GrafTech Reports Third Quarter 2009 Results
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PARMA, Ohio--(BUSINESS WIRE)-- GrafTech International Ltd. (NYSE: GTI) today announced financial results for the third quarter ended September 30, 2009.
2009 Third Quarter Highlights (Q3 2009 as compared to Q2 2009)
-- Net sales increased five percent to $165 million over the second quarter
of 2009.
-- Gross profit was $47 million, an increase of $1 million versus the
second quarter of 2009.
-- Operating income increased 29 percent to $25 million. Operating income
margin expanded nearly three percentage points to 15.2 percent.
-- Net income was $7 million, or $0.06 per diluted share, versus net loss
of $37 million, or $0.31 per diluted share, in the second quarter of
2009.
-- On an operating basis, net income before special items* was $18 million,
or $0.15 per diluted share, as compared to $15 million, or $0.12 per
diluted share, in the second quarter of 2009.
-- Net cash provided by operating activities was $61 million, a $15 million
improvement over operating cash flow generated in the second quarter of
2009. This solid cash flow performance allowed us to complete the early
redemption of all remaining 10-year Senior Notes, originally issued in
2002, and reduce our net debt* to $4 million.
-- As a result of stronger than expected third quarter results and
anticipation of a solid fourth quarter, we are increasing 2009 annual
operating income guidance by more than 25 percent.
2009 Third Quarter Highlights (Q3 2009 as compared to Q3 2008)
-- Net sales were $165 million, versus $316 million in the third quarter of
2008, primarily the result of lower volumes associated with
significantly reduced demand driven by the global economic recession.
-- Gross profit declined to $47 million or 28.3 percent of sales, as
compared to $114 million or 36.1 percent of sales in the third quarter
of 2008. The reduction in gross profit percentage was largely the result
of unfavorable fixed cost absorption associated with lower sales volumes
and the flow-through of higher cost raw materials.
-- Operating income was $25 million, versus $87 million in the third
quarter of 2008. Operating income margin decreased to 15.2 percent of
sales, from 27.5 percent in the same period in 2008.
-- Net income was $7 million, or $0.06 per diluted share, versus net income
of $83 million, or $0.70 per diluted share, in the third quarter of
2008.
-- On an operating basis, net income before special items* was $18 million,
or $0.15 per diluted share, as compared to $66 million, or $0.55 per
diluted share, in the third quarter of 2008.
-- Net cash provided by operating activities was $61 million, versus $67
million in the third quarter of 2008.
-- Net debt* was $4 million, a reduction of $127 million year-over-year.
Craig Shular, Chief Executive Officer of GrafTech, commented, "Our team continues to execute on productivity initiatives and remains focused on maximizing flow-through of sales dollars to bottom line results. On the cash flow front, this discipline has allowed us to remain cash flow positive in a very difficult operating environment. As a result, we exited the quarter virtually debt free. On the operating income front, we expect second half 2009 results to be approximately double the first half 2009 as a result of increased sales and continued tight cost control."
Industrial Materials Segment
The Industrial Materials segment's net sales were $137 million in the 2009 third quarter, as compared to $266 million in the 2008 third quarter. Net sales in the quarter increased $7 million from $130 million in the 2009 second quarter, as a result of slightly higher graphite electrode sales volume and prices.
Operating income for the Industrial Materials segment was $24 million, versus $74 million in the third quarter 2008. The decline was primarily due to lower sales volume for graphite electrodes related to the sharp reduction in global steel operating rates and the flow-through of higher cost raw materials.
Engineered Solutions Segment
Net sales for the Engineered Solutions segment were $28 million in the 2009 third quarter, as compared to $50 million in the 2008 third quarter. Net sales for the quarter were flat as compared to the second quarter 2009.
Operating income for the Engineered Solutions segment was $1 million, as compared to $13 million in the 2008 third quarter. The decrease was largely the result of lower sales volume across multiple product lines and an unfavorable product mix.
Corporate
Selling and administrative and research and development expenses declined $6 million to $21 million in the 2009 third quarter versus the same period last year. The reduction was largely due to approximately $3 million lower variable compensation expense in the third quarter 2009. The balance of the reduction is primarily related to successful execution of previously announced cost savings initiatives and effective resolution to various contingent liabilities.
