Solid Execution and Favorable Industry Demand
Trends Drive Strong Results
GrafTech International Ltd. (NYSE: EAF) ("GrafTech" or the
"Company") today announced financial results for the quarter ended
March 31, 2022.
First Quarter 2022 Highlights
- Net income of $124 million, or $0.47 per share, and adjusted
earnings per share(1)(2) of $0.48
- Adjusted EBITDA(1) of $170 million, for a 46% adjusted EBITDA
margin(3)
- Sales volume of 43 thousand metric tons ("MT") increased 16%
compared to the first quarter of 2021
- Production volume of 46 thousand MT increased 28% compared to
the first quarter of 2021
- Generated cash flow from operating activities of $146 million,
a 20% increase compared to the first quarter of 2021
- Strengthened the balance sheet further by reducing debt by $70
million
- Repurchased an aggregate of $30 million of our common
stock
CEO Comments
"We are pleased with our first quarter performance as we
continue to execute and deliver strong financial results while
navigating a challenging operating environment," said David
Rintoul, Chief Executive Officer and President. “Pricing trends
continued to improve in the first quarter of 2022, following a
strong finish to 2021. Our average non-LTA graphite electrode price
was just over $6,000 per metric ton, consistent with our
expectations, and up 19% sequentially from the fourth quarter. We
also experienced strong year-over-year improvement in sales volume,
production volume and capacity utilization."
“Maintaining a strong capital structure continues to be a
priority for GrafTech. During the first quarter, we generated
robust cash flow and reduced our debt by $70 million, further
strengthening our balance sheet. At the same time, we returned $30
million to our stockholders through the repurchase of common
stock."
"We are proud of the continued progress we are making with our
sustainability efforts across the organization. These include
capital projects to improve our environmental footprint and the
establishment of key environmental goals, which includes targeting
a meaningful reduction in greenhouse gas emissions. Electric arc
furnaces play a critical role in helping the steel industry reduce
its impact on the environment and our sustainability initiatives
will further strengthen our ability to support the decarbonization
of steel production."
First Quarter 2022 Financial Performance
(dollars in thousands, except per share amounts)
Q1 2022
Q4 2021
Q1 2021
Net sales
$
366,245
$
363,293
$
304,397
Net income
$
124,183
$
141,480
$
98,799
Earnings per share (EPS)(2)
$
0.47
$
0.54
$
0.37
Cash flow from operating activities
$
146,316
$
100,029
$
122,425
Adjusted net income(1)
$
125,920
$
131,180
$
99,880
Adjusted EPS(1)(2)
$
0.48
$
0.50
$
0.37
Adjusted EBITDA(1)
$
169,600
$
182,817
$
155,045
Adjusted free cash flow(4)
$
129,904
$
86,857
$
108,251
Net sales for the first quarter of 2022 were $366 million, an
increase of 20% compared to $304 million in the first quarter of
2021, reflecting higher sales volume and improved pricing.
Net income for the first quarter of 2022 was $124 million, or
$0.47 per share, compared to $99 million, or $0.37 per share, in
the first quarter of 2021. Adjusted EBITDA(1) was $170 million in
the first quarter of 2022, an increase of 9% compared to the same
period of 2021, and adjusted EBITDA margin(3) was 46%.
In the first quarter of 2022, cash flow from operating
activities was $146 million and adjusted free cash flow(4) was $130
million, with both measures increasing 20% compared to the same
period of 2021. For the first quarter of 2022, 77% of adjusted
EBITDA(1) was converted to adjusted free cash flow(5).
Operational and Commercial Update
Key operating metrics
(in thousands, except
percentages)
Q1 2022
Q4 2021
Q1 2021
Sales volume (MT)(6)
43
44
37
Production volume (MT)(7)
46
46
36
Total production capacity (MT)(8)(9)
58
59
58
Total capacity utilization(9)(10)
79
%
78
%
62
%
Production capacity excluding St. Marys
(MT)(8)(11)
51
52
51
Capacity utilization excluding St.
