
71%
The estimated shipments of graphite electrodes for 2022 through
2024 remain unchanged as follows:
2022
2023 through 2024
Estimated LTA volume (in thousands of
MT)
95-105
35-45
Estimated LTA revenue (in millions)
$910-$1,010
$350-$45014
Capital Structure and Capital Allocation
As of December 31, 2021, GrafTech had cash and cash equivalents
of $58 million and total debt of approximately $1.0 billion. We
continue to make progress in reducing our long-term debt, repaying
$100 million in the fourth quarter, for a total debt repayment of
$400 million in 2021.
We are committed to delivering value to our shareholders through
our disciplined capital allocation strategy. In 2022, we will
continue to focus on investing in our business, strengthening our
balance sheet and opportunistic purchases under the remaining $159
million stock repurchase authorization. Our capital expenditures in
2022 are focused on specific, highly targeted capital investments
in operational improvement activities and are expected to be in the
range of $70 to $80 million.
Outlook
The steel industry has experienced unprecedented pricing over
the past 12 months. While pricing has retreated recently, it
remains well above historical levels and the near-term fundamentals
in the steel industry remain strong. More broadly, the industry is
continuing to look for ways to de-carbonize and many of these
efforts are focused on moving away from traditional blast furnace
production to electric arc furnace steel production. GrafTech is
well-positioned to benefit from these events in 2022 and
beyond.
Conference Call Information
In connection with this earnings release, you are invited to
listen to our earnings call being held on February 4, 2022 at 10:00
a.m. Eastern Standard Time. The webcast and accompanying slide
presentation will be available at www.GrafTech.com, in the
Investors section. The earnings call dial-in number is +1 (833)
968-2275 toll-free in the U.S. and Canada or +1 (236) 714-2979 for
overseas calls, conference ID: 8449319. A replay of the Conference
Call will be available until May 4, 2022 by dialing +1 (800)
585-8367 toll-free in the U.S. and Canada or +1 (416) 621-4642 for
overseas calls, conference ID: 8449319. A replay of the webcast
will also be available on our website until May 4, 2022, at
www.GrafTech.com, in the Investors section. GrafTech also makes its
complete financial reports that have been filed with the Securities
and Exchange Commission (SEC) and other information available at
www.GrafTech.com. The information on our website is not part of
this release or any report we file or furnish to the SEC.
About GrafTech
GrafTech International Ltd. is a leading manufacturer of
high-quality graphite electrode products essential to the
production of electric arc furnace steel and other ferrous and
non-ferrous metals. The Company has a competitive portfolio of
low-cost, ultra-high power graphite electrode manufacturing
facilities, including three of the highest capacity facilities in
the world. We are the only large-scale graphite electrode producer
that is substantially vertically integrated into petroleum needle
coke, a key raw material for graphite electrode manufacturing. This
unique position provides competitive advantages in product quality
and cost.
________________________
1 A non-GAAP financial measure, see below for more information
and a reconciliation of EBITDA, adjusted EBITDA, adjusted net
income to net income, and adjusted EPS to EPS, the most directly
comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in the
United States of America (GAAP). 2 Earnings per share represents
diluted earnings per share. Adjusted earnings per share represents
diluted adjusted earnings per share. 3 Adjusted EBITDA margin is
calculated as adjusted EBITDA divided by net sales (Q4 2021
adjusted EBITDA of $183 million/Q4 2021 net sales of $363 million
and 2021 Adjusted EBITDA of $670 million/2021 net sales of $1,346
million). 4 A non-GAAP financial measure, see below for more
information and a reconciliation of adjusted free cash flow and
free cash flow to cash flow from operating activities, the most
directly comparable financial measure calculated and presented in
accordance with GAAP. 5 Adjusted free cash flow conversion is
calculated as adjusted free cash flow divided by adjusted EBITDA
(2021 adjusted free cash flow of $456 million/2021 adjusted EBITDA
of $670 million). 6 Sales volume reflects only graphite electrodes
manufactured by GrafTech. 7 Production volume reflects graphite
electrodes we produced during the period. 8 In the first quarter of
2018, our St. Marys, Pennsylvania facility began graphitizing a
limited number of electrodes sourced from our Monterrey, Mexico
facility. 9 Production capacity reflects expected maximum
production volume during the period under normal operating
conditions, standard product mix and expected maintenance outage.