Interest expense in the quarter was $1 million, versus $3 million in the third quarter 2008. The reduction was driven primarily by the Company's successful deleveraging initiatives.
Mr. Shular commented, "In the third quarter, we completed the early redemption of the Senior Notes, which originally totaled $550 million and represented our most expensive debt. For the full year 2009, we expect to generate approximately $150 million of operating net cash. The improvement to our balance sheet was recognized by Standard & Poor's, which has placed the Company's corporate credit ratings on positive watch."
Other expense, net, was $11 million in the 2009 third quarter, as compared to other income, net, of $17 million in the third quarter 2008. The change in the quarter is largely due to the foreign currency remeasurement of intercompany loans which generated a non-cash loss of approximately $10 million in the current quarter.
The effective income tax rate in the third quarter 2009, excluding special charges, was 24 percent, as compared to 21 percent in the 2008 third quarter. For the full year 2009, we continue to expect the effective tax rate to be in the range of 22 percent to 25 percent.
Outlook
Based on International Monetary Fund (IMF) projections and other economic forecasts, the global recession has begun to ease, driven by strength in Asian economies and unprecedented global government intervention. While stabilization has begun, steel end market demand remains far below pre-crisis levels and the pace of recovery is anticipated to be slow. As a result, steel producers continue to operate at low rates in order to match current market demand.
Third quarter results came in better than expected due to stronger than anticipated European steel operating rates as well as continued increases in steel operating rates in several geographies. As a result, we believe customers in various geographies have completed their graphite electrode destocking activities earlier than initially expected and began reordering in the third quarter. Accordingly, we are increasing our 2009 full year operating income guidance to reflect the improved third quarter performance and anticipation of a solid fourth quarter.
While the global economy remains fragile, we continue to expect an improvement in fourth quarter results as customers will have largely completed inventory destocking initiatives and continue restocking.
Given global economic conditions, which have been and may continue to be volatile and uncertain, GrafTech expects the following full year 2009 results:
-- Operating income targeted to be in the range of $80 million to $85
million (previous guidance was $60 million to $70 million);
-- The effective tax rate to be in the range of 22 percent to 25 percent;
-- Capital expenditures to be approximately $50 million to $55 million;
-- Depreciation expense to be in the range of $32 million to $34 million
(previous guidance was approximately $35 million);
-- Cash flow from operations targeted to be approximately $150 million.
In conjunction with this earnings release, you are invited to listen to our earnings call being held today at 11:00 a.m. Eastern Time. The call will be webcast and available at www.graftech.com, in the investor relations section. A conference call will also be available. The dial-in number is 800-894-3831 for domestic and 763-416-5291 for international. The rebroadcast webcast will be available following the call, and for 30 days thereafter, at www.graftech.com, in the investor relations section. GrafTech also makes its complete financial reports that have been filed with the Securities and Exchange Commission available at www.graftech.com. This includes its quarterly report on Form 10-Q for the period reported. Upon request, GrafTech will provide its stockholders with a hard copy of its complete financial statements free of charge.
GrafTech International Ltd. is one of the world's largest manufacturers and providers of high quality synthetic and natural graphite and carbon based products and technical and research and development services, with customers in 70 countries engaged in the manufacture of steel, automotive products and electronics. We manufacture graphite electrodes, products essential to the production of electric arc furnace steel. We also manufacture thermal management, fuel cell and other specialty graphite and carbon products for, and provide services to, the electronics, power generation, solar, oil and gas, transportation, petrochemical and other metals markets. We operate 11 manufacturing facilities strategically located on four continents. For additional information on GrafTech International Ltd., call 216-676-2000, or visit our website at www.graftech.com.