Marys(10)(11)
90
%
88
%
71
%
GrafTech reported solid sales volume of 43 thousand MT in the
first quarter of 2022, an increase of 16% compared to the first
quarter of 2021, consisting of 25 thousand MT of volume derived
from our take-or-pay agreements that had initial terms of
three-to-five years ("LTA") and 18 thousand MT of non-LTA
volume.
For the first quarter of 2022, the average realized price for
our LTA volume was nearly $9,600 per MT. For our non-LTA volume,
the average realized price for graphite electrodes delivered and
recognized in revenue in the first quarter of 2022 was just over
$6,000 per MT, an increase of over 19% compared to the average
non-LTA price for the fourth quarter of 2021.
Production volume increased to 46 thousand MT in the first
quarter of 2022, a 28% increase compared to the first quarter of
2021.
Globally, steel market capacity utilization rates continue to be
strong:
Q1 2022
Q4 2021
Q1 2021
Global (ex-China) capacity utilization
rate(12)
72
%
75
%
73
%
U.S. steel market capacity utilization
rate(13)
81
%
83
%
77
%
The estimated shipments of graphite electrodes under LTAs for
2022 through 2024 have been updated as follows:
2022
2023 through 2024
Estimated LTA volume (in thousands of
MT)
90-100
40-50
Estimated LTA revenue (in millions)
$860-$960
$400-$500(14)
As it relates to the conflict between Ukraine and Russia, we
have provided force majeure notices with respect to certain LTAs
serving customers in Russia.
Capital Structure and Capital Allocation
As of March 31, 2022, GrafTech had cash and cash equivalents of
$85 million and total debt of approximately $961 million. We
continue to make progress in reducing our long-term debt, repaying
$70 million in the first quarter of 2022. In addition, during the
first quarter of 2022, we repurchased 3.0 million shares of our
common stock at an average price of $9.88 per share for an
aggregate of $30 million.
We continue to expect full-year capital expenditures to be in
the range of $70 to $80 million in 2022.
Outlook
While the near-term operating environment remains dynamic, the
overall fundamentals in the steel industry are strong. Given solid
steel market capacity utilization rates, particularly in North
America, and industry efforts to decarbonize, we believe that
demand for graphite electrodes will continue to increase.
We also anticipate the demand for petroleum needle coke, a key
raw material used to produce graphite electrodes, will continue to
expand rapidly given its use in lithium-ion batteries for the
fast-growing electric vehicle market. As such, our ability to
deliver high-quality graphite electrodes to our customers, while
capitalizing on our low-cost structure and our substantial vertical
integration into petroleum needle coke, provides us a sustainable
competitive advantage. For these reasons, we believe GrafTech is
well-positioned to benefit from these positive industry trends as
we progress through 2022 and beyond.
Conference Call Information
In connection with this earnings release, you are invited to
listen to our earnings call being held on May 6, 2022 at 10:00 a.m.
(EDT). The webcast and accompanying slide presentation will be
available on our investor relations website at:
http://ir.graftech.com. 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: 8073706. Archived
replays of the conference call and webcast will be made available
on our investor relations website at: http://ir.graftech.com.
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 and 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 (Q1 2022 adjusted EBITDA of
$170 million/Q1 2022 net sales of $366 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
(Q1 2022 adjusted free cash flow of $130 million/Q1 2022 adjusted
EBITDA of $170 million).
(6)
Sales volume reflects only graphite
electrodes manufactured by us.
(7)
Production volume reflects graphite
electrodes we produced during the period.
(8)
Production capacity reflects expected
maximum production volume during the period depending on product
mix and expected maintenance outage. Actual production may
vary.
(9)
Includes graphite electrode facilities in
Calais, France; Monterrey, Mexico; Pamplona, Spain; and St. Marys,
Pennsylvania.
(10)
Capacity utilization reflects production
volume as a percentage of production capacity.
(11)
In the first quarter of 2018, our St.
Marys, Pennsylvania facility began graphitizing a limited number of
electrodes sourced from our Monterrey, Mexico facility.
(12)
Source: World Steel Association, Metal
Expert, Organisation for Economic Co-operation and Development and
GrafTech analysis.
(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.
