|
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
for the transition period from
to
|
|
|
|
Delaware
|
27-2496053
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
982 Keynote Circle
|
44131
|
Brooklyn Heights, OH
|
(Zip code)
|
(Address of principal executive offices)
|
|
|
Large Accelerated Filer
o
|
Accelerated Filer
o
|
Emerging Growth Company
o
|
Non-Accelerated Filer
x
|
Smaller Reporting Company
o
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.
o
|
|
|
PART I. FINANCIAL INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
the cyclical nature of our business and the selling prices of our products may lead to periods of reduced profitability and net losses in the future;
|
•
|
the possibility that we may be unable to implement our business strategies, including our initiative to secure and maintain longer-term customer contracts, in an effective manner;
|
•
|
the possibility that tax legislation could adversely affect us or our stockholders;
|
•
|
pricing for graphite electrodes has historically been cyclical and current prices are relatively high, however, the price of graphite electrodes may decline in the future;
|
•
|
the sensitivity of our business and operating results to economic conditions;
|
•
|
our dependence on the global steel industry generally and the electric arc furnace ("EAF") steel industry in particular;
|
•
|
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 petroleum needle coke;
|
•
|
our dependence on supplies of raw materials (in addition to petroleum needle coke) and energy;
|
•
|
the possibility that our manufacturing operations are subject to hazards;
|
•
|
changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities;
|
•
|
the legal, economic, social and political risks associated with our substantial operations in multiple countries;
|
•
|
the possibility that fluctuation of foreign currency exchange rates could materially harm our financial results;
|
•
|
the possibility that our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period, including as a result of equipment failure, climate change, regulatory issues, natural disasters, public health crises, political crises or other catastrophic events;
|
•
|
our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services;
|
•
|
the possibility that we are unable to recruit or retain key management and plant operating personnel or successfully negotiate with the representatives of our employees, including labor unions;
|
•
|
the possibility that we may divest or acquire businesses, which could require significant management attention or disrupt our business;
|
•
|
the sensitivity of goodwill on our balance sheet to changes in the market;
|
•
|
the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security;
|
•
|
our dependence on protecting our intellectual property;
|
•
|
the possibility that third parties may claim that our products or processes infringe their intellectual property rights;
|
•
|
the possibility that significant changes in our jurisdictional earnings mix or in the tax laws of those jurisdictions could adversely affect our business;
|
•
|
the possibility that our indebtedness could limit our financial and operating activities or that our cash flows may not be sufficient to service our indebtedness;
|
•
|
the possibility that restrictive covenants in our financing agreements could restrict or limit our operations;
|
•
|
the fact that borrowings under certain of our existing financing agreements subjects us to interest rate risk;
|
•
|
the possibility of a lowering or withdrawal of the ratings assigned to our debt;
|
•
|
the possibility that disruptions in the capital and credit markets could adversely affect our results of operations, cash flows and financial condition, or those of our customers and suppliers;
|
•
|
the possibility that highly concentrated ownership of our common stock may prevent minority stockholders from influencing significant corporate decisions;
|
•
|
the possibility that we may not pay cash dividends on our common stock in the future;
|
•
|
the fact that certain of our stockholders have the right to engage or invest in the same or similar businesses as us;
|
•
|
the fact that certain provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated By-Laws could hinder, delay or prevent a change of control;
|
•
|
the fact that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders; and
|
•
|
our status as a "controlled company" within the meaning of the New York Stock Exchange ("NYSE") corporate governance standards, which allows us to qualify for exemptions from certain corporate governance requirements.
