Total company overhead expenses were $33 million versus $38 million in the second quarter of 2012. The decline in overhead was largely driven by rightsizing initiatives, reductions in discretionary expenses and lower incentive compensation expense in a difficult operating environment.
Interest expense in the quarter was $9 million, versus $5 million in the second quarter of 2012. The increase was largely driven by the issuance of the Senior Unsecured Notes in November 2012.
OutlookIn its July 9 th report, the International Monetary Fund (IMF) reduced its estimate for 2013 global GDP growth to 3.1 percent, representing the third consecutive downward revision this year. The IMF also states that global growth has not accelerated as expected and has underperformed relative to its prior expectations due to several factors including protracted recessionary conditions in Europe, weaker than anticipated economic expansion in the United States and slower growth in emerging markets. On July 22, 2013, the World Steel Association cited that global steel production, excluding China, declined 2.7 percent in the first half of 2013 as compared to the same period in the prior year. Expectations for improvement in the second half of 2013 are waning and steel customer confidence remains low. As a result of the above economic factors, steel data and feedback from our customers, we are reducing our targeted EBITDA range for the full year 2013 to $145 million to $165 million to reflect weaker than previously anticipated demand for our Industrial Materials products. Consequently, we are also reducing our targeted operating cash flow guidance to $110 million to $130 million to reflect the reduction in profitability and higher than previously planned inventory levels. It is important to note that 2013 marks the final year of a third party wind-down agreement triggered by the acquisition of Seadrift Coke in which GrafTech is obliged to purchase minimum third party needle coke quantities. Going forward, this will provide us with increased flexibility to further optimize our vertical integration with Seadrift and reduce inventories. Given the challenging operating environment, we are also reducing our targeted overhead expense ** to approximately $135 million. This compares to overhead expense ** of $155 million in 2012. In the third quarter of 2013, we are targeting EBITDA to be in the range of $30 million to $40 million. Continued growth and improved profitability in the Engineered Solutions segment is expected to partially offset weakness in the Industrial Materials segment.