Delivering on Outlook and Successfully
Executing Strategic Initiatives to Reduce Costs
Announcing Agreement for New Capital to Bolster
Liquidity
GrafTech International Ltd. (NYSE: EAF) ("GrafTech," the
"Company," "we," or "our") today announced unaudited financial
results for the quarter and nine months ended September 30, 2024.
In a separate press release, dated November 12, 2024, the Company
also announced that it has entered into a commitment and consent
letter (the "Commitment Letter") with lenders holding all of its
existing revolving commitments and an ad hoc group that holds over
81% of its existing secured bonds to provide new debt financing on
competitive terms and extend maturities of its existing debt.
Third Quarter 2024 Summary
- Exceeded cost reduction goals resulting in significant cost
improvement
- Generated positive cash flow through working capital and
capital expenditure management
- Grew sales volume 9% year-over-year to 26.4 thousand metric
tons ("MT")
- Achieved third consecutive quarter of sequential sales volume
growth
- Announced financing agreement that will increase liquidity and
extend debt maturities
- Net sales of $131 million
- Net loss of $36 million, or $0.14 per share(1)
- Adjusted EBITDA(2) of negative $6 million
- Net cash provided by operating activities of $24 million
- Adjusted free cash flow(2) of $20 million
Summary of Transactions for New Capital
The transactions for new capital (collectively, the
"Transactions"), which are expected to close during the fourth
quarter of 2024, will provide incremental liquidity and extend our
current debt maturities as we manage the near-term industry-wide
challenges. Key terms of the Commitment Letter include the
following:
- $175 million of new senior first lien term loans, funded at
transaction closing.
- Commitments to fund an additional $100 million of new senior
first lien term loans, which are available to be drawn for 19
months following transaction closing.
- New senior term loans, both initially funded and subject to
delayed draw, will bear interest at a variable rate of SOFR plus
600 basis points and will mature in December 2029.
- An exchange offer will be launched for all of the Company’s
outstanding $950 million senior secured notes due December 2028 for
new second lien notes due December 2029.
- The Company’s existing $330 million senior secured revolving
credit facility maturing in May 2027 will be replaced with up to
$225 million of new first lien revolving commitments maturing in
November 2028.
- The Transactions are subject to the satisfaction or waiver of a
number of customary closing conditions.
CEO Comments
"We grew volume, cut costs and generated positive cash flow in
the third quarter and we are capitalizing on an opportunity to
improve our liquidity position," said Timothy Flanagan, Chief
Executive Officer and President. “This is evidence of our
relentless focus on managing what is within our control. Our
actions include aggressively addressing key elements of our cost
structure and managing our working capital and capital expenditure
levels to improve our cash position. Cash costs on a per metric ton
basis declined 28% in the third quarter on a year-over-year basis
and we generated $20 million of adjusted free cash flow during the
quarter. On the commercial front, we continue to execute our
customer engagement strategy, which contributed to a 9%
year-over-year improvement in sales volume for the quarter and a
13% year-over-year improvement for the first nine months of the
year."
"Furthermore, our announced financing agreement will provide
GrafTech with new money debt financing and maturity extension on
our existing debt," continued Mr. Flanagan. "This will provide
additional liquidity and operational flexibility as we continue to
manage through the near-term industry-wide challenges facing
GrafTech. We look forward to strengthening our financial foundation
and appreciate and are encouraged by the strong support of our
financial partners, which highlights their confidence in the
Company's future."
