Successfully Executing Plans to Navigate the
Current Market Conditions
Received Regulatory Approval to Restart
Production Activities at St. Marys, Pennsylvania Facility
GrafTech International Ltd. (NYSE: EAF) ("GrafTech" or the
"Company") today announced unaudited financial results for the
quarter ended March 31, 2023.
First Quarter 2023 Highlights
- Net loss of $7 million, or $0.03 per share(1)
- Adjusted EBITDA(2) of $15 million
- Sales volume of 17 thousand metric tons ("MT")
- Production volume of 16 thousand MT
- Cash flow from operating activities of $25 million
CEO Comments
"We are successfully executing our plans to manage the near-term
challenges in the market," said Marcel Kessler, Chief Executive
Officer and President. “This includes significant progress on our
risk mitigation strategies related to pin stock, as we received
regulatory approval to restart production activities at our St.
Marys, Pennsylvania facility. At the same time, we continue to
operate our European facilities at reduced levels in order to align
our total graphite electrode production volume with our current
demand outlook. In addition, we remain disciplined in our approach
to managing our operating costs, capital expenditures and working
capital levels, while making targeted investments to further
improve our strategic positioning and support long-term
growth."
"As we proceed through 2023, we expect our sales volume levels
to begin recovering in the second quarter with further improvement
in the second half of the year," said Mr. Kessler. "In addition, we
anticipate modest easing of the impact from inflationary pressures
on a sequential basis compared to the first quarter of 2023,
although still elevated on a year-over-year basis. We remain
confident that the actions we are taking to successfully navigate
the current market conditions, supported by an industry-leading
position as well as a distinct set of capabilities and competitive
advantages, will optimally position GrafTech to benefit from
long-term opportunities that will deliver shareholder value."
First Quarter 2023 Financial Performance
(dollars in thousands, except per share
amounts)
Q1 2023
Q4 2022
Q1 2022
Net sales
$
138,802
$
247,519
$
366,245
Net (loss) income
$
(7,369
)
$
50,331
$
124,183
(Loss) earnings per share(1)
$
(0.03
)
$
0.20
$
0.47
Cash flow from operating activities
$
24,798
$
50,023
$
146,316
Adjusted net (loss) income(2)
$
(5,549
)
$
44,761
$
125,920
Adjusted (loss) earnings per
share(1)(2)
$
(0.02
)
$
0.17
$
0.48
Adjusted EBITDA(2)
$
15,115
$
80,101
$
169,600
Adjusted free cash flow(2)
$
3,157
$
25,800
$
129,017
Net sales for the first quarter of 2023 were $139 million, a
decrease of 62% compared to $366 million in the first quarter of
2022, primarily reflecting lower sales volume driven by the
residual impact of the suspension of our operations in Monterrey,
Mexico that began near the end of the third quarter of 2022.
Although the facility resumed production during the fourth quarter
of 2022, the suspension coincided with a key commitment window for
customer purchases covering the first six months of 2023. The
resulting uncertainty during this timeframe limited our ability to
enter into new customer commitments for the first half of 2023. In
addition, the lower sales volume was partially attributable to
softness in graphite electrode demand. A shift in the mix of our
business from volume derived from our take-or-pay agreements that
had initial terms of three-to-five years ("LTA") to volume derived
from short-term agreements and spot sales ("non-LTA") further
contributed to the decline in net sales.
Net loss for the first quarter of 2023 was $7 million, or $0.03
per share, for a net loss margin of 5%. This compares to net income
of $124 million, or $0.47 per share, in the first quarter of 2022.
Adjusted EBITDA(2) was $15 million in the first quarter of 2023,
compared to $170 million in the first quarter of 2022, with the
decline reflecting lower sales volume, higher costs on a per MT
basis and the shift in the mix of our business from LTA volume to
non-LTA volume. Adjusted EBITDA margin(3) was 11% for the first
quarter of 2023.