NOTE ON FORWARD-LOOKING STATEMENTS: This news release and related discussions may contain forward-looking statements about such matters as: our preliminary unaudited results for the third quarter ended September 30, 2009 and outlook for the 2009 fourth quarter and for 2009 as a whole; regional and global economic and industry market conditions, including our expectations concerning their impact on the markets we serve and, our profitability, operating income, cash flow, and liquidity; conditions and changes in the global financial and credit markets and their impact on us and our customers and suppliers; the impact of actions being taken to improve our cost competitiveness and liquidity; estimated future capital expenditures and their impact on product quality and efficiencies; changes in production capacity, inventories, or operating rates in our operations and our customers' operations or possible suspensions thereof; growth rates for, future prices and sales of, and demand for our products and our customers products; costs of materials and production, including anticipated changes therein; our position in markets we serve; investments and acquisitions that we have made or may make in the future; tax rates and the effects of jurisdictional mix and nonrecurring and other items; future operational and financial performance; strategic and growth plans; currency exchange and interest rates; financing activities including those with respect to our credit facilities which expire in July 2010, factoring and supply chain financing; stock repurchase plans; raw material and supply chain management; future sales, costs, working capital, revenues, business opportunities; operational and financial performance; and debt levels. We have no duty to update these statements. Our expectations and targets are not predictions of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. Actual future events, circumstances, performance and trends could differ materially, positively or negatively, from those set forth in these statements due to various factors, including: the extent of any adjustments to our preliminary 2009 third quarter results; the actual timing of the filing of our Form 10-Q with the SEC and potential effects of delays in such filing; the adoption of government fiscal and monetary stimulus and stabilization plans that could significantly impact us and our industry; further downturns, production suspensions, or changes in steel and other markets we serve or that our customers serve that could result in additional loss of revenue, profitability, and cash flow; a protracted regional or global financial or economic crisis that could cause us not to achieve our growth and diversification plans or meet market expectations, or to lose market share; challenging economic conditions may lead to more intensified price competition and price or margin decreases; reductions in capacity or production by us and our customers; delays in customer destocking activities or failure of demand to increase thereafter; graphite electrode manufacturing capacity increases; differences between actual graphite electrode prices and spot or announced prices; changes in inventory management and utilization or in supply chain management; consolidation of steel producers; limitations on the amounts of or delays in the timing of our capital expenditures; absence of successful development and commercialization of new or improved products or subsequent displacement thereof by other products or technologies; failure to expand manufacturing capacity or inadequacy in production lead times to meet growth in demand, if any; investments and acquisitions that we make or may make in the future, failure to successfully integrate into our business or the failure of such investments and acquisitions to provide the performance or returns expected; inability to protect our intellectual property rights or infringement of intellectual property rights of others; unanticipated developments in legal proceedings or litigation; non-realization of anticipated benefits from organizational changes and restructurings; significant changes in our provision for income taxes and effective income tax rate; unanticipated developments relating to health, safety or environmental compliance or remediation obligations or liabilities to third parties, changes in labor relations; significant changes in the availability or cost of key and other raw materials, including petroleum based coke, or energy; changes in market prices of our securities, or other events that affect our financing and capital structure plans or limit our ability to obtain financing for working capital, growth, or other initiatives on acceptable terms; changes in interest or currency exchange rates or competitive conditions, including growth by producers in developing countries and the mix, distribution, and pricing of their products; inflation or deflation; changes in appropriation of or failure to satisfy conditions to government grants; failure to achieve earnings or other estimates; business interruptions adversely affecting our ability to supply our products; and other risks and uncertainties, including those detailed in our SEC filings, as well as future decisions by us. This news release does not constitute an offer or solicitation as to any securities. References to street or analyst earnings estimates mean those published by First Call.