Third Quarter 2024 Financial
Performance
(dollars in thousands, except per share
amounts)
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Net sales
$
130,654
$
137,327
$
158,992
$
404,565
$
483,355
Net loss
$
(36,068
)
$
(14,752
)
$
(22,621
)
$
(81,689
)
$
(37,841
)
Loss per share(1)
$
(0.14
)
$
(0.06
)
$
(0.09
)
$
(0.32
)
$
(0.15
)
Net cash provided by (used in) operating
activities
$
23,709
$
(36,855
)
$
51,495
$
(13,676
)
$
67,269
Adjusted net loss(2)
$
(34,276
)
$
(13,564
)
$
(20,866
)
$
(73,001
)
$
(32,183
)
Adjusted loss per share(1)(2)
$
(0.13
)
$
(0.05
)
$
(0.08
)
$
(0.28
)
$
(0.13
)
Adjusted EBITDA(2)
$
(6,196
)
$
14,493
$
919
$
8,491
$
42,056
Adjusted free cash flow(2)
$
19,682
$
(43,834
)
$
42,997
$
(35,193
)
$
46,435
Net sales for the third quarter of 2024 were $131 million, a
decrease of 18% compared to $159 million in the third quarter of
2023. The decline primarily reflected a decrease in the
weighted-average realized price for volume derived from short-term
agreements and spot sales ("non-LTA") and 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 non-LTA volume.
These factors were partially offset by higher overall sales
volume.
Net loss for the third quarter of 2024 was $36 million, or $0.14
per share, compared to a net loss of $23 million, or $0.09 per
share, in the third quarter of 2023.
Adjusted EBITDA(2) was negative $6 million in the third quarter
of 2024, compared to $1 million in the third quarter of 2023. The
decline primarily reflected lower weighted-average realized prices,
a shift in the mix of our business from LTA volume to non-LTA
volume and a lower of cost or market inventory valuation adjustment
of $8 million recognized in the third quarter of 2024. These
factors were mostly offset by a 28% reduction in cash costs on a
per MT basis for the third quarter of 2024, compared to the same
period in 2023.
In the third quarter of 2024, net cash provided by operating
activities was $24 million and adjusted free cash flow(2) was $20
million. The cash flow performance reflected our ongoing focus on
managing working capital levels, including a reduction in
inventories during the third quarter of 2024.
Operational and Commercial
Update
Key Operating Metrics
Nine Months Ended
September 30,
(in thousands, except
percentages)
Q3 2024
Q2 2024
Q3 2023
2024
2023
Sales volume (MT)
26.4
25.5
24.2
76.0
67.5
Production volume (MT)(3)
19.4
26.8
22.7
72.2
63.7
Production capacity (MT)(4)(5)
42.0
45.0
48.0
132.0
150.0
Capacity utilization(6)
46
%
60
%
47
%
55
%
42
%
Sales volume for the third quarter of 2024 was 26.4 thousand MT,
consisting of 23.4 thousand MT of non-LTA volume and 3.0 thousand
MT of LTA volume, and increased 9% compared to the third quarter of
2023.
For the third quarter of 2024, the weighted-average realized
price for our non-LTA volume was approximately $4,100 per MT, a
decrease of 24% compared to the third quarter of 2023, with the
decline reflecting the persistent competitive pressures in the
regions in which we operate. For our LTA volume, the
weighted-average realized price was approximately $7,700 per MT for
the third quarter of 2024.
Production volume was 19.4 thousand MT in the third quarter of
2024, a decrease of 15% compared to the third quarter of 2023. The
decline primarily reflected extended production shutdowns at our
European graphite electrode manufacturing facilities during the
third quarter of 2024, as was planned.
The table of estimated shipments of graphite electrodes under
existing LTAs is as follows, reflecting our current expectations
for the full year 2024:
2024
Estimated LTA volume (in thousands of
MT)
13 - 14
Estimated LTA revenue (in millions)
$110 - $120(7)
Capital Structure and Liquidity
As of September 30, 2024, we had liquidity of $253.8 million,
consisting of cash and cash equivalents of $141.4 million and
$112.4 million of availability under our revolving credit facility.
As of September 30, 2024, we had gross debt(8) of $950 million and
net debt(9) of approximately $809 million.