|
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
42,289
|
|
|
$
|
49,880
|
|
Accounts and notes receivable, net of allowance for doubtful accounts of
$1,036 as of March 31, 2019 and $1,129 as of December 31, 2018
|
278,410
|
|
|
248,286
|
|
||
Inventories
|
299,794
|
|
|
293,717
|
|
||
Prepaid expenses and other current assets
|
50,594
|
|
|
46,168
|
|
||
Total current assets
|
671,087
|
|
|
638,051
|
|
||
Property, plant and equipment
|
692,186
|
|
|
688,842
|
|
||
Less: accumulated depreciation
|
185,121
|
|
|
175,137
|
|
||
Net property, plant and equipment
|
507,065
|
|
|
513,705
|
|
||
Deferred income taxes
|
58,760
|
|
|
71,707
|
|
||
Goodwill
|
171,117
|
|
|
171,117
|
|
||
Other assets
|
121,670
|
|
|
110,911
|
|
||
Total assets
|
$
|
1,529,699
|
|
|
$
|
1,505,491
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
85,219
|
|
|
$
|
88,097
|
|
Short-term debt
|
15,492
|
|
|
106,323
|
|
||
Accrued income and other taxes
|
47,700
|
|
|
82,255
|
|
||
Other accrued liabilities
|
42,827
|
|
|
50,452
|
|
||
Related party payable - tax receivable agreement
|
23,852
|
|
|
—
|
|
||
Total current liabilities
|
215,090
|
|
|
327,127
|
|
||
Long-term debt
|
2,017,716
|
|
|
2,050,311
|
|
||
Other long-term obligations
|
69,471
|
|
|
72,519
|
|
||
Deferred income taxes
|
46,415
|
|
|
45,825
|
|
||
Related party payable - tax receivable agreement
|
62,625
|
|
|
86,478
|
|
||
Contingencies – Note 9
|
|
|
|
||||
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, 290,537,612
shares issued and outstanding as of March 31, 2019 and December 31, 2018
|
2,905
|
|
|
2,905
|
|
||
Additional paid-in capital
|
819,915
|
|
|
819,622
|
|
||
Accumulated other comprehensive income (loss)
|
16,318
|
|
|
(5,800
|
)
|
||
Accumulated deficit
|
(1,720,756
|
)
|
|
(1,893,496
|
)
|
||
Total stockholders’ (deficit) equity
|
(881,618
|
)
|
|
(1,076,769
|
)
|
||
|
|
|
|
||||
Total liabilities and stockholders’ equity
|
$
|
1,529,699
|
|
|
$
|
1,505,491
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
||||
Net sales
|
$
|
474,994
|
|
|
$
|
451,899
|
|
Cost of sales
|
195,524
|
|
|
145,149
|
|
||
Gross profit
|
279,470
|
|
|
306,750
|
|
||
Research and development
|
637
|
|
|
429
|
|
||
Selling and administrative expenses
|
15,226
|
|
|
15,876
|
|
||
Operating profit
|
263,607
|
|
|
290,445
|
|
||
|
|
|
|
||||
Other expense (income), net
|
467
|
|
|
2,005
|
|
||
Interest expense
|
33,700
|
|
|
37,865
|
|
||
Interest income
|
(414
|
)
|
|
(115
|
)
|
||
Income from continuing operations before provision for income taxes
|
229,854
|
|
|
250,690
|
|
||
|
|
|
|
||||
Provision for income taxes
|
32,418
|
|
|
28,643
|
|
||
Net income from continuing operations
|
197,436
|
|
|
222,047
|
|
||
|
|
|
|
||||
Income from discontinued operations, net of tax
|
—
|
|
|
1,626
|
|
||
|
|
|
|
||||
Net income
|
$
|
197,436
|
|
|
$
|
223,673
|
|
|
|
|
|
||||
Basic income per common share*:
|
|
|
|
||||
Net income per share
|
$
|
0.68
|
|
|
$
|
0.74
|
|
Net income from continuing operations per share
|
$
|
0.68
|
|
|
$
|
0.73
|
|
Weighted average common shares outstanding
|
290,559,025
|
|
|
302,225,923
|
|
||
Diluted income per common share*:
|
|
|
|
||||
Income per share
|
$
|
0.68
|
|
|
$
|
0.74
|
|
Diluted income from continuing operations per share
|
$
|
0.68
|
|
|
$
|
0.73
|
|
Weighted average common shares outstanding
|
290,566,163
|
|
|
302,225,923
|
|
||
|
|
|
|
||||
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
||||
Net income
|