In the first quarter of 2023, cash flow from operating
activities was $25 million and adjusted free cash flow(2) was $3
million, with both measures decreasing compared to the same period
in 2022 primarily driven by lower net income, partially offset by
an increase in cash provided by the net change in working
capital.
Operational and Commercial Update
Key operating metrics
(in thousands, except
percentages)
Q1 2023
Q4 2022
Q1 2022
Sales volume (MT)
16.9
27.8
43.3
Production volume (MT)(4)
15.8
29.4
46.1
Total production capacity (MT)(5)(6)
58.0
59.0
58.0
Total capacity utilization(6)(7)
27
%
50
%
79
%
Production capacity excluding St. Marys
(MT)(5)(8)
51.0
52.0
51.0
Capacity utilization excluding St.
Marys(7)(8)
31
%
57
%
90
%
Sales volume for the first quarter of 2023 was 16.9 thousand MT,
consisting of 7.4 thousand MT of LTA volume and 9.5 thousand MT of
non-LTA volume, and decreased 61% compared to the first quarter of
2022.
For the first quarter of 2023, the weighted-average realized
price for our LTA volume was $9,000 per MT. For our non-LTA volume,
the weighted-average realized price for graphite electrodes
delivered and recognized in revenue in the first quarter of 2023
was $6,000 per MT, consistent with the weighted-average realized
non-LTA price for 2022.
Production volume was 15.8 thousand MT in the first quarter of
2023, a decrease of 66% compared to the first quarter of 2022, as
we proactively reduced production at our European graphite
electrode manufacturing facilities to align our production volume
with our evolving demand outlook.
The table of estimated shipments of graphite electrodes under
existing LTAs has been updated as follows to reflect our current
expectations for the full years of 2023 and 2024:
2023
2024
Estimated LTA volume (in thousands of
MT)
27 - 31
13 - 16
Estimated LTA revenue (in millions)
$235 - $265
$100 - $135(9)
Capital Structure and Capital Allocation
As of March 31, 2023, GrafTech had cash and cash equivalents of
$135 million and gross debt(10) of approximately $934 million,
resulting in net debt(11) of approximately $799 million, with these
metrics relatively unchanged compared to the end of 2022. The
Company's current capital allocation approach is focused on
maintaining sufficient liquidity as we recover from the impact of
the temporary suspension of our operations in Monterrey, Mexico,
while making targeted investments to support long-term growth. We
anticipate our full-year capital expenditures will be in the range
of $55 million to $60 million in 2023.
Outlook
The suspension of our operations in Monterrey, Mexico in late
2022 will have a significant impact on our sales volume through the
end of the second quarter of 2023. In addition, we anticipate
continued soft demand for graphite electrodes due to ongoing
economic uncertainty and geopolitical conflict. Reflecting these
factors, we estimate our sales volume for the second quarter of
2023 will be in the range of 24 thousand MT to 27 thousand MT. In
the second half of the year, we anticipate sales volume levels will
further recover, as we move past Monterrey suspension-driven
uncertainty, however we expect demand for graphite electrodes will
continue to be impacted by softness in the commercial environment.
Among other factors, this reflects graphite electrode inventory
levels at our customers that currently exceed typical norms. As a
result, we estimate our sales volume for the full year of 2023 will
be in the range of 100 thousand MT to 115 thousand MT.
For the full year of 2023, we continue to expect a significant
year-over-year increase in our cash cost of goods sold per MT as
fixed costs are being recognized over a smaller volume base and
reflecting the full-year impact of higher raw material costs that
increased throughout 2022. In response to higher input costs, we
are closely managing our operating costs and capital expenditures,
as well as our working capital levels.