Outlook
We expect demand for graphite electrodes in the near term will
remain weak, reflecting persistent challenges in the commercial
environment as steel industry production remains constrained by
global economic uncertainty. Given these trends, challenging
pricing dynamics have persisted in most regions. As a result, we
remain selective in the commercial opportunities we choose to
pursue. Despite these headwinds, we expect a low double-digit
percentage point year-over-year improvement in sales volume for the
full year of 2024. Sales volume in the fourth quarter of 2024 is
expected to be broadly in line with sales volume for the third
quarter of 2024. For 2025, we expect another year of low
double-digit percentage point sales volume growth. This performance
reflects our compelling customer value proposition and our ongoing
focus on delivering on the needs of our customers.
As it relates to costs, we now expect the year-over-year decline
in our full-year 2024 cash cost of goods sold per MT to exceed our
previous guidance of a mid-teen percentage point decline compared
to 2023. Reflecting the continued progress we are making on our
cost structure, we now anticipate a decline of approximately 20%
for the full year of 2024, compared to 2023, and we anticipate a
further improvement in 2025. The significant improvement in our
cost structure reflects (1) the deliberate actions we have taken to
reduce our fixed manufacturing costs, (2) the benefit of additional
actions we are taking to reduce our variable costs and (3) the
anticipated year-over-year improvement in our sales and production
volume levels.
In addition, we continue to closely manage our working capital
levels and capital expenditures. For 2024, we now expect the net
impact of working capital will be favorable to our full-year cash
flow performance. We continue to anticipate our full-year 2024
capital expenditures will be in the range of $35 million to $40
million.
Longer term, we remain confident that 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 graphite electrodes, to accelerate driven by its
utilization in producing synthetic graphite for use in lithium-ion
batteries for the growing electric vehicle market. We believe that
the near-term actions we are taking, supported by an
industry-leading position and our sustainable competitive
advantages, including our substantial vertical integration into
petroleum needle coke via our Seadrift facility, will optimally
position GrafTech to benefit from that long-term growth.
Conference Call Information
In connection with this earnings release, you are invited to
listen to our earnings call being held on November 12, 2024 at
10:00 a.m. (EST). 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
(800) 717-1738 toll-free in North America or +1 (289) 514-5100 for
overseas calls, conference ID: 65597. 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 with 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, with some 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 per share represents diluted loss per
share. Adjusted loss per share represents diluted adjusted loss 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)
Production volume reflects graphite
electrodes we produced during the period.
(4)
Production capacity reflects expected
maximum production volume during the period depending on product
mix and expected maintenance outage. Actual production may
vary.
(5)
Includes graphite electrode facilities in
Calais, France; Monterrey, Mexico; and Pamplona, Spain. While
maintaining the capability to produce up to 28,000 MT of graphite
electrodes and pins on an annual basis at our St. Marys,
Pennsylvania facility, most production activities at St. Marys have
been suspended. The wind down of these production activities was
completed in the second quarter of 2024. Remaining activities at
St. Marys are limited to machining graphite electrodes and pins
sourced from our other plants.
(6)
Capacity utilization reflects production
volume as a percentage of production capacity.
(7)
Estimated LTA revenue includes payments
from customers that failed to meet certain obligations under their
LTAs.
(8)
Gross debt reflects the notional value of
our outstanding debt and excludes unamortized debt discount and
issuance costs.
(9)
A non-GAAP financial measure, net debt is
calculated as gross debt minus cash and cash equivalents (September
30, 2024 gross debt of $950 million less September 30, 2024 cash
and cash equivalents of $141 million).
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, the proposed Transactions,
short-term and long-term liquidity, expectations regarding the
effect of the Transactions, 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 volume,
pricing and revenue, anticipated levels of capital expenditures and
cost of goods sold, anticipated reduction in our costs resulting
from our cost rationalization initiatives and one-time costs of
implementation and guidance relating to adjusted EBITDA and free
cash flow. 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 continue to decline in the
future, and may lead to prolonged periods of reduced profitability
and net losses or adversely impact liquidity; 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 primary reliance on one facility in
Monterrey, Mexico for the manufacturing of connecting pins; the
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 further 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 a global 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 long-lived assets 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 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; past increases in benchmark interest rates and the
fact that any future borrowings may subject us to interest rate
risk; risks and uncertainties associated with our ability to access
the capital and credit markets could adversely affect our results
of operations, cash flows and financial condition; the possibility
that disruptions in the capital and credit markets could adversely
affect 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
cash dividends on our common stock, which are currently suspended,
will remain suspended and we may not pay cash dividends on our
common stock in the future; our ability to continue to meet NYSE
continued listing standards; and the ability to satisfy the
conditions precedent with respect to the new financings.