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
At December 31, At September 30,
2008 2009
ASSETS (as adjusted)
Current Assets:
Cash and cash equivalents $ 11,664 $ 8,665
Accounts and notes receivable, net of
allowance for doubtful accounts of $4,110 at 146,986 104,450
December 31, 2008 and $5,061 at September
30, 2009
Inventories 290,397 251,802
Loan to non-consolidated affiliate - 6,000
Prepaid expenses and other current assets 14,376 19,044
Total current assets 463,423 389,961
Property, plant and equipment 873,932 957,015
Less: accumulated depreciation 536,562 591,672
Net property, plant and equipment 337,370 365,343
Deferred income taxes 1,907 6,516
Goodwill 7,166 8,784
Other assets 12,887 12,089
Investment in non-consolidated affiliate 118,925 64,460
Restricted cash 1,451 2,450
Total assets $ 943,129 $ 849,603
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,132 $ 41,248
Interest payable 953 7
Short-term debt 9,347 10,256
Accrued income and other taxes 34,861 33,134
Other accrued liabilities 140,330 64,814
Total current liabilities 240,623 149,459
Long-term debt:
Principal 50,328 2,145
Fair value adjustments for hedge instruments 191 -
Unamoritized premium (discount) 38 (651 )
Total long-term debt 50,557 1,494
Other long-term obligations 118,272 121,723
Deferred income taxes 29,087 30,012
Stockholders' equity:
Preferred stock, par value $.01, 10,000,000 - -
shares authorized, none issued
Common stock, par value $.01, 150,000,000
shares authorized at December 31, 2008 and
225,000,000 authorized at September 30, 1,226 1,239
2009, 122,634,854 shares issued at December
31, 2008 and 123,945,414 shares issued at
September 30, 2009
Additional paid-in capital 1,290,381 1,298,108
Accumulated other comprehensive loss (355,960 ) (299,557 )
Accumulated deficit (317,752 ) (339,510 )
Less: cost of common stock held in treasury,
3,974,345 shares at December 31, 2008 and (112,511 ) (112,511 )
September 30, 2009
Less: common stock held in employee benefit
and compensation trusts, 55,728 shares at (794 ) (854 )
December 31, 2008 and 69,661 shares at
September 30, 2009
Total stockholders' equity 504,590 546,915
Total liabilities and stockholders' equity $ 943,129 $ 849,603
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
(as adjusted) (as adjusted)
Net sales $ 315,748 $ 164,879 $ 925,288 $ 456,679
Cost of sales 201,795 118,226 588,884 332,244
Gross profit 113,953 46,653 336,404 124,435
Research and development 2,479 2,871 6,579 8,048
Selling and 24,754 18,589 71,033 63,319
administrative expenses
Restructuring charges, 7 120 349 88
net
Operating income 86,713 25,073 258,443 52,980
Equity in losses and
write-down of investment - 953 - 54,343
in non-consolidated
affiliate
Other (income) expense, (16,919 ) 10,710 7,035 8,446
net
Interest expense 3,427 1,168 16,859 4,236
Interest income (204 ) (251 ) (782 ) (552 )
Income (loss) before
provision for income 100,409 12,493 235,331 (13,493 )
taxes
Provision for (benefit 17,009 5,629 69,392 8,265
from) income taxes
Net income (loss) $ 83,400 $ 6,864 $ 165,939 $ (21,758 )
Basic income (loss) per
common share:
Net income (loss) per $ 0.70 $ 0.06 $ 1.52 $ (0.18 )
share
Weighted average common 118,764 119,928 109,063 119,596
shares outstanding
Diluted earnings (loss)
per common share:
Net income (loss) per $ 0.70 $ 0.06 $ 1.45 $ (0.18 )
share
Weighted average common 119,965 120,716 118,920 119,596
shares outstanding
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
(as adjusted) (as adjusted)
Cash flow from
operating activities:
Net income (loss) $ 83,400 $ 6,864 $ 165,939 $ (21,758 )
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and 9,332 7,703 26,748 23,905
amortization
Deferred income taxes (880 ) (11,677 ) 10,212 (10,829 )
Equity in losses and - 953 - 54,343
write-down of
investment in
non-consolidated
affiliate
Gain on redemption of - - (4,060 ) -
debentures
Currency (gains) losses (22,065 ) 8,817 (7,752 ) 5,135
Post retirement and 5,098 1,290 6,679 6,688
pension plan changes
Stock based
compensation, including 1,488 999 3,861 5,957
incentive compensation
paid in company stock