Looking ahead, we remain confident in our ability to overcome
near-term challenges and are optimistic about the longer-term
outlook for our business. We anticipate the steel industry’s
accelerating efforts to decarbonize will lead to increased adoption
of the electric arc furnace method of steelmaking, driving
long-term demand growth for graphite electrodes. We also anticipate
the demand for petroleum needle coke, the key raw material we use
to produce our graphite electrodes, to accelerate driven by its use
to produce synthetic graphite for use in lithium-ion batteries for
the growing electric vehicle market. We believe that the actions we
are taking, supported by a distinct set of capabilities, including
our vertical integration into petroleum needle coke production via
our Seadrift facility, will optimally position GrafTech to benefit
from these sustainable industry tailwinds.
Conference Call Information
In connection with this earnings release, you are invited to
listen to our earnings call being held on April 28, 2023 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
(888) 886-7786 toll-free in North America or +1 (416) 764-8658 for
overseas calls, conference ID: 19627539. 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, our key raw material for graphite electrode manufacturing.
This unique position provides us with competitive advantages in
product quality and cost.
________________________
(1)
(Loss) earnings per share represents
diluted (loss) earnings per share. Adjusted (loss) earnings per
share represents diluted adjusted (loss) earnings per share.
(2)
A non-GAAP financial measure, see below
for more information and reconciliations to the most directly
comparable financial measures calculated and presented in
accordance with accounting principles generally accepted in the
United States of America ("GAAP").
(3)
A non-GAAP financial measure, adjusted
EBITDA margin is calculated as adjusted EBITDA divided by net sales
(Q1 2023 adjusted EBITDA of $15 million/Q1 2023 net sales of $139
million).
(4)
Production volume reflects graphite
electrodes we produced during the period.
(5)
Production capacity reflects expected
maximum production volume during the period depending on product
mix and expected maintenance outage. Actual production may
vary.
(6)
Includes graphite electrode facilities in
Calais, France; Monterrey, Mexico; Pamplona, Spain; and St. Marys,
Pennsylvania.
(7)
Capacity utilization reflects production
volume as a percentage of production capacity.
(8)
Our St. Marys, Pennsylvania facility
graphitizes a limited number of electrodes and pins sourced from
our Monterrey, Mexico facility.
(9)
Includes expected termination fees from a
few customers that have failed to meet certain obligations under
their LTAs.
(10)
Gross debt reflects the notional value of
our debt and excludes unamortized debt discount and issuance
costs.
(11)
A non-GAAP financial measure, net debt is
calculated as gross debt minus cash and cash equivalents.
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
volume derived from our LTAs, future pricing of non-LTAs,
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: our dependence on the global steel
industry generally and the electric arc furnace steel industry in
particular; 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 sensitivity of our business and operating results to economic
conditions, including any recession, and the possibility others may
not be able to fulfill their obligations to us in a timely fashion
or at all; the possibility that we may be unable to implement our
business strategies in an effective manner; the possibility that
global graphite electrode overcapacity may adversely affect
graphite electrode prices; the competitiveness of the graphite
electrode industry; our dependence on the supply of raw materials,
including decant oil and petroleum needle coke, and disruptions in
supply chains for these materials; our reliance on one facility in
Monterrey, Mexico for the manufacturing of connecting pins; the
availability and cost of electric power and natural gas,
particularly in Europe; our manufacturing operations are subject to
hazards; 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; the risks and uncertainties associated with
litigation, arbitration, and like disputes, including disputes
related to contractual commitments; our dependence on third parties
for certain construction, maintenance, engineering, transportation,
warehousing and logistics services; the possibility that we are
subject to information technology systems failures, cybersecurity
attacks, network disruptions and breaches of data security; 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; 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 impact
of inflation and our ability to mitigate the effect on our costs;
the impact of macroeconomic and geopolitical events, including
developments arising from the COVID-19 pandemic and the conflict
between Russia and Ukraine, on our business, results of operations,
financial condition and cash flows, and the disruptions and
inefficiencies in our supply chain that may occur as a result of
such events; 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; recent increases in
benchmark interest rates and 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 restrictive covenants in our
financing agreements could restrict or limit our operations;
changes in, or more stringent enforcement of, health, safety and
environmental regulations applicable to our manufacturing
operations and facilities; 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 Corporation and its affiliates (together,
"Brookfield"); the fact that our stockholders have the right to
engage or invest in the same or similar businesses as us; and the
possibility that we may not pay cash dividends on our common stock
in the future.