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. Additionally, there can
be no assurances that the Transactions will be successfully
consummated as they remain subject to the satisfaction of certain
conditions precedent. 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 net loss, adjusted loss per share, free cash flow,
adjusted free cash flow, net debt and cash cost of goods sold per
MT are non-GAAP financial measures.
We define EBITDA, a non-GAAP financial measure, as net loss plus
interest expense, minus interest income, plus income taxes and
depreciation and amortization. We define adjusted EBITDA, a
non-GAAP financial measure, as EBITDA adjusted by any pension and
other post-employment benefit ("OPEB") plan expenses or benefits,
rationalization and rationalization-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, proxy contest expenses and 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. In addition, we believe adjusted EBITDA 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.
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 rationalization or
rationalization-related expenses;
- 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 proxy contest expenses;
- adjusted EBITDA does not reflect Tax Receivable Agreement
adjustments; and
- other companies, including companies in our industry, may
calculate EBITDA and adjusted EBITDA differently, which reduces its
usefulness as a comparative measure.
We define adjusted net loss, a non-GAAP financial measure, as
net loss, excluding the items used to calculate adjusted EBITDA,
less the tax effect of those adjustments. We define adjusted loss
per share, a non-GAAP financial measure, as adjusted net loss
divided by the weighted average diluted common shares outstanding
during the period. We believe adjusted net loss and adjusted loss
per share are useful to present to investors because we believe
that they assist investors’ understanding of the underlying
operational profitability of the Company.
We define free cash flow, a non-GAAP financial measure, as net
cash provided by or used in operating activities less capital
expenditures. We define adjusted free cash flow, a non-GAAP
financial measure, as free cash flow adjusted by payments made or
received from the settlement of interest rate swap contracts. We
use free cash flow and adjusted free cash flow as critical measures
in the evaluation of liquidity in conjunction with related GAAP
amounts. We also use these measures when considering available
cash, including for decision-making purposes related to dividends
and discretionary investments. Further, these measures help
management, the audit committee, and investors evaluate the
Company's ability to generate liquidity from operating
activities.
We define net debt, a non-GAAP financial measure, as gross debt
minus cash and cash equivalents. We believe this is an important
measure as it is more representative of our financial position.
We define cash cost of goods sold per MT, a non-GAAP financial
measure, as cost of goods sold less depreciation and amortization,
less cost of goods sold associated with the portion of our sales
that consists of deliveries of by-products of the manufacturing
processes and less rationalization-related expenses, with this
total divided by our sales volume measured in MT. We believe this
is an important measure as it is used by our management and Board
of Directors to evaluate our costs on a per MT basis.
In evaluating these non-GAAP financial measures, you should be
aware that in the future, we may incur expenses similar to the
adjustments in the reconciliations presented below. Our
presentations of these non-GAAP financial measures 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 these non-GAAP
financial measures alongside other measures of financial
performance and liquidity, including our net loss, loss per share,
cash flow from operating activities, cost of goods sold and other
GAAP measures.