Actual production may vary. 10 Capacity utilization reflects
production volume as a percentage of production capacity. 11
Includes graphite electrode facilities in Calais, France;
Monterrey, Mexico; Pamplona, Spain; and St. Marys, Pennsylvania. 12
Source: World Steel Association, January 25, 2022. 13 Source:
American Iron and Steel Institute. 14 Includes expected termination
fees from a few customers that have failed to meet certain
obligations under their LTAs.
Special note regarding forward-looking statements
This news release and related discussions may contain
forward-looking statements within the meaning of the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements reflect our current views with
respect to, among other things, financial projections, plans and
objectives of management for future operations, and future economic
performance. Examples of forward-looking statements include, among
others, statements we make regarding future estimated long-term
agreement ("LTA") revenues and volumes, future non-LTA pricing,
anticipated levels of capital expenditures, and guidance relating
to earnings per share and adjusted EBITDA. You can identify these
forward-looking statements by the use of forward-looking words such
as “will,” “may,” “plan,” “estimate,” “project,” “believe,”
“anticipate,” “expect,” “foresee,” “intend,” “should,” “would,”
“could,” “target,” “goal,” “continue to,” “positioned to,” “are
confident,” or the negative versions of those words or other
comparable words. Any forward-looking statements contained in this
news release are based upon our historical performance and on our
current plans, estimates and expectations considering information
currently available to us. The inclusion of this forward-looking
information should not be regarded as a representation by us that
the future plans, estimates, or expectations contemplated by us
will be achieved. Our expectations and targets are not predictions
of actual performance and historically our performance has
deviated, often significantly, from our expectations and targets.
These forward-looking statements are subject to various risks and
uncertainties and assumptions relating to our operations, financial
results, financial condition, business, prospects, growth strategy
and liquidity. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those
indicated in these statements. We believe that these factors
include, but are not limited to: the ultimate impact the COVID-19
pandemic has on our business, results of operations, financial
condition and cash flows, including the duration and spread of any
variants, the duration and scope of related government orders and
restrictions, the impact on our employees, and the disruptions and
inefficiencies in our supply chain; the possibility that we may be
unable to implement our business strategies, including our ability
to secure and maintain longer-term customer contracts, in an
effective manner; the cyclical nature of our business and the
selling prices of our products may lead to periods of reduced
profitability and net losses in the future; the risks and
uncertainties associated with litigation, arbitration, and like
disputes, including the current stockholder litigation and disputes
related to contractual commitments; the possibility that global
graphite electrode overcapacity may adversely affect graphite
electrode prices; pricing for graphite electrodes has historically
been cyclical and the price of graphite electrodes may decline in
the future; our dependence on the global steel industry generally
and the electric arc furnace steel industry in particular; the
sensitivity of our business and operating results to economic
conditions and the possibility others may not be able to fulfill
their obligations to us in a timely fashion or at all; the
competitiveness of the graphite electrode industry; our dependence
on the supply of raw materials, including petroleum needle coke,
and energy, and disruptions in supply chains for these materials;
our manufacturing operations are subject to hazards; changes in, or
more stringent enforcement of, health, safety and environmental
regulations applicable to our manufacturing operations and
facilities; the legal, compliance, economic, social and political
risks associated with our substantial operations in multiple
countries; the possibility that fluctuation of foreign currency
exchange rates could materially harm our financial results; the
possibility that our results of operations could deteriorate if our
manufacturing operations were substantially disrupted for an
extended period, including as a result of equipment failure,
climate change, regulatory issues, natural disasters, public health
crises, such as the COVID-19 pandemic, political crises or other
catastrophic events; our dependence on third parties for certain
construction, maintenance, engineering, transportation, warehousing
and logistics services; the possibility that we are unable to
recruit or retain key management and plant operating personnel or
successfully negotiate with the representatives of our employees,
including labor unions; the sensitivity of goodwill on our balance
sheet to changes in the market; the possibility that we are subject
to information technology systems failures, cybersecurity attacks,
network disruptions and breaches of data security; our dependence
on protecting our intellectual property and the possibility that
third parties may claim that our products or processes infringe
their intellectual property rights; the possibility that our
indebtedness could limit our financial and operating activities or
that our cash flows may not be sufficient to service our
indebtedness; the possibility that restrictive covenants in our
financing agreements could restrict or limit our operations; the
fact that borrowings under certain of our existing financing
agreements subject us to interest rate risk; the possibility that
disruptions in the capital and credit markets could adversely
affect our results of operations, cash flows and financial
condition, or those of our customers and suppliers; the possibility
that the market price of our common stock could be negatively
affected by sales of substantial amounts of our common stock in the
public markets, including by Brookfield Asset Management Inc. and
its affiliates; the possibility that we may not pay cash dividends
on our common stock in the future; and the fact that our
stockholders have the right to engage or invest in the same or
similar businesses as us.