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.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, our actual results may vary materially from what we may
have expressed or implied by these forward-looking statements. We
caution that you should not place undue reliance on any of our
forward-looking statements. You should specifically consider the
factors identified in this press release that could cause actual
results to differ before making an investment decision to purchase
our common stock. Furthermore, new risks and uncertainties arise
from time to time, and it is impossible for us to predict those
events or how they may affect us.
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 (loss) income, adjusted (loss)
earnings per share, free cash flow, adjusted free cash flow and net
debt 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 adjusted by any pension and other post-employment benefit
("OPEB") plan expenses or benefits, 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 and related party payable - Tax
Receivable Agreement adjustments. 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 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 or benefits 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 stock-based compensation
expense;
- adjusted EBITDA does not reflect the non‑cash write‑off of
fixed assets;
- adjusted EBITDA does not reflect related party payable - Tax
Receivable Agreement adjustments; 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 (loss) 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 (loss) earnings per share, a
non‑GAAP financial measure, as adjusted net (loss) income divided
by the weighted average diluted common shares outstanding during
the period. We believe adjusted net (loss) income and adjusted
(loss) earnings per share 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 and payments made or received from the settlement of
interest rate swap contracts. We modified our definition of
adjusted free cash flow in 2023 to include the adjustment for
payments related to the settlement of interest rate swap contracts
and recast prior periods to conform with this new definition. The
change was made to conform our adjusted free cash flow definition
with the metric used by management and our Board of Directors to
establish goals for managing our cash flow and evaluating our
performance. 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. For
purposes of this release, 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 (the
"Change in Control").
We define net debt as gross debt (the most directly comparable
GAAP measure) minus cash and cash equivalents. We believe this is
an important measure as it is more representative of our financial
position.
In evaluating EBITDA, adjusted EBITDA, adjusted EBITDA margin,
adjusted net (loss) income, adjusted (loss) earnings per share,
free cash flow and adjusted free cash flow, 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 (loss) income, adjusted (loss) earnings per share,
free cash flow and adjusted free cash flow 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 (loss) income, adjusted (loss) earnings
per share, free cash flow and adjusted free cash flow alongside
other measures of financial performance and liquidity, including
our net (loss) income, (loss) earnings per share 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)
March 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
135,440
$
134,641
Accounts and notes receivable, net of
allowance for doubtful accounts of
$8,203 as of March 31, 2023 and $8,019 as
of December 31, 2022
83,913
145,574
Inventories
468,609
447,741
Prepaid expenses and other current
assets
72,683
87,272
Total current assets
760,645
815,228
Property, plant and equipment
890,253
869,168
Less: accumulated depreciation
363,154
350,022