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars
in thousands, except per share data) (Unaudited)
September 30,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
141,406
$
176,878
Accounts and notes receivable, net of
allowance for doubtful accounts of $7,672 as of September 30, 2024
and $7,708 as of December 31, 2023
89,516
101,387
Inventories
266,459
330,146
Prepaid expenses and other current
assets
60,611
66,382
Total current assets
557,992
674,793
Property, plant and equipment
933,502
920,444
Less: accumulated depreciation
436,815
398,330
Net property, plant and equipment
496,687
522,114
Deferred income taxes
36,599
31,542
Other assets
51,720
60,440
Total assets
$
1,142,998
$
1,288,889
LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY
Current liabilities:
Accounts payable
$
55,112
$
83,268
Long-term debt, current maturities
139
134
Accrued income and other taxes
10,085
10,022
Other accrued liabilities
79,906
91,702
Tax Receivable Agreement
1,949
5,417
Total current liabilities
147,191
190,543
Long-term debt
929,313
925,511
Other long-term obligations
47,760
55,645
Deferred income taxes
23,944
33,206
Tax Receivable Agreement long-term
3,788
5,737
Stockholders’ (deficit) 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, 257,167,127 and 256,831,870 shares
issued and outstanding as of September 30, 2024 and December 31,
2023, respectively
2,572
2,568
Additional paid-in capital
753,796
749,527
Accumulated other comprehensive loss
(21,378
)
(11,458
)
Accumulated deficit
(743,988
)
(662,390
)
Total stockholders’ (deficit) equity
(8,998
)
78,247
Total liabilities and stockholders’
(deficit) equity
$
1,142,998
$
1,288,889
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net sales
$
130,654
$
158,992
$
404,565
$
483,355
Cost of goods sold
134,885
157,603
402,059
427,464
Lower of cost or market inventory
valuation adjustment
7,843
—
11,916
—
Gross (loss) profit
(12,074
)
1,389
(9,410
)
55,891
Research and development
1,245
1,295
4,319
3,683
Selling and administrative expenses
13,060
18,231
33,435
58,933
Rationalization expenses
(99
)
—
3,156
—
Operating loss
(26,280
)
(18,137
)
(50,320
)
(6,725
)
Other (income) expense, net
(285
)
153
(1,769
)
1,261
Interest expense
16,503
15,719
47,738
42,432
Interest income
(1,098
)
(1,144
)
(4,475
)
(1,758
)
Loss before income taxes
(41,400
)
(32,865
)
(91,814
)
(48,660
)
Income tax benefit
(5,332
)
(10,244
)
(10,125
)
(10,819
)
Net loss
$
(36,068
)
$
(22,621
)
$
(81,689
)
$
(37,841
)
Basic loss per common share:
Net loss per share
$
(0.14
)
$
(0.09
)
$
(0.32
)
$
(0.15
)
Weighted average common shares
outstanding
257,694,799
257,090,113
257,568,237
256,987,778
Diluted loss per common share:
Net loss per share
$
(0.14
)
$
(0.09
)
$
(0.32
)
$
(0.15
)
Weighted average common shares
outstanding
257,694,799
257,090,113
257,568,237
256,987,778
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Dollars in thousands) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Cash flow from operating activities:
Net loss
$
(36,068
)
$
(22,621
)
$
(81,689
)
$
(37,841
)
Adjustments to reconcile net loss to cash
provided by (used in) operations:
Depreciation and amortization
17,933
16,954
46,135
43,053
Deferred income tax benefit
(5,625
)
(3,873
)
(11,743
)
(10,297
)
Non-cash stock-based compensation
expense
1,838
1,628
4,446
3,809
Non-cash interest expense
(608
)
(1,435
)
(3,578
)
10,249
Lower of cost or market inventory
valuation adjustment
7,843
—
11,916
—
Other adjustments
2,742
3,138
4,981
(3,278
)
Net change in working capital*
43,056
58,433
29,711
64,833
Change in Tax Receivable Agreement
—
—
(5,417
)
(4,631
)