$
|
197,436
|
|
|
$
|
223,673
|
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments
|
(3,539
|
)
|
|
5,040
|
|
||
Commodities derivatives, net of tax of ($6,903) and $0, respectively
|
25,657
|
|
|
(6,113
|
)
|
||
Other comprehensive income (loss), net of tax:
|
22,118
|
|
|
(1,073
|
)
|
||
Comprehensive income
|
$
|
219,554
|
|
|
$
|
222,600
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
Cash flow from operating activities:
|
|
|
|
||||
Net income
|
$
|
197,436
|
|
|
$
|
223,673
|
|
Adjustments to reconcile net income to cash provided by operations:
|
|
|
|
||||
Depreciation and amortization
|
15,585
|
|
|
16,328
|
|
||
Deferred income tax (benefit)/provision
|
6,427
|
|
|
19,791
|
|
||
Loss on extinguishment of debt
|
—
|
|
|
23,827
|
|
||
Interest expense
|
1,588
|
|
|
1,129
|
|
||
Other charges, net
|
3,268
|
|
|
2,574
|
|
||
Net change in working capital*
|
(71,443
|
)
|
|
(150,527
|
)
|
||
Change in long-term assets and liabilities
|
3,956
|
|
|
3,758
|
|
||
Net cash provided by operating activities
|
156,817
|
|
|
140,553
|
|
||
Cash flow from investing activities:
|
|
|
|
||||
Capital expenditures
|
(14,569
|
)
|
|
(14,025
|
)
|
||
Proceeds from the sale of assets
|
74
|
|
|
736
|
|
||
Net cash used in investing activities
|
(14,495
|
)
|
|
(13,289
|
)
|
||
Cash flow from financing activities:
|
|
|
|
||||
Short-term debt, net
|
—
|
|
|
(12,536
|
)
|
||
Revolving Facility reductions
|
—
|
|
|
(45,692
|
)
|
||
Debt issuance costs
|
—
|
|
|
(20,090
|
)
|
||
Proceeds from the issuance of long-term debt, net of
original issuance discount
|
—
|
|
|
1,492,500
|
|
||
Repayment of Senior Notes
|
—
|
|
|
(304,782
|
)
|
||
Principal repayments on long-term debt
|
(125,000
|
)
|
|
—
|
|
||
Dividends paid to non-related-party
|
(5,194
|
)
|
|
—
|
|
||
Dividends paid to related-party
|
(19,502
|
)
|
|
(1,112,000
|
)
|
||
Net cash used in financing activities
|
(149,696
|
)
|
|
(2,600
|
)
|
||
Net change in cash and cash equivalents
|
(7,374
|
)
|
|
124,664
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(217
|
)
|
|
344
|
|
||
Cash and cash equivalents at beginning of period
|
49,880
|
|
|
13,365
|
|
||
Cash and cash equivalents at end of period
|
$
|
42,289
|
|
|
$
|
138,373
|
|
|
|
|
|
||||
* Net change in working capital due to changes in the following components:
|
|
|
|
||||
Accounts and notes receivable, net
|
$
|
(31,389
|
)
|
|
$
|
(132,794
|
)
|
Inventories
|
(4,705
|
)
|
|
(28,679
|
)
|
||
Prepaid expenses and other current assets
|
7,425
|
|
|
10,754
|
|
||
Income taxes payable
|
(38,333
|
)
|
|
6,533
|
|
||
Accounts payable and accruals
|
(5,305
|
)
|
|
(8,227
|
)
|
||
Interest payable
|
864
|
|
|
1,886
|
|
||
Net change in working capital
|
$
|
(71,443
|
)
|
|
$
|
(150,527
|
)
|
|
Issued
Shares of
Common
Stock
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income(Loss)
|
|
Retained Earnings (Accumulated
Deficit)
|
|
Total
Stockholders’
Equity
|
|||||||||||
Balance as of December 31, 2018
|
290,537,612
|
|
|
$
|
2,905
|
|
|
$
|
819,622
|
|
|
$
|
(5,800
|
)
|
|
$
|
(1,893,496
|
)
|
|
$
|
(1,076,769
|
)
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,436
|
|
|
197,436
|
|
|||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodity and foreign currency derivatives income, net of tax of ($7,295)
|
|
|
|
|
|
|
27,113
|
|
|
|
|
27,113
|
|
|||||||||
Commodity and foreign currency derivatives reclassification adjustments, net of tax of $392
|
|
|
|
|
|
|
(1,456
|
)
|
|
|
|