These factors should not be construed as exhaustive and should
be read in connection with our other cautionary statements,
including the Risk Factors sections included in our most recent
Annual Report on Form 10-K and other filings with the SEC. The
forward-looking statements made in this press release relate only
to events as of the date on which the statements are made. Except
as required by law, we do not undertake any obligation to publicly
update or review any forward-looking statement, whether as a result
of new information, future developments or otherwise.
Non-GAAP financial measures
In addition to providing results that are determined in
accordance with GAAP, we have provided certain financial measures
that are not in accordance with GAAP. EBITDA, adjusted EBITDA,
adjusted EBITDA margin, adjusted net income, adjusted EPS, free
cash flow, adjusted free cash flow, free cash flow conversion and
adjusted free cash flow conversion are non-GAAP financial
measures.
We define EBITDA, a non-GAAP financial measure, as net income or
loss plus interest expense, minus interest income, plus income
taxes and depreciation and amortization. We define adjusted EBITDA
as EBITDA plus any pension and other post-employment benefit (OPEB)
plan expenses, adjustments for public offerings and related
expenses, non-cash gains or losses from foreign currency
remeasurement of non-operating assets and liabilities in our
foreign subsidiaries where the functional currency is the U.S.
dollar, related party payable - tax receivable agreement
adjustments, stock-based compensation, non-cash fixed asset
write-offs, value-added tax credit gains in Brazil and Change in
Control charges that were triggered as a result of the ownership of
our largest stockholder falling below 30% of our total outstanding
shares. Adjusted EBITDA is the primary metric used by our
management and our Board of Directors to establish budgets and
operational goals for managing our business and evaluating our
performance. For purposes of this section, a "Change in Control"
occurred when Brookfield and any affiliates thereof ceased to own
stock of the Company that constitutes at least thirty percent (30%)
or thirty-five percent (35%), as applicable, of the total fair
market value or total voting power of the stock of the Company.
Adjusted EBITDA is the primary metric used by our management and
our Board of Directors to establish budgets and operational goals
for managing our business and evaluating our performance.
We monitor adjusted EBITDA as a supplement to our GAAP measures,
and believe it is useful to present to investors, because we
believe that it facilitates evaluation of our period-to-period
operating performance by eliminating items that are not operational
in nature, allowing comparison of our recurring core business
operating results over multiple periods unaffected by differences
in capital structure, capital investment cycles and fixed asset
base. Adjusted EBITDA margin is also a non-GAAP financial measure
used by our management and our Board of Directors as supplemental
information to assess the Company’s operational performance and is
calculated as adjusted EBITDA divided by net sales. In addition, we
believe adjusted EBITDA, adjusted EBITDA margin and similar
measures are widely used by investors, securities analysts, ratings
agencies, and other parties in evaluating companies in our industry
as a measure of financial performance and debt-service
capabilities. We also monitor the ratio of total debt to trailing
twelve month adjusted EBITDA, because we believe it is a useful and
widely used way to assess our leverage.
Our use of adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP. Some
of these limitations are:
- adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- adjusted EBITDA does not reflect our cash expenditures for
capital equipment or other contractual commitments, including any
capital expenditure requirements to augment or replace our capital
assets;
- adjusted EBITDA does not reflect the interest expense or the
cash requirements necessary to service interest or principal
payments on our indebtedness;
- adjusted EBITDA does not reflect tax payments that may
represent a reduction in cash available to us;
- adjusted EBITDA does not reflect expenses relating to our
pension and OPEB plans;
- adjusted EBITDA does not reflect the non-cash gains or losses
from foreign currency remeasurement of non-operating assets and
liabilities in our foreign subsidiaries where the functional
currency is the U.S. dollar;
- adjusted EBITDA does not reflect public offerings and related
expenses;
- adjusted EBITDA does not reflect related party payable - tax
receivable agreement adjustments;
- adjusted EBITDA does not reflect stock-based compensation or
the non-cash write-off of fixed assets;
- adjusted EBITDA does not reflect gains on a value-added tax
matter in Brazil;
- adjusted EBITDA does not reflect the Change in Control charges;
and
- other companies, including companies in our industry, may
calculate EBITDA, adjusted EBITDA and adjusted EBITDA margin
differently, which reduces its usefulness as a comparative
measure.