Change in long-term assets and
liabilities
(7,402
)
(729
)
(8,438
)
1,372
Net cash provided by (used in) operating
activities
23,709
51,495
(13,676
)
67,269
Cash flow from investing activities:
Capital expenditures
(4,027
)
(8,498
)
(21,517
)
(48,287
)
Proceeds from the sale of fixed assets
20
6
100
220
Net cash used in investing activities
(4,007
)
(8,492
)
(21,417
)
(48,067
)
Cash flow from financing activities:
Interest rate swap settlements
—
—
—
27,453
Debt issuance and modification costs
—
(1,809
)
—
(8,133
)
Proceeds from the issuance of long-term
debt, net of original issuance discount
—
—
—
438,552
Principal payments on long-term debt
—
—
—
(433,708
)
Payments for taxes related to net share
settlement of equity awards
—
—
(82
)
(129
)
Dividends paid
—
—
—
(5,134
)
Principal payments under finance lease
obligations
(23
)
(10
)
(58
)
(20
)
Net cash (used in) provided by financing
activities
(23
)
(1,819
)
(140
)
18,881
Net change in cash and cash
equivalents
19,679
41,184
(35,233
)
38,083
Effect of exchange rate changes on cash
and cash equivalents
1,001
(537
)
(239
)
83
Cash and cash equivalents at beginning of
period
120,726
132,160
176,878
134,641
Cash and cash equivalents at end of
period
$
141,406
$
172,807
$
141,406
$
172,807
* Net change in working capital due to
changes in the following components:
Accounts and notes receivable, net
$
6,759
$
13,287
$
11,201
$
48,007
Inventories
29,319
50,526
50,105
69,258
Prepaid expenses and other current
assets
2,093
841
2,810
4,974
Income taxes payable
248
(8,960
)
(2,616
)
(31,356
)
Accounts payable and accruals
(12,254
)
(14,250
)
(48,666
)
(43,391
)
Interest payable
16,891
16,989
16,877
17,341
Net change in working capital
$
43,056
$
58,433
$
29,711
$
64,833
NON-GAAP RECONCILIATIONS
(Dollars in thousands, except per share and per MT data)
(Unaudited) The following tables reconcile our non-GAAP financial
measures to the most directly comparable GAAP measures:
Reconciliation of Net Loss to Adjusted
Net Loss
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Net loss
$
(36,068
)
$
(14,752
)
$
(22,621
)
$
(81,689
)
$
(37,841
)
Diluted loss per common share:
Net loss per share
$
(0.14
)
$
(0.06
)
$
(0.09
)
$
(0.32
)
$
(0.15
)
Weighted average shares outstanding
257,694,799
257,772,069
257,090,113
257,568,237
256,987,778
Adjustments, pre-tax:
Pension and OPEB plan expenses(1)
479
477
914
1,303
2,731
Rationalization expenses(2)
(99
)
110
—
3,156
—
Rationalization-related expenses(3)
—
—
—
2,655
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
(352
)
(928
)
(287
)
(1,442
)
433
Stock-based compensation expense(5)
1,838
1,561
1,628
4,446
3,809
Proxy contest expenses(6)
—
542
—
752
—
Tax Receivable Agreement adjustment(7)
—
—
—
37
16
Total non-GAAP adjustments pre-tax
1,866
1,762
2,255
10,907
6,989
Income tax impact on non-GAAP
adjustments(8)
74
574
500
2,219
1,331
Adjusted net loss
$
(34,276
)
$
(13,564
)
$
(20,866
)
$
(73,001
)
$
(32,183
)
Reconciliation of Loss Per Share to
Adjusted Loss Per Share
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Loss per share
$
(0.14
)
$
(0.06
)
$
(0.09
)
$
(0.32
)
$
(0.15
)
Adjustments per share:
Pension and OPEB plan expenses(1)
—
—
—
0.01
0.01
Rationalization expenses(2)
—
—
—
0.01
—
Rationalization-related expenses(3)
—
—
—
0.01
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
—
—
—
—
—
Stock-based compensation expense(5)
0.01
0.01
0.01
0.02
0.02
Proxy contest expenses(6)
—
—
—
—
—
Tax Receivable Agreement adjustment(7)
—
—
—
—
—
Total non-GAAP adjustments pre-tax per
share
0.01
0.01
0.01
0.05
0.03
Income tax impact on non-GAAP adjustments
per share(8)
—
—
—
0.01