(1,456
|
)
|
|||||||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,539
|
)
|
|
—
|
|
|
(3,539
|
)
|
|||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
22,118
|
|
|
—
|
|
|
22,118
|
|
|||||
Stock-based compensation
|
|
|
|
|
293
|
|
|
|
|
|
|
293
|
|
|||||||||
Dividends paid to related party
stockholder ($0.085 per share) |
|
|
|
|
|
|
|
|
(19,502
|
)
|
|
(19,502
|
)
|
|||||||||
Dividends paid to non-related party
stockholders ($0.085 per share) |
|
|
|
|
|
|
|
|
(5,194
|
)
|
|
(5,194
|
)
|
|||||||||
Balance as of March 31, 2019
|
290,537,612
|
|
|
$
|
2,905
|
|
|
$
|
819,915
|
|
|
$
|
16,318
|
|
|
$
|
(1,720,756
|
)
|
|
$
|
(881,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of December 31, 2017
(1)
|
302,225,923
|
|
|
$
|
3,022
|
|
|
$
|
851,315
|
|
|
$
|
20,289
|
|
|
$
|
(261,411
|
)
|
|
$
|
613,215
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
223,673
|
|
|
223,673
|
|
|||||
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commodity and foreign currency derivatives loss, net of tax of $0
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,113
|
)
|
|
—
|
|
|
(6,113
|
)
|
|||||
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
5,040
|
|
|
—
|
|
|
5,040
|
|
|||||
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,073
|
)
|
|
—
|
|
|
(1,073
|
)
|
|||||
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||||||
Dividends paid to related party
stockholder ($3.68 per share) |
|
|
|
|
|
|
|
|
(1,112,000
|
)
|
|
(1,112,000
|
)
|
|||||||||
Balance as of March 31, 2018
(1)
|
302,225,923
|
|
|
$
|
3,022
|
|
|
$
|
851,315
|
|
|
$
|
19,216
|
|
|
$
|
(1,149,738
|
)
|
|
$
|
(276,185
|
)
|
(1)
|
Organization and Summary of Significant Accounting Policies
|
(2)
|
Revenue from Contracts with Customers
|
|
For the Three
Months Ended
March 31, 2019
|
|
For the Three
Months Ended March 31, 2018 |
||||
|
(Dollars in thousands)
|
||||||
Graphite Electrodes - Three-to-five-year take-or-pay contracts
|
$
|
396,040
|
|
|
$
|
272,201
|
|
Graphite Electrodes - Short-term agreements and spot sales
|
47,296
|
|
|
143,710
|
|
||
By-products and other
|
31,658
|
|
|
35,988
|
|
||
Total Revenues
|
$
|
474,994
|
|
|
$
|
451,899
|
|
|
Current deferred revenue
|
|
Long-Term deferred revenue
|
||||
|
(dollars in thousands)
|
||||||
Balance as of December 31, 2018
|
$
|
5,380
|
|
|
$
|
7,716
|
|
Revenue recognized that was included in the deferred revenue balance
at the beginning of the period
|
(1,424
|
)
|
|
—
|
|
||
Increases due to cash received, excluding amounts recognized as revenue during the period
|
297
|
|
|
—
|
|
||
Foreign currency impact
|
$
|
4
|
|
|
(17
|
)
|
|
Balance as of March 31, 2019
|
$
|
4,257
|
|
|
$
|
7,699
|
|
(3)
|
Leases
|
|
|
For the Three Months Ended March 31, 2019
|
||
|
|
(Dollars in thousands)
|
||
Operating lease cost
|
|
1,032
|
|
|
Short-term lease cost
|
|
4
|
|
|
Variable lease cost
|
|
52
|
|
|
Total lease cost
|
|
$
|
1,088
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
|
|
(Dollars in thousands)
|
|
RoU assets obtained in exchange for new operating lease liabilities (non-cash)
|
|
832
|
|
Operating (use of cash) from operating leases
|
|
(1,032
|
)
|
|
|
As of
March 31, 2019
|
||
|
|
(Dollars in thousands)
|
||
Operating RoU Assets*
|
|
$
|
7,370
|
|
*Amount included in Other assets
|
|
|
||
|
|
|
||
Current operating lease liabilities
|
|
3,701
|
|
|
Non-current operating lease liabilities
|
|
3,660
|
|
|
Total operating lease liabilities**
|
|
$
|