Cautionary Note Regarding Forward-Looking Statements
This press 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 revenues and
volumes derived from our take-or-pay agreements that had initial
terms of three-to-five years ("LTA"), future pricing of short-term
agreements and spot sales ("Non-LTA"), 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 press 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 ultimate impact the
conflict between Russia and Ukraine has on our business, results of
operations, financial condition and cash flows, including the
duration and scope of such conflict, its impact on disruptions and
inefficiencies in our supply chain and our ability to procure
certain raw materials; 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, which may decline in the future, may lead to
periods of reduced profitability and net losses in the future; the
impact of inflation and our ability to mitigate the effect on our
costs; the risks and uncertainties associated with litigation,
arbitration, and like disputes, including disputes related to
contractual commitments; the possibility that global graphite
electrode overcapacity may adversely affect graphite electrode
prices; 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 decant oil, 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
("Brookfield"); 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 conjunction with the Risk Factors and other cautionary
statements that are 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, 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, stock-based compensation expense, non-cash fixed asset
write-offs, related party payable - Tax Receivable Agreement
adjustments and value-added tax credit gains in Brazil. 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
expense or the non-cash write-off of fixed assets;
- adjusted EBITDA does not reflect gains on a value-added tax
matter in Brazil; 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, 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 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 payments of 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.
Adjusted free cash flow conversion is also a non-GAAP financial
measure 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 adjusted free cash flow conversion as adjusted free cash
flow divided by adjusted EBITDA. 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.
In evaluating EBITDA, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income, adjusted EPS, free cash flow, adjusted free
cash flow and adjusted free cash flow conversion, you should be
aware that in the future, we will incur expenses similar to the
adjustments in the reconciliations presented below. Our
presentations of EBITDA, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income, adjusted EPS, free cash flow, adjusted free
cash flow 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 and adjusted free cash flow
conversion alongside other measures of financial performance and
liquidity, including our net income, EPS and cash flow from
operating activities, respectively, and other GAAP measures.
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands, except per
share data)
(Unaudited)
As of March 31,
2022
As of
December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
85,053
$
57,514
Accounts and notes receivable, net of
allowance for doubtful accounts of $8,018 as of December 31, 2022
and $6,835 as of December 31, 2021
213,280
207,547
Inventories
318,058
289,432
Prepaid expenses and other current
assets
86,538
73,364
Total current assets
702,929
627,857
Property, plant and equipment
819,163
815,298
Less: accumulated depreciation
323,801
313,825
Net property, plant and equipment
495,362
501,473
Deferred income taxes
23,464
26,187
Goodwill
171,117
171,117
Other assets
90,932
85,684
Total assets
$
1,483,804
$
1,412,318
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
123,381
$
117,112
Short-term debt
125
127
Accrued income and other taxes
42,029
57,097
Other accrued liabilities
97,456
56,405
Related party payable - Tax Receivable
Agreement
4,481
3,828
Total current liabilities
267,472
234,569
Long-term debt
961,324
1,029,561
Other long-term obligations
66,296
68,657
Deferred income taxes
42,334
40,674
Related party payable - Tax Receivable
Agreement long-term
10,973
15,455
Stockholders’ equity:
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, 260,222,585 and 263,255,708 shares
issued and outstanding as of March 31, 2022 and December 31, 2021,
respectively
2,602
2,633
Additional paid-in capital
753,509
761,412