We define adjusted net income, a non-GAAP financial measure, as
net income or loss and excluding the items used to calculate
adjusted EBITDA, less the tax effect of those adjustments. We
define adjusted EPS, a non-GAAP financial measure, as adjusted net
income divided by the weighted average of diluted common shares
outstanding during the period. We believe adjusted net income and
adjusted EPS are useful to present to investors because we believe
that they assist investors’ understanding of the underlying
operational profitability of the Company.
Free cash flow and adjusted free cash flow, non-GAAP financial
measures, are metrics used by our management and our Board of
Directors to analyze cash flows generated from operations. We
define free cash flow as net cash provided by operating activities
less capital expenditures. We define adjusted free cash flow as
free cash flow adjusted by the Change in Control charges that were
triggered as a result of the ownership of our largest stockholder
falling below 30% of our total outstanding shares. We believe these
free cash flow metrics are useful to present to investors because
we believe that they facilitate comparison of the Company’s
performance with its competitors. Free cash flow conversion and
adjusted free cash flow conversion are also non-GAAP financial
measures used by our management and our Board of Directors as
supplemental information to evaluate the Company’s ability to
convert earnings from our operational performance to cash. We
calculate free cash flow conversion as free cash flow divided by
adjusted EBITDA and adjusted free cash flow conversion as adjusted
free cash flow divided by adjusted EBITDA.
In evaluating EBITDA, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income, adjusted EPS, free cash flow, adjusted free
cash flow, free cash flow conversion and adjusted free cash flow
conversion, you should be aware that in the future, we will incur
expenses similar to the adjustments in the reconciliation presented
below, other than the Change in Control charges. Our presentations
of EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net
income, adjusted EPS, free cash flow, adjusted free cash flow, free
cash flow conversion and adjusted free cash flow conversion should
not be construed as suggesting that our future results will be
unaffected by these expenses or any unusual or non-recurring items.
When evaluating our performance, you should consider EBITDA,
adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted EPS, free cash flow, adjusted free cash flow, free cash
flow conversion and adjusted free cash flow conversion alongside
other measures of financial performance and liquidity, including
our net income (loss), EPS and cash flow from operating activities,
respectively, and other GAAP measures.
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars
in thousands) Unaudited
As of
December 31,
2021
As of
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents
$
57,514
$
145,442
Accounts and notes receivable, net of
allowance for doubtful accounts of $6,835 as of December 31, 2021
and $8,243 as of December 31, 2020
207,547
182,647
Inventories
289,432
265,964
Prepaid expenses and other current
assets
73,364
35,114
Total current assets
627,857
629,167
Property, plant and equipment
815,298
784,902
Less: accumulated depreciation
313,825
278,685
Net property, plant and equipment
501,473
506,217
Deferred income taxes
26,187
32,551
Goodwill
171,117
171,117
Other assets
85,684
93,660
Total assets
$
1,412,318
$
1,432,712
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
117,112
$
70,989
Short-term debt
127
131
Accrued income and other taxes
57,097
48,720
Other accrued liabilities
56,405
56,501
Related party payable - tax receivable
agreement
3,828
21,752
Total current liabilities
234,569
198,093
Long-term debt
1,029,561
1,420,000
Other long-term obligations
68,657
81,478
Deferred income taxes
40,674
43,428
Related party payable - tax receivable
agreement long-term
15,455
19,098
Stockholders’ equity (deficit):
