Solid Execution Leads to Sequential Improvement
in Key Metrics
GrafTech International Ltd. (NYSE: EAF) ("GrafTech," the
"Company," "we," or "our") today announced unaudited financial
results for the quarter and six months ended June 30, 2024.
Second Quarter 2024 Summary
- Significant cost improvement reflects actions to aggressively
address key elements of our cost structure
- Sequential improvement in sales volume of 6% and capacity
utilization increase to 60%
- Net sales of $137 million
- Net loss of $15 million, or $0.06 per share(1)
- Adjusted EBITDA(2) of $14 million
- Net cash used in operating activities of $37 million and
adjusted free cash flow(2) of negative $44 million
CEO Comments
"We continue to successfully execute our stated initiatives,
which drove sequential improvement in key metrics for the quarter,"
said Timothy Flanagan, Chief Executive Officer and President. "Our
actions to aggressively address our cost structure led to a
sequential improvement in cash costs on a per metric ton basis, as
well as an 18% improvement compared to the second quarter of 2023.
Our significant enhancement of our customer engagement efforts and
focus on our customer value proposition contributed to a 6%
sequential improvement in sales volume and supported our ability to
increase capacity utilization. This company-wide emphasis on
managing what is within our control is critical to our ability to
navigate through the ongoing weakness in the commercial environment
and preserve our ability to capitalize on long-term growth
opportunities and deliver shareholder value."
Second Quarter 2024 Financial Performance
(dollars in thousands, except per share
amounts)
Six Months Ended
June 30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Net sales
$
137,327
$
136,584
$
185,561
$
273,911
$
324,363
Net loss
$
(14,752
)
$
(30,869
)
$
(7,851
)
$
(45,621
)
$
(15,220
)
Loss per share(1)
$
(0.06
)
$
(0.12
)
$
(0.03
)
$
(0.18
)
$
(0.06
)
Net cash (used in) provided by operating
activities
$
(36,855
)
$
(530
)
$
(9,024
)
$
(37,385
)
$
15,774
Adjusted net loss(2)
$
(13,564
)
$
(25,161
)
$
(5,768
)
$
(38,725
)
$
(11,317
)
Adjusted loss per share(1)(2)
$
(0.05
)
$
(0.10
)
$
(0.02
)
$
(0.15
)
$
(0.04
)
Adjusted EBITDA(2)
$
14,493
$
194
$
26,022
$
14,687
$
41,137
Adjusted free cash flow(2)
$
(43,834
)
$
(11,041
)
$
281
$
(54,875
)
$
3,438
Net sales for the second quarter of 2024 were $137 million, a
decrease of 26% compared to $186 million in the second 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.
Net loss for the second quarter of 2024 was $15 million, or
$0.06 per share, compared to a net loss of $8 million, or $0.03 per
share, in the second quarter of 2023.
Adjusted EBITDA(2) was $14 million in the second quarter of
2024, compared to $26 million in the second quarter of 2023. The
decline primarily reflected lower weighted-average realized prices
and a shift in the mix of our business from LTA volume to non-LTA
volume. These factors were partially offset by an 18% reduction in
cash costs on a per metric ton ("MT") basis for the second quarter
of 2024, compared to the same period in 2023. In addition, adjusted
EBITDA(2) for the second quarter of 2024 included a $9 million
benefit related to the final award in a long-standing LTA
arbitration. This represented a reimbursement of the Company's
legal fees and other related expenses and was recorded as a
reduction in selling and administrative expenses for the second
quarter of 2024.
In the second quarter of 2024, net cash used in operating
activities was $37 million and adjusted free cash flow(2) was a
cash usage of $44 million, including a $34 million semi-annual
interest payment on the Company's senior secured notes.
Operational and Commercial Update
Key operating metrics
Six Months Ended
June 30,
(in thousands, except
percentages)
Q2 2024
Q1 2024
Q2 2023
2024
2023
Sales volume (MT)
25.5
24.1
26.4
49.6
43.3
Production volume (MT)(3)
26.8
26.0
25.2
52.8
41.0
Production capacity (MT)(4)(5)
45.0
45.0
51.0
90.0
102.0
Capacity utilization(6)
60
%
58
%
49
%
59
%
40
%
Sales volume for the second quarter of 2024 was 25.5 thousand
MT, a decrease of 3% compared to the second quarter of 2023,
consisting of 22.7 thousand MT of non-LTA volume and 2.8 thousand
MT of LTA volume.