Net property, plant and equipment
527,099
519,146
Deferred income taxes
17,973
11,960
Goodwill
171,117
171,117
Other assets
78,419
86,727
Total assets
$
1,555,253
$
1,604,178
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
86,645
$
103,156
Long-term debt, current maturities
128
124
Accrued income and other taxes
12,142
40,592
Other accrued liabilities
94,113
89,349
Related party payable - Tax Receivable
Agreement
5,137
4,631
Total current liabilities
198,165
237,852
Long-term debt
922,500
921,803
Other long-term obligations
51,613
50,822
Deferred income taxes
46,698
45,065
Related party payable - Tax Receivable
Agreement long-term
5,784
10,921
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, 256,678,298 and 256,597,342 shares
issued and outstanding as of March 31, 2023 and December 31, 2022,
respectively
2,567
2,566
Additional paid-in capital
745,891
745,164
Accumulated other comprehensive loss
(6,024
)
(8,070
)
Accumulated deficit
(411,941
)
(401,945
)
Total stockholders’ equity
330,493
337,715
Total liabilities and stockholders’
equity
$
1,555,253
$
1,604,178
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per
share data)
(Unaudited)
Three Months
Ended March 31,
2023
2022
Net sales
$
138,802
$
366,245
Cost of goods sold
112,645
191,214
Gross profit
26,157
175,031
Research and development
1,192
880
Selling and administrative expenses
22,151
21,254
Operating income
2,814
152,897
Other expense (income), net
653
(197
)
Interest expense
12,806
9,212
Interest income
(372
)
(98
)
(Loss) income before (benefit) provision
for income taxes
(10,273
)
143,980
(Benefit) provision for income taxes
(2,904
)
19,797
Net (loss) income
$
(7,369
)
$
124,183
Basic (loss) income per common share:
Net (loss) income per share
$
(0.03
)
$
0.47
Weighted average common shares
outstanding
256,974,904
262,592,029
Diluted (loss) income per common
share:
Net (loss) income per share
$
(0.03
)
$
0.47
Weighted average common shares
outstanding
256,974,904
262,657,799
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months
Ended March 31,
2023
2022
Cash flow from operating activities:
Net (loss) income
$
(7,369
)
$
124,183
Adjustments to reconcile net (loss) income
to cash provided by operations:
Depreciation and amortization
10,777
14,434
Deferred income tax (benefit)
provision
(3,750
)
1,395
Non-cash stock-based compensation
expense
796
465
Non-cash interest expense
2,184
(2,146
)
Other adjustments
105
403
Net change in working capital*
25,657
12,590
Change in related party Tax Receivable
Agreement
(4,631
)
(3,828
)
Change in long-term assets and
liabilities
1,029
(1,180
)
Net cash provided by operating
activities
24,798
146,316
Cash flow from investing activities:
Capital expenditures
(25,271
)
(16,855
)
Proceeds from the sale of fixed assets
92
73
Net cash used in investing activities
(25,179
)
(16,782
)
Cash flow from financing activities:
Interest rate swap settlements
3,630
(887
)
Debt issuance and modification costs
(128
)
—
Principal payments on long-term debt
—
(70,000
)
Repurchase of common stock
—
(30,000
)
Payments for taxes related to net share
settlement of equity awards
(129
)
(230
)
Proceeds from exercise of stock
options
—
225
Dividends paid to non-related party
(1,926
)
(1,985
)
Dividends paid to related party
(640
)
(640
)
Net cash provided by (used in) financing
activities
807
(103,517
)
Net change in cash and cash
equivalents
426
26,017
Effect of exchange rate changes on cash
and cash equivalents
373
1,522
Cash and cash equivalents at beginning of
period
134,641
57,514
Cash and cash equivalents at end of
period
$
135,440
$
85,053
* Net change in working capital due to
changes in the following components:
Accounts and notes receivable, net
$
62,350
$
(1,221
)
Inventories
(16,897
)
(24,215
)
Prepaid expenses and other current
assets
12,588
(5,298
)
Income taxes payable
(25,594
)
(19,419