Accumulated other comprehensive income
(loss)
12,541
(7,444
)
Accumulated deficit
(633,247
)
(733,199
)
Total stockholders’ equity
135,405
23,402
Total liabilities and stockholders’
equity
$
1,483,804
$
1,412,318
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per
share data)
(Unaudited)
For the Three Months
Ended March 31,
2022
2021
Net sales
$
366,245
$
304,397
Cost of sales
191,214
146,396
Gross profit
175,031
158,001
Research and development
880
969
Selling and administrative expenses
21,254
20,153
Operating income
152,897
136,879
Other income, net
(197
)
(307
)
Interest expense
9,212
22,167
Interest income
(98
)
(37
)
Income before provision for income
taxes
143,980
115,056
Provision for income taxes
19,797
16,257
Net income
$
124,183
$
98,799
Basic income per common share:
Net income per share
$
0.47
$
0.37
Weighted average common shares
outstanding
262,592,029
267,318,860
Diluted income per common share:
Net income per share
$
0.47
$
0.37
Weighted average common shares
outstanding
262,657,799
267,465,319
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months
Ended
March 31,
2022
2021
Cash flow from operating activities:
Net income
$
124,183
$
98,799
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization
14,434
16,539
Deferred income tax provision
1,395
(2,840
)
Non-cash stock-based compensation
expense
465
767
Non-cash interest expense
(2,146
)
5,309
Other adjustments
403
1,582
Net change in working capital*
12,590
25,187
Change in related party Tax Receivable
Agreement
(3,828
)
(21,752
)
Change in long-term assets and
liabilities
(1,180
)
(1,166
)
Net cash provided by operating
activities
146,316
122,425
Cash flow from investing activities:
Capital expenditures
(16,855
)
(14,174
)
Proceeds from the sale of fixed assets
73
151
Net cash used in investing activities
(16,782
)
(14,023
)
Cash flow from financing activities:
Debt issuance and modification costs
—
(2,971
)
Principal payments on long-term debt
(70,000
)
(150,000
)
Repurchase of common stock - non-related
party
(30,000
)
—
Payments for taxes related to net share
settlement of equity awards
(230
)
(273
)
Proceeds from exercise of stock
options
225
—
Dividends paid to non-related party
(1,985
)
(1,394
)
Dividends paid to related party
(640
)
(1,277
)
Interest rate swap settlements
(887
)
(847
)
Net cash used in financing activities
(103,517
)
(156,762
)
Net change in cash and cash
equivalents
26,017
(48,360
)
Effect of exchange rate changes on cash
and cash equivalents
1,522
(636
)
Cash and cash equivalents at beginning of
period
57,514
145,442
Cash and cash equivalents at end of
period
$
85,053
$
96,446
* Net change in working capital due to
changes in the following components:
Accounts and notes receivable, net
$
(1,221
)
$
(16,643
)
Inventories
(24,215
)
11,648
Prepaid expenses and other current
assets
(5,298
)
(1,510
)
Income taxes payable
(19,419
)
(18,368
)
Accounts payable and accruals
56,958
44,333
Interest payable
5,785
5,727
Net change in working capital
$
12,590
$
25,187
NON-GAAP
RECONCILIATION
(Dollars in thousands, except per
share data)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation of
Net Income to Adjusted Net Income
Q1 2022
Q4 2021
Q1 2021
Net income
$
124,183
$
141,480
$
98,799
Diluted income
per common share:
Net income per share
$
0.47
$
0.54
$
0.37
Weighted average shares outstanding
262,657,799
263,516,311
267,465,319
Adjustments, pre-tax:
Pension and OPEB plan expenses
(benefits)(1)
551
(3,840
)
431
Public offerings and related
expenses(2)
—
—
422
Non-cash losses (gains) on foreign
currency remeasurement(3)
1,236
(484
)
(348
)
Stock-based compensation expense(4)
465
337
768
Non-cash fixed asset write-off (5)
—
2,884
—
Related party payable - Tax Receivable
Agreement adjustment(6)
(180
)
184
47
Brazil value-added tax credit(7)
—
(11,511
)
—
Total non-GAAP adjustments pre-tax
2,072
(12,430
)
1,320
Income tax impact on non-GAAP
adjustments(8)
335
(2,130
)
239
Adjusted net income
$
125,920
$
131,180
$
99,880
(1)
Net periodic benefit cost (credit) for our
pension and OPEB plans, including a mark-to-market (gain) loss,
representing actuarial gains and losses that result from the
remeasurement of plan assets and obligations due to changes in
assumptions or experience. We recognize in earnings the actuarial
gains and losses in connection with the annual remeasurement in the
fourth quarter of each year.
(2)
Legal, accounting, printing and
registration fees associated with the public offerings and related
expenses.
(3)
Non-cash (gains) 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)
Gain from the settlement of a value-added
tax matter in Brazil.