Preferred stock, par value $0.01,
300,000,000 shares authorized, none issued
—
—
Common stock, par value $0.01,
3,000,000,000 shares authorized, 263,255,708 shares issued and
outstanding as of December 31, 2021 and 267,188,547 as of December
31, 2020
2,633
2,672
Additional paid-in capital
761,412
758,354
Accumulated other comprehensive loss
(7,444
)
(19,641
)
Accumulated deficit
(733,199
)
(1,070,770
)
Total stockholders’ equity (deficit)
23,402
(329,385
)
Total liabilities and stockholders’
equity
$
1,412,318
$
1,432,712
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in thousands, except per share data)
Unaudited
For the Three Months
Ended
December 31,
For the Year Ended
December 31,
2021
2020
2021
2020
CONSOLIDATED STATEMENTS OF
OPERATIONS
Net sales
$
363,293
$
338,010
$
1,345,788
$
1,224,361
Cost of sales
182,786
162,485
701,335
563,864
Gross profit
180,507
175,525
644,453
660,497
Research and development
801
1,903
3,771
3,975
Selling and administrative expenses
17,666
17,918
132,608
67,913
Operating income
162,040
155,704
508,074
588,609
Other (income) expense, net
(16,090
)
5,639
(16,451
)
3,330
Related party tax receivable agreement
expense (benefit)
184
(17,744
)
231
(21,090
)
Interest expense
14,551
29,048
68,760
98,074
Interest income
(219
)
(168
)
(872
)
(1,750
)
Income before provision for income
taxes
163,614
138,929
456,406
510,045
Provision for income taxes
22,134
13,833
68,076
75,671
Net income
$
141,480
$
125,096
$
388,330
$
434,374
Basic income per common share:
Net income per share
$
0.54
$
0.47
$
1.46
$
1.62
Weighted average common shares
outstanding
263,424,743
267,285,677
266,251,097
267,916,483
Diluted income per common share:
Net income per share
$
0.54
$
0.47
$
1.46
$
1.62
Weighted average common shares
outstanding
263,516,311
267,321,380
266,317,194
267,930,644
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in thousands) Unaudited
For the Three Months
Ended
December 31,
For the Year Ended
December 31,
2021
2020
2021
2020
Cash flow from operating activities:
Net income
$
141,480
$
125,096
$
388,330
$
434,374
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
17,301
17,889
65,716
62,963
Related party tax receivable agreement
expense (benefit)
184
(17,744
)
231
(21,090
)
Deferred income tax provision
2,523
4,004
(3,657
)
20,241
Loss on extinguishment of debt
—
8,329
—
8,329
Stock- based compensation
338
778
16,631
2,665
Interest expense
2,301
1,424
12,051
6,192
Other charges, net
323
7,413
7,107
7,861
Net change in working capital*
(63,551
)
1,340
(16,377
)
86,438
Change in related-party tax receivable
agreement
—
—
(21,799
)
(27,857
)
Change in long-term assets and
liabilities
(870
)
(1,548
)
(5,193
)
(16,470
)
Net cash provided by operating
activities
100,029
146,981
443,040
563,646
Cash flow from investing activities:
Capital expenditures
(17,831
)
(5,387
)
(58,257
)
(36,075
)
Proceeds from the sale of assets
41
301
397
379
Net cash used in investing activities
(17,790
)
(5,086
)
(57,860
)
(35,696
)
Cash flow from financing activities:
Short-term debt reductions, net
(142
)
(146
)
(142
)
(146
)
Debt issuance and modification costs
—
(6,278
)
(3,109
)
(6,278
)
Proceeds from the issuance of long-term
debt
—
500,000
—
500,000
Principal repayments on long-term debt
(100,000
)
(647,000
)
(400,000
)
(896,214
)
Repurchase of common stock - non-related
party
(7,622
)
—
(50,000
)
(30,099
)
Payments for taxes related to net share
settlement of equity awards
(3
)
—
(4,077
)
(71
)
Dividends paid to non-related party
(1,993
)
(1,050
)
(7,439
)
(8,603
)
Dividends paid to related party
(639
)
(1,622
)
(3,206
)
(22,272
)
Other
(555
)
—
(3,819
)
—
Net cash used in financing activities
(110,954
)
(156,096
)
(471,792
)
(463,683
)
Net change in cash and cash
equivalents
(28,715
)
(14,201
)
(86,612
)
64,267
Effect of exchange rate changes on cash
and cash equivalents
(427
)
802
(1,316
)
240
Cash and cash equivalents at beginning of
period
86,656
158,841
145,442
80,935
Cash and cash equivalents at end of
period
$
57,514
$
145,442
$
57,514
$
145,442
