GrafTech International Inc. ( GTI) Q4 2010 Earnings Conference Call February 24, 2011, 11:00 am ET Executives Kelly Taylor – Director, IR Craig Shular – Chairman, President & CEO Mark Widmar – CFO Analysts Luke Folta – Longbow Research Ian Zaffino – Oppenheimer & Co. Eric Glover – Canaccord Mark Parr – KeyBanc Capital Ray Rund – Shaker Investments Charles Bradford – Bradford Research Presentation Operator
Previous Statements by GTI
» GrafTech International Management Discusses Q 2010 Results - Earnings Call Transcript
» GrafTech International Ltd. Q2 2010 Earnings Call Transcript
» GrafTech International Ltd. Q1 2010 Earnings Call Transcript
» GrafTech International Ltd. Q4 2009 Earnings Call Transcript
Also to the extent that we discuss any non-GAAP financial measures you will find reconciliations in our press release, which is posted on our Web site at www.graftech.com in the Investor Relation section.Finally, we’d like to thank those of you who joined our call on Tuesday to discuss accounting related to our recent acquisition. For your reference, a replay of that call is available on our Web site. At this time, I’d like to turn the call over to Craig. Craig Shular Thank you, Kelly. Good morning, everyone and thank you for joining our call today. Today, we’ll take you through our full-year and our fourth-quarter highlights, and then open it up to your questions. 2010 proved to be a historic year for our company. We successfully completed the strategic acquisitions of Seadrift and St. Marys. These are the first major acquisitions in GrafTech’s history and are important to generating sustainable long-term value for our shareholders and better serving our customer needs. Following the completion of the acquisitions, we exited the year with a very solid balance sheet well-positioned to capitalize on opportunities for future growth, as the global economies continued to recover. The integration process with Seadrift and St. Marys is well underway and progressing very nicely. We’ve inherited two great teams. The cultural fit of our companies is excellent. Our values around safety, ethics, team work, productivity, cost control and continuous improvement are well aligned. Our current expectation is that Seadrift and St. Marys will contribute EBITDA after synergies of approximately $90 million in 2011. Our assessment of operational, tax and working capital synergies potential is consistent with our earlier expectations. Recapping our results, excluding the contributions from the acquisitions and other special items, our 2010 sales increased 50% to $988 million. Operating income improved 85% to $174 million. Net income more than doubled year-over-year to $146 million or $1.20 per share.
Turning to Q4 results. Sales improved to $262 million. Operating income in the quarter was $39 million or approximately 15% of sales. Net income was $39 million or $0.32 per share. Net income was favorably impacted by a lower tax rate, resulting in a $0.06 benefit to the quarter for a normalized EPS of $0.26 per share. The improvement in the rate resulted from realization of a portion of the acquisition related tax synergies in the quarter.In our Industrial Materials segment, sales increased 29% to $215 million in the fourth-quarter. Sales in the quarter increased primarily as a result of higher graphite electrode sales volume partially offset by lower prices. Operating income for the segment was $33 million. In our Engineered Solutions segment, sales were $47 million in the quarter, an increase of 26%, as compared to Q4 ‘09. This was due to higher sales volume across multiple product lines including solar, oil and gas, transportation and electronics. Operating income was $6 million, as compared to $4 million in Q4 ‘09. Our team has grown the Engineered Solutions business from essentially a breakeven business in ‘06 to a solid contributor today. The segment sales in 2010 came in at $173 million, our second best year ever. On February 9th this year, we executed our first external growth initiative in Engineered Solutions. We acquired Micron Research Corporation, a privately held producer of super fine grain graphite for $6.5 million. Micron uses a unique technology to manufacture graphite materials suitable for applications in solar, electronics, EDM and the medical industries. This addition fills a gap in our technology portfolio and is very complementary to our existing Engineered Solutions product portfolio. It will aid in continuing to propel this segment forward. Turning to outlook, based on current IMF projections and other global economic forecast, world output is projected to expand at an average of 4.5% in 2011. IMF has stated that the degrees of growth will vary in both advanced and emerging economies and downside risk remains to the stability of the global recovery. Read the rest of this transcript for free on seekingalpha.com