For the second quarter of 2024, the weighted-average realized
price for our non-LTA volume was approximately $4,300 per MT, a
decrease of 23% compared to the second quarter of 2023, with the
decline reflecting the persistent challenges in the commercial
environment. For our LTA volume, the weighted-average realized
price was approximately $8,300 per MT for the second quarter of
2024.
Production volume was 26.8 thousand MT in the second quarter of
2024, an increase of 6% compared to the second quarter of 2023. We
continue to proactively 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, 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 June 30, 2024, we had liquidity of $232 million,
consisting of cash and cash equivalents of $121 million and $111
million of availability under our revolving credit facility. As of
June 30, 2024, we had gross debt(8) of $950 million and net debt(9)
of approximately $829 million. We believe we continue to have
adequate liquidity in 2024 to navigate the persistent challenges in
the commercial environment.
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. Sales volume in the third quarter of 2024 is expected to be
broadly in line with sales volume for the second quarter of 2024
and we continue to expect a modest year-over-year improvement in
sales volume for the full year.
We continue to expect a mid-teen percentage point decline in our
full year 2024 cash cost of goods sold per MT compared to 2023.
This significant improvement in our year-over-year 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. 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 July 26, 2024 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
(800) 717-1738 toll-free in North America or +1 (289) 514-5100 for
overseas calls, conference ID: 40706. 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
(June 30, 2024 gross debt of $950 million less June 30, 2024 cash
and cash equivalents of $121 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, 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; recent 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; and our ability to continue to meet
NYSE continued listing standards.
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 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 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)
June 30, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
120,726
$
176,878
Accounts and notes receivable, net of
allowance for doubtful accounts of
$7,942 as of June 30, 2024 and $7,708 as
of December 31, 2023
95,043
101,387
Inventories
304,786
330,146
Prepaid expenses and other current
assets
62,448
66,382
Total current assets
583,003
674,793
Property, plant and equipment
913,710
920,444
Less: accumulated depreciation
418,157
398,330
Net property, plant and equipment
495,553
522,114
Deferred income taxes
30,793
31,542
Other assets
53,648
60,440
Total assets
$
1,162,997
$
1,288,889
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
61,011
$
83,268
Long-term debt, current maturities
132
134
Accrued income and other taxes
9,791
10,022
Other accrued liabilities
65,245
91,702
Tax Receivable Agreement
1,949
5,417
Total current liabilities
138,128
190,543
Long-term debt
928,046
925,511
Other long-term obligations
52,723
55,645
Deferred income taxes
24,073
33,206
Tax Receivable Agreement long-term
3,788
5,737
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, 257,167,127 and 256,831,870 shares
issued and outstanding as of June 30, 2024 and December 31, 2023,
respectively
2,572
2,568
Additional paid-in capital
751,958
749,527
Accumulated other comprehensive loss
(30,371
)
(11,458
)
Accumulated deficit
(707,920
)
(662,390
)
Total stockholders’ equity
16,239
78,247
Total liabilities and stockholders’
equity
$
1,162,997
$
1,288,889
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net sales
$
137,327
$
185,561
$
273,911
$
324,363
Cost of goods sold
131,970