* Net change in working capital due to
changes in the following components:
Accounts and notes receivable, net
$
(25,472
)
$
(14,851
)
$
(28,927
)
$
63,557
Inventories
(20,919
)
34,262
(28,165
)
44,633
Prepaid expenses and other current
assets
(14,257
)
(2,409
)
(31,921
)
3,028
Income taxes payable
8,045
(28,452
)
5,674
(12,420
)
Accounts payable and accruals
(5,157
)
12,288
66,591
(12,790
)
Interest payable
(5,791
)
502
371
430
Net change in working capital
$
(63,551
)
$
1,340
$
(16,377
)
$
86,438
NON-GAAP RECONCILIATION
(Dollars in thousands)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation to Adjusted net
income
For the Year Ended
December 31,
Q4 2021
Q3 2021
Q4 2020
2021
2020
Net income
$
141,480
$
119,886
$
125,096
$
388,330
$
434,374
Adjustments, pre-tax:
Pension and OPEB plan expenses (1)
(3,840
)
434
4,430
(2,545
)
6,096
Public offerings and related expenses
(2)
—
—
260
663
264
Non-cash gains and losses on foreign
currency remeasurement (3)
(484
)
(1,542
)
1,738
(119
)
1,297
Stock-based compensation (4)
337
262
778
1,917
2,669
Non-cash fixed asset write-off (5)
2,884
—
378
3,197
378
Related party tax receivable agreement
adjustment (6)
184
—
(17,744
)
231
(21,090
)
Change in control LTIP award (7)
—
—
—
73,384
—
Change in control stock-based compensation
acceleration (7)
—
—
—
14,713
—
Brazil value-added tax credit (8)
(11,511
)
—
—
(11,511
)
—
Total non-GAAP adjustments
pre-tax
(12,430
)
(846
)
(10,160
)
79,930
(10,386
)
Income tax impact on non-GAAP
adjustments
(2,130
)
2
768
3,675
1,476
Adjusted net income
$
131,180
$
119,038
$
114,168
$
464,585
$
422,512
(1)
Net periodic (benefit) cost for our
pension and OPEB plans. Also includes a mark-to-market loss (gain)
for plan assets as of December of each year.
(2)
Legal, accounting, printing and
registration fees associated with public offerings and related
expenses.
(3)
Non-cash gains and losses from foreign
currency remeasurement of non-operating assets and liabilities of
our non-U.S. subsidiaries where the functional currency is the U.S.
dollar.
(4)
Non-cash expense for stock-based
compensation grants.
(5)
Non-cash fixed asset write-off recorded
for obsolete assets.
(6)
Non-cash expense adjustment for future
payment to our sole pre-IPO stockholder for tax assets that are
expected to be utilized.
(7)
In the second quarter of 2021, we incurred
Change in Control charges as a result of the ownership of our
largest stockholder, Brookfield, moving below 30% of our total
shares outstanding.
(8)
Gain from the settlement of a value-added
tax matter in Brazil.
NON-GAAP RECONCILIATION
(Dollars in thousands)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation to Adjusted EPS
For the Year Ended
December 31,
Q4 2021
Q3 2021
Q4 2020
2021
2020
EPS
$
0.54
$
0.45
$
0.47
$
1.46
$
1.62
Adjustments per share:
Pension and OPEB plan expenses (1)
(0.02
)
—
0.02
(0.01
)
0.03
Public offerings and related expenses
(2)
—
—
—
—
—
Non-cash gains and losses on foreign
currency
remeasurement (3)
—
—
0.01
—
0.01
Stock-based compensation (4)
—
—
—
—
0.01
Non-cash fixed asset write-off (5)
0.01
—
—
0.01
—
Related party tax receivable agreement
adjustment (6)
—
—
—
—
(0.08
)
Change in control LTIP award (7)
—
—
—
0.27
—
Change in control stock-based
compensation
acceleration (7)
—
—
—
0.06
—
Brazil value-added tax credit (8)
(0.04
)
—
(0.07
)
(0.04
)
—
Total non-GAAP adjustments pre-tax per
share
(0.05
)
—
(0.04
)
0.29
(0.03
)
Income tax impact on non-GAAP adjustments
per share
(0.01
)
—
—
0.01
0.01
Adjusted EPS
$
0.50
$
0.45
$
0.43
$
1.74
$
1.58
(1)
Net periodic (benefit) cost for our
pension and OPEB plans. Also includes a mark-to-market loss (gain)
for plan assets as of December of each year.
(2)
Legal, accounting, printing and
registration fees associated with public offerings and related
expenses.
(3)
Non-cash gains and losses from foreign
currency remeasurement of non-operating assets and liabilities of
our non-U.S. subsidiaries where the functional currency is the U.S.
dollar.
(4)
Non-cash expense for stock-based
compensation grants.