Interest expense 519 380 7,488 1,040
Other (credits) (9,915 ) 2,067 (7,298 ) 14,666
charges, net
Dividends from
non-consolidated - - - 122
affiliate
(Increase) decrease in 5,442 44,290 (29,560 ) 47,693
working capital1
Long-term assets and (5,501 ) (414 ) (2,978 ) (5,259 )
liabilities
Net cash provided by 66,918 61,272 169,279 121,703
operating activities
Cash flow from
investing activities:
Capital expenditures (20,056 ) (10,580 ) (47,610 ) (40,544 )
Proceeds from 87 170 311 433
derivative instruments
Investment in and loan
to non-consolidated (1,779 ) (6,000 ) (136,390 ) (6,000 )
affiliate
Proceeds from sale of 301 43 319 112
assets
Change in restricted 257 (980 ) 91 (999 )
cash
Net cash used in (21,190 ) (17,347 ) (183,279 ) (46,998 )
investing activities
Cash flow from
financing activities:
Short-term debt (3,368 ) (1,756 ) 11,625 773
borrowings, net
Revolving Facility 25,036 10,000 180,661 124,715
borrowings
Revolving Facility (67 ) (43,231 ) (70,877 ) (155,231 )
reductions
Long-term debt - 1,837 - 1,837
additions
Long-term debt (54,910 ) (19,906 ) (179,418 ) (20,035 )
reductions
Excess tax benefit from
stock-based 2,137 - 14,273 10
compensation
Supply chain financing - - - (30,115 )
Long-term financing (296 ) (279 ) (296 ) (815 )
obligations
Purchase of treasury (15,927 ) - (21,250 ) -
shares
Proceeds from exercise 595 32 36,910 89
of stock options
Net cash provided by
(used in) financing (46,800 ) (53,303 ) (28,372 ) (78,772 )
activities
Net increase (decrease)
in cash and cash (1,072 ) (9,378 ) (42,372 ) (4,067 )
equivalents
Effect of exchange rate
changes on cash and (1,359 ) 414 (1,237 ) 1,068
cash equivalents
Cash and cash
equivalents at 13,563 17,629 54,741 11,664
beginning of period
Cash and cash
equivalents at end of $ 11,132 $ 8,665 $ 11,132 $ 8,665
period
1Net change in working
capital due to the
following components:
(Increase) decrease in
current assets:
Accounts and notes $ (12,410 ) $ (9,506 ) $ (60,596 ) $ 64,187
receivable
Effect of factoring on 323 (175 ) 24,096 (15,993 )
accounts receivable
Inventories (5,450 ) 32,352 (11,009 ) 62,819
Prepaid expenses and 241 245 (735 ) (596 )
other current assets
Restructuring payments (57 ) (1 ) (873 ) (12 )
Increase (decrease) in
accounts payable and 20,202 9,258 10,540 (62,672 )
accruals
Increase in accrued 4,899 13,077 17,837 906
income taxes
(Decrease) in interest (2,306 ) (960 ) (8,820 ) (946 )
payable
(Increase) decrease in $ 5,442 $ 44,290 $ (29,560 ) $ 47,693
working capital
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY
(Dollars in thousands)
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2009 2008 2009
Net sales:
Industrial Materials $ 266,046 $ 136,721 $ 789,456 $ 371,076
Engineered Solutions 49,702 28,158 135,832 85,603
Net sales $ 315,748 $ 164,879 $ 925,288 $ 456,679
Operating income:
Industrial Materials $ 74,180 $ 23,828 $ 228,491 $ 46,986
Engineered Solutions 12,533 1,245 29,952 5,994
Operating income $ 86,713 $ 25,073 $ 258,443 $ 52,980
Operating income margin:
Industrial Materials 27.9 % 17.4 % 28.9 % 12.7 %
Engineered Solutions 25.2 % 4.4 % 22.1 % 7.0 %
Operating income margin 27.5 % 15.2 % 27.9 % 11.6 %
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SELECTED SECOND QUARTER 2009 DATA
(Dollars in thousands)
(Unaudited)
For the Three Months Ended June 30,
2009
Net Sales $ 157,774
Industrial Materials Net Sales $ 129,834
Engineered Solutions Net Sales $ 27,940
Gross Profit $ 45,688
Operating Income $ 19,484
Net Income $ (37,091 )
Net Income Before Special Items* $ 14,778
Net Cash Provided by Operating Activities $ 46,107
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)
Net Income and Earnings per
Share Reconciliation
For the For the
Three Months Ended Three Months Ended
September 30, 2008 September 30, 2009
Income EPS Impact Income EPS Impact
Net Income $ 83,400 $ 0.70 $ 6,864 $ 0.06
Adjustments, net of tax, per
diluted share
- Equity in losses of and
write down of investment in - - 766 0.01
non-consolidated affiliate
- Non-recurring tax 274 - (1,253 ) (0.02 )
adjustments
- Restructuring and Other (17,636 ) (0.15 ) 12,085 0.10
(income) expense, net