157,216
267,174
269,861
Lower of cost or market inventory
valuation adjustment
1,381
—
4,073
—
Gross profit
3,976
28,345
2,664
54,502
Research and development
1,447
1,196
3,074
2,388
Selling and administrative expenses
5,098
18,551
20,375
40,702
Rationalization expenses
110
—
3,255
—
Operating (loss) income
(2,679
)
8,598
(24,040
)
11,412
Other (income) expense, net
(1,091
)
455
(1,484
)
1,108
Interest expense
15,609
13,907
31,235
26,713
Interest income
(1,853
)
(242
)
(3,377
)
(614
)
Loss before (benefit) provision for income
taxes
(15,344
)
(5,522
)
(50,414
)
(15,795
)
(Benefit) provision for income taxes
(592
)
2,329
(4,793
)
(575
)
Net loss
$
(14,752
)
$
(7,851
)
$
(45,621
)
$
(15,220
)
Basic loss per common share:
Net loss per share
$
(0.06
)
$
(0.03
)
$
(0.18
)
$
(0.06
)
Weighted average common shares
outstanding
257,772,069
257,003,691
257,587,613
256,935,763
Diluted loss per common share:
Net loss per share
$
(0.06
)
$
(0.03
)
$
(0.18
)
$
(0.06
)
Weighted average common shares
outstanding
257,772,069
257,003,691
257,587,613
256,935,763
GRAFTECH INTERNATIONAL LTD.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Cash flow from operating activities:
Net loss
$
(14,752
)
$
(7,851
)
$
(45,621
)
$
(15,220
)
Adjustments to reconcile net loss to cash
(used in) provided by operations:
Depreciation and amortization
14,319
15,322
28,202
26,099
Deferred income tax benefit
(1,537
)
(2,674
)
(6,118
)
(6,424
)
Non-cash stock-based compensation
expense
1,561
1,385
2,608
2,181
Non-cash interest expense
(1,501
)
9,500
(2,970
)
11,684
Lower of cost or market inventory
valuation adjustment
1,381
—
4,073
—
Other adjustments
775
(6,521
)
2,239
(6,416
)
Net change in working capital*
(36,407
)
(19,257
)
(13,345
)
6,400
Change in Tax Receivable Agreement
—
—
(5,417
)
(4,631
)
Change in long-term assets and
liabilities
(694
)
1,072
(1,036
)
2,101
Net cash (used in) provided by operating
activities
(36,855
)
(9,024
)
(37,385
)
15,774
Cash flow from investing activities:
Capital expenditures
(6,979
)
(14,518
)
(17,490
)
(39,789
)
Proceeds from the sale of fixed assets
77
122
80
214
Net cash used in investing activities
(6,902
)
(14,396
)
(17,410
)
(39,575
)
Cash flow from financing activities:
Interest rate swap settlements
—
23,823
—
27,453
Debt issuance and modification costs
—
(6,196
)
—
(6,324
)
Proceeds from the issuance of long-term
debt, net of original issuance discount
—
438,552
—
438,552
Principal payments on long-term debt
—
(433,708
)
—
(433,708
)
Payments for taxes related to net share
settlement of equity awards
—
—
(82
)
(129
)
Dividends paid
—
(2,568
)
—
(5,134
)
Principal payments under finance lease
obligations
(19
)
(10
)
(35
)
(10
)
Net cash (used in) provided by financing
activities
(19
)
19,893
(117
)
20,700
Net change in cash and cash
equivalents
(43,776
)
(3,527
)
(54,912
)
(3,101
)
Effect of exchange rate changes on cash
and cash equivalents
(688
)
247
(1,240
)
620
Cash and cash equivalents at beginning of
period
165,190
135,440
176,878
134,641
Cash and cash equivalents at end of
period
$
120,726
$
132,160
$
120,726
$
132,160
* Net change in working capital due to
changes in the following components:
Accounts and notes receivable, net
$
(4,133
)
$
(27,630
)
$
4,442
$
34,720
Inventories
(4,542
)
35,629
20,786
18,732
Prepaid expenses and other current
assets
(3,596
)
(8,455
)
717
4,133
Income taxes payable
(431
)
3,198
(2,864
)
(22,396
)
Accounts payable and accruals
(6,814
)
(16,646
)
(36,412
)
(29,141
)
Interest payable
(16,891
)
(5,353
)
(14
)
352
Net change in working capital
$
(36,407
)
$
(19,257
)
$
(13,345
)
$
6,400
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
Six Months Ended June
30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Net loss
$
(14,752
)
$
(30,869
)
$
(7,851
)
$
(45,621
)
$
(15,220
)
Diluted loss per
common share:
Net loss per share
$
(0.06
)
$
(0.12
)
$
(0.03
)
$
(0.18
)
$
(0.06
)
Weighted average shares outstanding