(5)
Non-cash fixed asset write-off recorded
for obsolete assets.
(6)
Non-cash expense adjustment for future
payment to our sole pre-IPO stockholder for tax assets that are
expected to be utilized.
(7)
In the second quarter of 2021, we incurred
Change in Control charges as a result of the ownership of our
largest shareholder, Brookfield, moving below 30% of our total
shares outstanding.
(8)
Gain from the settlement of a value added
tax matter in Brazil.
NON-GAAP RECONCILIATION
(Dollars in thousands)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation to Adjusted
EBITDA
For the Year Ended
December 31,
Q4 2021
Q3 2021
Q4 2020
2021
2020
Net income
$
141,480
$
119,886
$
125,096
$
388,330
$
434,374
Add:
Depreciation and amortization
17,301
15,584
17,889
65,716
62,963
Interest expense
14,551
16,048
29,048
68,760
98,074
Interest income
(219
)
(417
)
(168
)
(872
)
(1,750
)
Income taxes
22,134
21,920
13,833
68,076
75,671
EBITDA
$
195,247
$
173,021
$
185,698
$
590,010
$
669,332
Adjustments:
Pension and OPEB plan expenses (1)
(3,840
)
434
4,430
(2,545
)
6,096
Public offerings and related expenses
(2)
—
—
260
663
264
Non-cash gains and losses on foreign
currency remeasurement (3)
(484
)
(1,542
)
1,738
(119
)
1,297
Stock-based compensation (4)
337
262
778
1,917
2,669
Non-cash fixed asset write-off (5)
2,884
—
378
3,197
378
Related party tax receivable agreement
adjustment (6)
184
—
(17,744
)
231
(21,090
)
Change in control LTIP award (7)
—
—
—
73,384
—
Change in control stock-based compensation
acceleration (7)
—
—
—
14,713
—
Brazil value-added tax credit (8)
(11,511
)
—
—
(11,511
)
—
Adjusted EBITDA
$
182,817
$
172,175
$
175,538
$
669,940
$
658,946
(1)
Net periodic (benefit) cost for our
pension and OPEB plans. Also includes a mark-to-market loss (gain)
for plan assets as of December of each year.
(2)
Legal, accounting, printing and
registration fees associated with public offerings and related
expenses.
(3)
Non-cash gains and losses from foreign
currency remeasurement of non-operating assets and liabilities of
our non-U.S. subsidiaries where the functional currency is the U.S.
dollar.
(4)
Non-cash expense for stock-based
compensation grants.
(5)
Non-cash fixed asset write-off recorded
for obsolete assets.
(6)
Non-cash expense adjustment for future
payment to our sole pre-IPO stockholder for tax assets that are
expected to be utilized.
(7)
In the second quarter of 2021, we incurred
Change in Control charges as a result of the ownership of our
largest shareholder, Brookfield, moving below 30% of our total
shares outstanding.
(8)
Gain from the settlement of a value-added
tax matter in Brazil.
NON-GAAP RECONCILIATION
(Dollars in thousands)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation to Free Cash Flow and
Adjusted Free Cash Flow
For the Year Ended
December 31,
(in thousands)
Q4 2021
Q3 2021
Q4 2020
2021
2020
Net cash provided by operating
activities
$
100,029
$
134,256
$
146,981
$
443,040
$
563,646
Capital expenditures
(17,831
)
(14,374
)
(5,387
)
(58,257
)
(36,075
)
Free cash flow
82,198
119,882
141,594
384,783
527,571
Change in control payment (1)
4,659
5,263
—
71,377
—
Adjusted free cash flow
$
86,857
$
125,145
$
141,594
$
456,160
$
527,571
(1)
In the second quarter of 2021, we incurred
pre-tax Change in Control charges of $88 million as a result of the
ownership of our largest stockholder, Brookfield, moving below 30%
of our total shares outstanding. Of the $88 million in pre-tax
Change in Control charges, $73 million are cash and $15 million are
non-cash. $61 million of the cash charges were paid in the second
quarter of 2021, $5 million of the cash charges were paid in the
third quarter of 2021 and $5 million in the fourth quarter of 2021;
an additional $2 million will be paid in subsequent quarters, as a
result of the timing of related payroll tax payments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220203005815/en/
Adam Dible 216-676-2000
GrafTech (NYSE:EAF)
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GrafTech (NYSE:EAF)
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