7,361
|
|
**Amounts included in other accrued liabilities assets and other long-term obligations
|
|
|
||
|
|
|
||
Weighted average remaining lease term (in years)
|
|
2.78
|
|
|
Weighted average discount rate - operating leases
|
|
5.62
|
%
|
(4)
|
Retirement Plans and Postretirement Benefits
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(Dollars in thousands)
|
||||||
Service cost
|
$
|
575
|
|
|
$
|
498
|
|
Interest cost
|
1,316
|
|
|
1,241
|
|
||
Expected return on plan assets
|
(1,338
|
)
|
|
(1,502
|
)
|
||
Net cost
|
$
|
553
|
|
|
$
|
237
|
|
(5)
|
Goodwill and Other Intangible Assets
|
Goodwill
|
|||
(Dollars in thousands)
|
|||
Balance as of December 31, 2018
|
$
|
171,117
|
|
Adjustments
|
—
|
|
|
Balance as of March 31, 2019
|
$
|
171,117
|
|
Intangible Assets
|
|||||||||||||||||||||||
|
As of March 31, 2019
|
|
As of December 31, 2018
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization |
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
|
(Dollars in Thousands)
|
||||||||||||||||||||||
Trade name
|
$
|
22,500
|
|
|
$
|
(8,262
|
)
|
|
$
|
14,238
|
|
|
$
|
22,500
|
|
|
$
|
(7,721
|
)
|
|
$
|
14,779
|
|
Technological know-how
|
55,300
|
|
|
(24,964
|
)
|
|
30,336
|
|
|
55,300
|
|
|
(23,503
|
)
|
|
31,797
|
|
||||||
Customer–related
intangible
|
64,500
|
|
|
(16,173
|
)
|
|
48,327
|
|
|
64,500
|
|
|
(15,070
|
)
|
|
49,430
|
|
||||||
Total finite-lived
intangible assets
|
$
|
142,300
|
|
|
$
|
(49,399
|
)
|
|
$
|
92,901
|
|
|
$
|
142,300
|
|
|
$
|
(46,294
|
)
|
|
$
|
96,006
|
|
(6)
|
Debt and Liquidity
|
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(Dollars in thousands)
|
||||||
2018 Credit Facility (2018 Term Loan and 2018 Revolving Facility)
|
2,032,463
|
|
|
2,155,883
|
|
||
Other Debt
|
745
|
|
|
751
|
|
||
Total debt
|
2,033,208
|
|
|
2,156,634
|
|
||
Less: Short-term debt
|
(15,492
|
)
|
|
(106,323
|
)
|
||
Long-term debt
|
$
|
2,017,716
|
|
|
$
|
2,050,311
|
|
(7)
|
Inventories
|
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(Dollars in thousands)
|
||||||
Inventories:
|
|
|
|
||||
Raw materials
|
$
|
97,951
|
|
|
$
|
99,935
|
|
Work in process
|
138,664
|
|
|
125,767
|
|
||
Finished goods
|
63,179
|
|
|
68,015
|
|
||
Total
|
$
|
299,794
|
|
|
$
|
293,717
|
|
|
For the Three Months
Ended March 31, |
||||||
|
2019
|
|
2018
|
||||
|
(Dollars in thousands)
|
||||||
Interest incurred on debt
|
$
|
32,120
|
|
|
$
|
12,919
|
|
Senior Note redemption premium
|
—
|
|
|
4,782
|
|
||
Accretion of fair value adjustment on Senior Notes
|
—
|
|
|
19,414
|
|
||
Accretion of original issue discount on 2018 Term Loans
|
549
|
|
|
88
|
|
||
Amortization of debt issuance costs
|
1,031
|
|
|
662
|
|
||
Total interest expense
|
$
|
33,700
|
|
|
$
|
37,865
|
|
(9)
|
Contingencies
|
(10)
|
Income Taxes
|
(11)
|
Derivative Instruments
|
|
|
|
|
Amount of (Gain)/Loss
Recognized
|
||||
|
|
Location of (Gain)/Loss Recognized in the Consolidated Statement of Operations
|
|
For the Three Months Ended March 31,
|
||||
|
|
|
2019
|
|
2018
|
|||
Derivatives designated as cash flow hedges:
|
|
|
|
(Dollars in thousands)
|
||||
Commodity contract hedges
|
|
Cost of sales
|
|
(1,848
|
)
|
|
—
|
|
|
|
|
|
|
|
|
||
Derivatives not designated as hedges:
|
|
|
|
|
|
|
||
Foreign currency derivatives
|
|
Cost of sales, Other (income)/expense
|
|
(677
|
)
|
|
118
|
|
(12)
|
Accumulated Other Comprehensive Income (Loss)
|
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(Dollars in thousands)
|