0.01
Adjusted loss per share
$
(0.13
)
$
(0.05
)
$
(0.08
)
$
(0.28
)
$
(0.13
)
Reconciliation of Net Loss to Adjusted
EBITDA
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Net loss
$
(36,068
)
$
(14,752
)
$
(22,621
)
$
(81,689
)
$
(37,841
)
Add:
Depreciation and amortization
17,933
14,319
16,954
46,135
43,053
Interest expense
16,503
15,609
15,719
47,738
42,432
Interest income
(1,098
)
(1,853
)
(1,144
)
(4,475
)
(1,758
)
Income taxes
(5,332
)
(592
)
(10,244
)
(10,125
)
(10,819
)
EBITDA
(8,062
)
12,731
(1,336
)
(2,416
)
35,067
Adjustments:
Pension and OPEB plan expenses(1)
479
477
914
1,303
2,731
Rationalization expenses(2)
(99
)
110
—
3,156
—
Rationalization-related expenses(3)
—
—
—
2,655
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
(352
)
(928
)
(287
)
(1,442
)
433
Stock-based compensation expense(5)
1,838
1,561
1,628
4,446
3,809
Proxy contest expenses(6)
—
542
—
752
—
Tax Receivable Agreement adjustment(7)
—
—
—
37
16
Adjusted EBITDA
$
(6,196
)
$
14,493
$
919
$
8,491
$
42,056
Reconciliation of
Net Cash Provided by (Used in) Operating Activities to Free Cash
Flow and Adjusted Free Cash Flow
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Net cash provided by (used in)
operating activities
$
23,709
$
(36,855
)
$
51,495
$
(13,676
)
$
67,269
Capital expenditures
(4,027
)
(6,979
)
(8,498
)
(21,517
)
(48,287
)
Free cash flow
19,682
(43,834
)
42,997
(35,193
)
18,982
Interest rate swap settlements(9)
—
—
—
—
27,453
Adjusted free cash flow
$
19,682
$
(43,834
)
$
42,997
$
(35,193
)
$
46,435
Reconciliation of
Cost of Goods Sold to Cash Cost of Goods Sold per MT
Nine Months Ended
September 30,
Q3 2024
Q2 2024
Q3 2023
2024
2023
Cost of goods sold
$
134,885
$
131,970
$
157,603
$
402,059
$
427,464
Less:
Depreciation and amortization(10)
16,281
12,648
15,291
41,136
37,961
Cost of goods sold - by-products and
other(11)
7,806
9,301
430
26,707
13,720
Rationalization-related expenses(3)
—
—
—
2,655
—
Cash cost of goods sold
110,798
110,021
141,882
331,561
375,783
Sales volume (in thousands of MT)
26.4
25.5
24.2
76.0
67.5
Cash cost of goods sold per MT
$
4,197
$
4,315
$
5,863
$
4,363
$
5,567
(1)
Net periodic benefit cost for our pension
and OPEB plans.
(2)
Severance and contract termination costs
associated with the cost rationalization and footprint optimization
plan announced in February 2024.
(3)
Other non-cash costs, primarily inventory
and fixed asset write-offs, associated with the cost
rationalization and footprint optimization plan announced in
February 2024.
(4)
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.
(5)
Non-cash expense for stock-based
compensation awards.
(6)
Expenses associated with our proxy
contest.
(7)
Expense adjustment for future payment to
our sole pre-initial public offering stockholder for tax assets
that have been utilized.
(8)
The tax impact on the non-GAAP adjustments
is affected by their tax deductibility and the applicable
jurisdictional tax rates.
(9)
Receipt of cash related to the monthly
settlement of our interest rate swap contracts prior to their
termination in the second quarter of 2023, as well as receipt of
cash related to the termination of the interest rate swap
contracts.
(10)
Reflects the portion of depreciation and
amortization that is recognized in cost of goods sold.
(11)
Primarily reflects cost of goods sold
associated with the portion of our sales that consists of
deliveries of by-products of the manufacturing processes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241111112647/en/
Michael Dillon 216-676-2000 investor.relations@graftech.com
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