257,772,069
257,399,365
257,003,691
257,587,613
256,935,763
Adjustments, pre-tax:
Pension and OPEB plan expenses(1)
477
347
899
824
1,817
Rationalization expenses(2)
110
3,145
—
3,255
—
Rationalization-related expenses(3)
—
2,655
—
2,655
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
(928
)
(162
)
273
(1,090
)
720
Stock-based compensation expense(5)
1,561
1,047
1,385
2,608
2,181
Proxy contest expenses(6)
542
210
—
752
—
Tax Receivable Agreement adjustment(7)
—
37
—
37
16
Total non-GAAP adjustments pre-tax
1,762
7,279
2,557
9,041
4,734
Income tax impact on non-GAAP
adjustments(8)
574
1,571
474
2,145
831
Adjusted net loss
$
(13,564
)
$
(25,161
)
$
(5,768
)
$
(38,725
)
$
(11,317
)
Reconciliation of Loss Per Share to
Adjusted Loss Per Share
Six Months Ended June
30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Loss per share
$
(0.06
)
$
(0.12
)
$
(0.03
)
$
(0.18
)
$
(0.06
)
Adjustments per share:
Pension and OPEB plan expenses(1)
—
—
—
—
0.01
Rationalization expenses(2)
—
0.01
—
0.01
—
Rationalization-related expenses(3)
—
0.01
—
0.01
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
—
—
—
—
—
Stock-based compensation expense(5)
0.01
0.01
0.01
0.01
0.01
Proxy contest expenses(6)
—
—
—
—
—
Tax Receivable Agreement adjustment(7)
—
—
—
—
—
Total non-GAAP adjustments pre-tax per
share
0.01
0.03
0.01
0.03
0.02
Income tax impact on non-GAAP adjustments
per share(8)
—
0.01
—
—
—
Adjusted loss per share
$
(0.05
)
$
(0.10
)
$
(0.02
)
$
(0.15
)
$
(0.04
)
Reconciliation of Net Loss to Adjusted
EBITDA
Six Months Ended June
30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Net loss
$
(14,752
)
$
(30,869
)
$
(7,851
)
$
(45,621
)
$
(15,220
)
Add:
Depreciation and amortization
14,319
13,883
15,322
28,202
26,099
Interest expense
15,609
15,626
13,907
31,235
26,713
Interest income
(1,853
)
(1,524
)
(242
)
(3,377
)
(614
)
Income taxes
(592
)
(4,201
)
2,329
(4,793
)
(575
)
EBITDA
12,731
(7,085
)
23,465
5,646
36,403
Adjustments:
Pension and OPEB plan expenses(1)
477
347
899
824
1,817
Rationalization expenses(2)
110
3,145
—
3,255
—
Rationalization-related expenses(3)
—
2,655
—
2,655
—
Non-cash (gains) losses on foreign
currency remeasurement(4)
(928
)
(162
)
273
(1,090
)
720
Stock-based compensation expense(5)
1,561
1,047
1,385
2,608
2,181
Proxy contest expenses(6)
542
210
—
752
—
Tax Receivable Agreement adjustment(7)
—
37
—
37
16
Adjusted EBITDA
$
14,493
$
194
$
26,022
$
14,687
$
41,137
Reconciliation of
Net Cash (Used in) Provided by Operating Activities to Free Cash
Flow and Adjusted Free Cash Flow
Six Months Ended June
30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Net cash (used in) provided by
operating activities
$
(36,855
)
$
(530
)
$
(9,024
)
$
(37,385
)
$
15,774
Capital expenditures
(6,979
)
(10,511
)
(14,518
)
(17,490
)
(39,789
)
Free cash flow
(43,834
)
(11,041
)
(23,542
)
(54,875
)
(24,015
)
Interest rate swap settlements(9)
—
—
23,823
—
27,453
Adjusted free cash flow
$
(43,834
)
$
(11,041
)
$
281
$
(54,875
)
$
3,438
Reconciliation of
Cost of Goods Sold to Cash Cost of Goods Sold per MT
Six Months Ended June
30,
Q2 2024
Q1 2024
Q2 2023
2024
2023
Cost of goods sold
$
131,970
$
135,204
$
157,216
$
267,174
$
269,861
Less:
Depreciation and amortization(10)
12,648
12,207
13,605
24,855
22,670
Cost of goods sold - by-products and
other(11)
9,301
9,600
4,958
18,901
13,290
Rationalization-related expenses(3)
—
2,655
—
2,655
—
Cash cost of goods sold
110,021
110,742
138,653
220,763
233,901
Sales volume (in thousands of MT)
25.5
24.1
26.4
49.6
43.3
Cash cost of goods sold per MT
$
4,315
$
4,595
$
5,252
$
4,451
$
5,402
(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 grants.
(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 are expected to be 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/20240725662850/en/
Michael Dillon 216-676-2000 investor.relations@graftech.com
GrafTech (NYSE:EAF)
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