||||||
Foreign currency translation adjustments, net of tax
|
$
|
(6,461
|
)
|
|
$
|
(2,922
|
)
|
Commodities and foreign currency derivatives, net of tax
|
22,779
|
|
|
(2,878
|
)
|
||
Total accumulated comprehensive income (loss)
|
$
|
16,318
|
|
|
$
|
(5,800
|
)
|
(13)
|
Earnings per Share
|
|
For the Three Months
Ended March 31, |
||||
|
2019
|
|
2018
|
||
|
|
|
|
||
Weighted average common shares outstanding for basic calculation
|
290,559,025
|
|
|
302,225,923
|
|
Add: Effect of stock options, deferred stock units and restricted stock units
|
7,138
|
|
|
—
|
|
Weighted average common shares outstanding for diluted calculation
|
290,566,163
|
|
|
302,225,923
|
|
|
Number
of Shares
|
|
Weighted-
Average
Exercise
Price
|
||
Outstanding unvested as of December 31, 2018
|
968,720
|
|
|
15.68
|
|
Granted
|
157,000
|
|
|
13.64
|
|
Forfeited
|
(24,670
|
)
|
|
15.00
|
|
Outstanding unvested as of March 31, 2019
|
1,101,050
|
|
|
15.40
|
|
|
Number
of Shares
|
|
Weighted-
Average
Grant Date
Fair Value
|
||
Outstanding unvested as of December 31, 2018
|
27,570
|
|
|
12.88
|
|
Granted
|
182,185
|
|
|
13.36
|
|
Vested
|
(143
|
)
|
|
12.79
|
|
Outstanding unvested as of March 31, 2019
|
209,612
|
|
|
13.38
|
|
|
For the Three Months
Ended March 31, |
|||||
(in thousands)
|
2019
|
2018
|
||||
Net sales
|
$
|
474,994
|
|
$
|
451,899
|
|
Net income
|
197,436
|
|
223,673
|
|
||
EBITDA from continuing operations
(1)
|
278,725
|
|
304,768
|
|
||
Adjusted EBITDA from continuing operations
(1)
|
283,815
|
|
310,339
|
|
|
For the Three Months
Ended March 31, |
|||||
(in thousands, except price data)
|
2019
|
2018
|
||||
Sales volume (MT)
(1)
|
45
|
|
42
|
|
||
Weighted average realized price
(2)
|
$
|
9,954
|
|
$
|
9,989
|
|
Production volume (MT)
(3)
|
48
|
|
43
|
|
||
Production capacity excluding St. Marys during idle period (MT)
(4)(5)
|
51
|
|
44
|
|
||
Capacity utilization excluding St. Marys during idle period
(4)(6)
|
94
|
%
|
98
|
%
|
||
Total production capacity (MT)
(5)(7)
|
58
|
|
51
|
|
||
Total capacity utilization
(6)(7)
|
83
|
%
|
84
|
%
|
•
|
adjusted EBITDA from continuing operations does not reflect changes in, or cash requirements for, our working capital needs;
|
•
|
adjusted EBITDA from continuing operations 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 from continuing operations does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
|
•
|
adjusted EBITDA from continuing operations does not reflect tax payments that may represent a reduction in cash available to us;
|
•
|
adjusted EBITDA from continuing operations does not reflect expenses relating to our pension and OPEB plans;
|
•
|
adjusted EBITDA from continuing operations does not reflect the non‑cash gains or losses from foreign currency remeasurement of non‑operating liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar;
|
•
|
adjusted EBITDA from continuing operations does not reflect initial and follow-on public offering expenses;
|
•
|
adjusted EBITDA from continuing operations does not reflect related party Tax Receivable Agreement expense;
|
•
|
adjusted EBITDA from continuing operations does not reflect rationalization‑related charges, stock-based compensation or the non‑cash write‑off of fixed assets; and
|
•
|
other companies, including companies in our industry, may calculate EBITDA from continuing operations and adjusted EBITDA from continuing operations differently, which reduces its usefulness as a comparative measure.