)
Accounts payable and accruals
(12,495
)
56,958
Interest payable
5,705
5,785
Net change in working capital
$
25,657
$
12,590
NON-GAAP
RECONCILIATIONS
(Dollars in thousands, except per
share data)
(Unaudited)
The following tables reconcile our
non-GAAP key financial measures to the most directly comparable
GAAP measures:
Reconciliation of Net (Loss) Income to
Adjusted Net (Loss) Income
Q1 2023
Q4 2022
Q1 2022
Net (loss) income
$
(7,369
)
$
50,331
$
124,183
Diluted (loss)
income per common share:
Net (loss) income per share
$
(0.03
)
$
0.20
$
0.47
Weighted average shares outstanding
256,974,904
256,902,385
262,657,799
Adjustments, pre-tax:
Pension and OPEB plan expenses
(benefits)(1)
918
(8,993
)
551
Non-cash losses on foreign currency
remeasurement(2)
447
819
1,236
Stock-based compensation expense(3)
796
645
465
Non-cash fixed asset write-off (4)
—
1,068
—
Related party payable - Tax Receivable
Agreement adjustment(5)
16
97
(180
)
Total non-GAAP adjustments pre-tax
2,177
(6,364
)
2,072
Income tax impact on non-GAAP
adjustments(6)
357
(794
)
335
Adjusted net (loss) income
$
(5,549
)
$
44,761
$
125,920
Reconciliation of (Loss) Earnings Per
Share to Adjusted (Loss) Earnings Per Share
Q1 2023
Q4 2022
Q1 2022
(Loss) earnings per share
$
(0.03
)
$
0.20
$
0.47
Adjustments per share:
Pension and OPEB plan expenses
(benefits)(1)
0.01
(0.04
)
—
Non-cash losses on foreign currency
remeasurement(2)
—
—
0.01
Stock-based compensation expense(3)
—
—
—
Non-cash fixed asset write-off (4)
—
0.01
—
Related party payable - Tax Receivable
Agreement adjustment(5)
—
—
—
Total non-GAAP adjustments pre-tax per
share
0.01
(0.03
)
0.01
Income tax impact on non-GAAP adjustments
per share(6)
—
—
—
Adjusted (loss) earnings per
share
$
(0.02
)
$
0.17
$
0.48
Reconciliation of Net (Loss) Income to
Adjusted EBITDA
Q1 2023
Q4 2022
Q1 2022
Net (loss) income
$
(7,369
)
$
50,331
$
124,183
Add:
Depreciation and amortization
10,777
13,788
14,434
Interest expense
12,806
11,533
9,212
Interest income
(372
)
(2,283
)
(98
)
Income taxes
(2,904
)
13,096
19,797
EBITDA
12,938
86,465
167,528
Adjustments:
Pension and OPEB plan expenses
(benefits)(1)
918
(8,993
)
551
Non-cash losses on foreign currency
remeasurement(2)
447
819
1,236
Stock-based compensation expense(3)
796
645
465
Non-cash fixed asset write-off (4)
—
1,068
—
Related party payable - Tax Receivable
Agreement adjustment(5)
16
97
(180
)
Adjusted EBITDA
$
15,115
$
80,101
$
169,600
Reconciliation of Net Cash Provided by
Operating Activities to Free Cash Flow and Adjusted Free Cash
Flow
Q1 2023
Q4 2022
Q1 2022
Net cash provided by operating
activities
$
24,798
$
50,023
$
146,316
Capital expenditures
(25,271
)
(26,884
)
(16,855
)
Free cash flow
(473
)
23,139
129,461
Interest rate swap settlements(7)
3,630
2,661
(887
)
Change in Control payment(8)
—
—
443
Adjusted free cash flow
$
3,157
$
25,800
$
129,017
(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)
Non-cash 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.
(3)
Non-cash expense for stock-based
compensation grants.
(4)
Non-cash write-off of fixed assets.
(5)
Non-cash expense adjustment for future
payment to our sole pre-IPO stockholder for tax assets that are
expected to be utilized.
(6)
The tax impact on the non-GAAP adjustments
is affected by their tax deductibility and the applicable
jurisdictional tax rates.
(7)
Receipt (payment) of cash related to the
monthly settlement of our outstanding interest rate swap
contracts.
(8)
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 were cash and $15 million
were non-cash. An aggregate of $72 million of the cash charges have
been paid through the first quarter of 2023 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/20230427005707/en/
Michael Dillon 216-676-2000 investor.relations@graftech.com
GrafTech (NYSE:EAF)
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