Summary of Key Actions in 2013
Update on Rationalization and Related Initiatives
- Announced global initiatives to significantly improve GrafTech's competitive position to drive operating efficiencies, global competitiveness and shareholder value, primarily in its Industrial Materials segment. These initiatives are now expected to be completed ahead of schedule, resulting in increased savings in 2014.
- Reduced selling and administrative expense by 18 percent from prior year.
- Implemented LEAN and procurement initiatives in 2013 expected to generate savings of $20 million or more in 2014.
- Reduced working capital by $32 million compared to the prior year, primarily driven by decreases in inventory and accounts receivable.
- Generated net cash provided by operating activities of $117 million versus $101 million in 2012.
- Lowered capital expenditures by $41 million compared to 2012.
It is now estimated that savings in 2014 will be $50 million, up from the previous estimate of $35 million. Thereafter, annualized savings are still expected to be approximately $75 million. In addition, overall costs of the initiatives are estimated to be lower than originally anticipated, down from $105 million to $100 million ($30 million of which is expected to be cash).
The Company now expects these initiatives, along with the completion of the wind-down agreement for third party supply of needle coke, to generate approximately $150 million of working capital improvements, up from the previous estimate of $100 million. Approximately $75 million is expected in 2014, with the remaining $75 million in 2015.
Industrial Materials Segment
The Industrial Materials segment’s net sales were $236 million in the fourth quarter of 2013, as compared to $310 million in the fourth quarter of 2012. The Industrial Materials segment had an operating loss in the fourth quarter of 2013 of $33 million, as compared to operating income of $39 million in the fourth quarter of 2012. Adjusted segment operating income* (which excludes the impact of rationalization and related charges and pension mark-to-market accounting) was $4 million in the fourth quarter of 2013 as compared to $44 million in the fourth quarter of 2012. The reductions in sales and operating income are largely due to lower graphite electrode and needle coke pricing.