(8)
The tax impact on the non-GAAP adjustments
is affected by their tax deductibility and the applicable
jurisdictional tax rates.
NON-GAAP
RECONCILIATION
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation of
EPS to Adjusted EPS
Q1 2022
Q4 2021
Q1 2021
EPS
$
0.47
$
0.54
$
0.37
Adjustments per share:
Pension and OPEB plan expenses
(benefits)(1)
—
(0.02
)
—
Public offerings and related
expenses(2)
—
—
—
Non-cash losses (gains) on foreign
currency remeasurement(3)
0.01
—
—
Stock-based compensation expense(4)
—
—
—
Non-cash fixed asset write-off (5)
—
0.01
—
Related party payable - Tax Receivable
Agreement adjustment(6)
—
—
—
Brazil value-added tax credit(7)
—
(0.04
)
—
Total non-GAAP adjustments pre-tax per
share
0.01
(0.05
)
—
Income tax impact on non-GAAP adjustments
per share(8)
—
(0.01
)
—
Adjusted EPS
$
0.48
$
0.50
$
0.37
(1)
Net periodic benefit cost (credit) for our
pension and OPEB plans, including a mark-to-market (gain) loss,
representing actuarial gains and losses that result from the
remeasurement of plan assets and obligations due to changes in
assumptions or experience. We recognize in earnings the actuarial
gains and losses in connection with the annual remeasurement in the
fourth quarter of each year.
(2)
Legal, accounting, printing and
registration fees associated with the public offerings and related
expenses.
(3)
Non-cash (gains) 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)
Gain from the settlement of a value-added
tax matter in Brazil.
(8)
The tax impact on the non-GAAP adjustments
is affected by their tax deductibility and the applicable
jurisdictional tax rates.
NON-GAAP
RECONCILIATION
(Dollars in thousands)
The following table reconciles our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation of
Net Income to Adjusted EBITDA
Q1 2022
Q4 2021
Q1 2021
Net income
$
124,183
$
141,480
$
98,799
Add:
Depreciation and amortization
14,434
17,301
16,539
Interest expense
9,212
14,551
22,167
Interest income
(98
)
(219
)
(37
)
Income taxes
19,797
22,134
16,257
EBITDA
167,528
195,247
153,725
Adjustments:
Pension and OPEB plan expenses
(benefits)(1)
551
(3,840
)
431
Public offerings and related
expenses(2)
—
—
422
Non-cash losses (gains) on foreign
currency remeasurement(3)
1,236
(484
)
(348
)
Stock-based compensation expense(4)
465
337
768
Non-cash fixed asset write-off (5)
—
2,884
—
Related party payable - Tax Receivable
Agreement adjustment(6)
(180
)
184
47
Brazil value-added tax credit(7)
—
(11,511
)
—
Adjusted EBITDA
$
169,600
$
182,817
$
155,045
(1)
Net periodic benefit cost (credit) for our
pension and OPEB plans, including a mark-to-market (gain) loss,
representing actuarial gains and losses that result from the
remeasurement of plan assets and obligations due to changes in
assumptions or experience. We recognize in earnings the actuarial
gains and losses in connection with the annual remeasurement in the
fourth quarter of each year.
(2)
Legal, accounting, printing and
registration fees associated with the public offerings and related
expenses.
(3)
Non-cash (gains) 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)
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 of Net Cash Provided by
Operating Activities to Free Cash Flow and Adjusted Free Cash
Flow
Q1 2022
Q4 2021
Q1 2021
Net cash provided by operating
activities
$
146,316
$
100,029
$
122,425
Capital expenditures
(16,855
)
(17,831
)
(14,174
)
Free cash flow
129,461
82,198
108,251
Change in control payment(1)
443
4,659
—
Adjusted free cash flow
$
129,904
$
86,857
$
108,251
(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. An aggregate of $72 million of the cash charges have been
paid through the first quarter of 2022 and an additional $1 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/20220505005795/en/
Michael Dillon 216-676-2000 investor.relations@graftech.com
GrafTech (NYSE:EAF)
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