Net Income before special $ 66,038 $ 0.55 $ 18,462 $ 0.15
items
For the For the
Nine Months Ended Nine Months Ended
September 30, 2008 September 30, 2009
Income EPS Impact Income EPS Impact
Net Income $ 165,939 $ 1.45 $ (21,758 ) $ (0.18 )
Adjustments, net of tax, per
diluted share
- Equity in losses of and
write down of investment in - - 46,953 0.39
non-consolidated affiliate
- Non-recurring tax 902 0.01 2,662 0.02
adjustments
- Accounting standards 5,841 0.05 - -
codification ACS 470-2
- Restructuring and Other 10,928 0.09 10,208 0.09
(income) expense, net
Net Income before special $ 183,610 $ 1.60 $ 38,065 $ 0.32
items
For 2008, the non-GAAP earnings per diluted share includes 13.6 million shares underlying our previously outstanding contingently convertible debentures and excludes approximately $3 million (before and after tax) in the second quarter of 2008 and $6 million (before and after tax) through June 19, 2008 of contingently convertible debenture interest expense.
NOTE ON RECONCILIATION OF EARNINGS DATA: Income (loss) excluding the items mentioned above is a non-GAAP financial measure that GrafTech calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GrafTech believes that the excluded items are not primarily related to core operational activities. GrafTech believes that income (loss) excluding items that are not primarily related to core operational activities is generally viewed as providing useful information regarding a company's operating profitability. Management uses income (loss) excluding these items as well as other financial measures in connection with its decision-making activities. Income (loss) excluding these items should not be considered in isolation or as a substitute for net income (loss), income (loss) from continuing operations or other consolidated income data prepared in accordance with GAAP. GrafTech's method for calculating income (loss) excluding these items may not be comparable to methods used by other companies.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
Net Debt Reconciliation
At September 30, At December 31, At June 30, At September 30,
2008 2008 2009 2009
Long-term debt $ 130,577 $ 50,557 $ 53,712 $ 1,494
Short-term 11,982 9,347 12,019 10,256
debt
Supply chain - 30,115 - -
financing
Total debt $ 142,559 $ 90,019 $ 65,731 $ 11,750
Less:
Fair value
adjustments 204 191 165 -
for hedge
instruments
Unamortized
premium 41 38 33 (651 )
(discount)
Cash and cash 11,132 11,664 17,629 8,665
equivalents
Net Debt $ 131,182 $ 78,126 $ 47,904 $ 3,736
NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP financial measure that GrafTech calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GrafTech excludes the unamortized bond premium from its sale of $150 million aggregate principal amount of additional senior notes in May 2002 at a price of 104.5% of principal amount. The premium received in excess of principal amount is amortized to reduce interest expense over the term of the senior notes. GrafTech also excludes the fair value adjustments for hedge instruments, which includes interest rate swaps that have been marked-to-market and realized gains or (losses) on interest rate swaps. GrafTech believes that net debt is generally accepted as providing useful information regarding a company's indebtedness and that net debt provides meaningful information to investors to assist them to analyze leverage. Management uses net debt as well as other financial measures in connection with its decision-making activities. Net debt should not be considered in isolation or as a substitute for total debt or total debt and other long-term obligations calculated in accordance with GAAP. GrafTech's method for calculating net debt may not be comparable to methods used by other companies and is not the same as the method for calculating net debt under its senior secured revolving credit facility. GrafTech does not forecast the fair value adjustment for hedging instruments.
*Non-GAAP financial measures. See attached reconciliations.
GTI-G
Source: GrafTech International Ltd.
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