|
|
For the Three Months
Ended March 31, |
|||
|
2019
|
2018
|
||
|
(in thousands)
|
|||
Net income
|
197,436
|
|
223,673
|
|
Add:
|
|
|
||
Discontinued operations
|
—
|
|
(1,626
|
)
|
Depreciation and amortization
|
15,585
|
|
16,328
|
|
Interest expense
|
33,700
|
|
37,865
|
|
Interest income
|
(414
|
)
|
(115
|
)
|
Income taxes
|
32,418
|
|
28,643
|
|
EBITDA from continuing operations
|
278,725
|
|
304,768
|
|
Adjustments:
|
|
|
||
Pension and OPEB plan expenses
(1)
|
770
|
|
511
|
|
Initial and follow-on public offering expenses
(2)
|
685
|
|
3,187
|
|
Non‑cash loss on foreign currency remeasurement
(3)
|
411
|
|
1,873
|
|
Stock-based compensation
(4)
|
292
|
|
—
|
|
Non‑cash fixed asset write-off
(5)
|
2,932
|
|
—
|
|
Adjusted EBITDA from continuing operations
|
283,815
|
|
310,339
|
|
(1)
|
Service and interest cost of our OPEB plans. Also includes a mark‑to‑market loss (gain) for plan assets as of December of each year.
|
(2)
|
Legal, accounting, printing and registration fees associated with the initial and follow-on public offerings.
|
(3)
|
Non‑cash loss from foreign currency remeasurement of non‑operating liabilities of our non‑U.S. subsidiaries where the functional currency is the U.S. dollar.
|
(4)
|
Non-cash expense for stock-based compensation grants.
|
(5)
|
Non‑cash fixed asset write‑off recorded for obsolete manufacturing equipment.
|
|
For the Three Months
Ended March 31,
|
|
Increase/ Decrease
|
|
% Change
|
|||||||||
|
2019
|
|
2018
|
|
|
|||||||||
|
(Dollars in thousands)
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||
Net sales
|
$
|
474,994
|
|
|
$
|
451,899
|
|
|
$
|
23,095
|
|
|
5
|
%
|
Cost of sales
|
195,524
|
|
|
145,149
|
|
|
50,375
|
|
|
35
|
%
|
|||
Gross profit
|
279,470
|
|
|
306,750
|
|
|
(27,280
|
)
|
|
(9
|
)%
|
|||
Research and development
|
637
|
|
|
429
|
|
|
208
|
|
|
48
|
%
|
|||
Selling and administrative expenses
|
15,226
|
|
|
15,876
|
|
|
(650
|
)
|
|
(4
|
)%
|
|||
Operating income
|
263,607
|
|
|
290,445
|
|
|
(26,838
|
)
|
|
(9
|
)%
|
|||
Other expense
|
467
|
|
|
2,005
|
|
|
(1,538
|
)
|
|
(77
|
)%
|
|||
Interest expense
|
33,700
|
|
|
37,865
|
|
|
(4,165
|
)
|
|
(11
|
)%
|
|||
Interest income
|
(414
|
)
|
|
(115
|
)
|
|
(299
|
)
|
|
260
|
%
|
|||
Income from continuing operations before
provision for income taxes |
229,854
|
|
|
250,690
|
|
|
(20,836
|
)
|
|
(8
|
)%
|
|||
Provision for income taxes
|
32,418
|
|
|
28,643
|
|
|
3,775
|
|
|
13
|
%
|
|||
Net income from continuing operations
|
197,436
|
|
|
222,047
|
|
|
(24,611
|
)
|
|
(11
|
)%
|
|||
Income from discontinued operations, net of tax
|
—
|
|
|
1,626
|
|
|
(1,626
|
)
|
|
(100
|
)%
|
|||
Net income
|
$
|
197,436
|
|
|
$
|
223,673
|
|
|
$
|
(26,237
|
)
|
|
(12
|
)%
|
•
|
Non-cash items such as depreciation and amortization, impairment, post retirement obligations, and severance and pension plan changes;
|
•
|
Gains and losses attributed to investing and financing activities such as gains and losses on the sale of assets and unrealized currency transaction gains and losses; and
|
•
|
Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.
|
•
|
net cash outflows in accounts receivable of
$31.4 million
from the increase in accounts receivable due to the timing of sales;
|
•
|
net cash outflows from increases in inventory of
$4.7 million
, due primarily to higher priced raw materials;
|
•
|
net cash inflows from the utilization of prepaid assets of
$7.4 million
;
|
•
|
net cash outflows from decreases in accounts payable and accruals of
$5.3 million
, due to the timing of payments; and
|
•
|
net cash outflows from decreased income taxes payable of
$38.3 million
resulting from required tax payments as our profitability has increased.
|
•
|
net cash outflows in accounts receivable of $132.8 million from the increase in accounts receivable due to increased sales driven by higher weighted average realized prices;
|
•
|
net cash outflows from increases in inventory of $28.7 million, due primarily to higher priced raw materials; and
|
•
|
net cash inflows from decreased prepaid expense of $10.8 million due to the reduction of advanced payments.
|
•
|
sales made by our subsidiaries in currencies other than local currencies;
|
•
|
raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and
|
•
|
investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the U.S. dollar.
|
Exhibit
Number
|
Description of Exhibit
|
3.1*#
|
|
|
|
3.2
|
|
|
|
10.1*+
|
|
|
|
10.2*+
|
|
|
|
31.1*
|
|
|
|
31.2*
|
|
|
|
32.1*
|
|
|
|
32.2*
|
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
+
|
Indicates management contract or compensatory plan or arrangement
|
#
|
Corrected version of exhibit previously filed as Exhibit 3.1 to GrafTech International Ltd.'s Registration Statement on Form S-1/A filed April 13, 2018.
|
|
|
|
GRAFTECH INTERNATIONAL LTD.
|
Date:
|
May 1, 2019
|
By:
|
/s/ Quinn J. Coburn
|
|
|
|
Quinn J. Coburn
|
|
|
|
Vice President and Chief Financial
Officer (Principal Financial Officer)
|
(a)
|
[ ] RSUs shall vest on the first anniversary of the Grant Date;
|
(b)
|
[ ] RSUs shall vest on the second anniversary of the Grant Date;
|
(c)
|
[ ] RSUs shall vest on the third anniversary of the Grant Date;
|
(d)
|
[ ] RSUs shall vest on the fourth anniversary of the Grant Date; and
|
(e)
|
[ ] RSUs shall vest on the fifth anniversary of the Grant Date;
|
(a)
|
[ ] Options shall vest and become exercisable on the first anniversary of the Grant Date;
|
(b)
|
[ ] Options shall vest and become exercisable on the second anniversary of the Grant Date;
|
(c)
|
[ ] Options shall vest and become exercisable on the third anniversary of the Grant Date;
|
(d)
|
[ ] Options shall vest and become exercisable on the fourth anniversary of the Grant Date; and
|
(e)
|
[ ] Options shall vest and become exercisable on the fifth anniversary of the Grant Date.
|
5.
|
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
|
By:
|
|
/s/ David J. Rintoul
|
|
|
David J. Rintoul
President and Chief Executive Officer,
(Principal Executive Officer)
|
|
|
May 1, 2019
|
5.
|
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
|
By:
|
|
/s/ Quinn J. Coburn
|
|
|
Quinn J. Coburn
Chief Financial Officer, Vice President Finance and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
May 1, 2019
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.
|
By:
|
|
/s/ David J. Rintoul
|
|
|
David J. Rintoul
President and Chief Executive Officer,
(Principal Executive Officer)
|
|
|
May 1, 2019
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.
|
By:
|
|
/s/ Quinn J. Coburn
|
|
|
Quinn J. Coburn
Chief Financial Officer, Vice President Finance and Treasurer
(Principal Financial and Accounting Officer)
|
|
|
May 1, 2019
|