Business Context and Reporting Period
This Form 8-K Current Report was filed by GrafTech International Ltd. on March 15, 2004. The filing serves to disclose Regulation FD information regarding the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. The primary purpose is to provide a reconciliation of net income and earnings per share (EPS) before special items (non-GAAP) to the net loss and net loss per share calculated under Generally Accepted Accounting Principles (GAAP).
Key Financial Metrics
The filing provides a reconciliation of financial results for the years ended December 31, 2002, and December 31, 2003. Specific figures for revenue, cash flow, margins, debt, and liquidity are not provided in this document; only net income/loss and EPS data are presented.
| Metric | Year Ended Dec 31, 2002 | Year Ended Dec 31, 2003 |
|---|---|---|
| Net Income (Loss) - GAAP | $(18) million | $(24) million |
| Diluted EPS - GAAP | $(0.33) | $(0.36) |
| Income (Loss) Excluding Adjustments (Non-GAAP) | $(8) million | $23 million |
| Diluted EPS Excluding Adjustments (Non-GAAP) | $(0.15) | $0.33 |
| Income (Loss) Excluding All Special Items (Non-GAAP) | $(14) million | $16 million |
| Diluted EPS Excluding All Special Items (Non-GAAP) | $(0.25) | $0.21 |
Material Changes and Adjustments
While GAAP net loss increased from $(18) million in 2002 to $(24) million in 2003, the company reported a significant improvement in non-GAAP income, shifting from a loss of $(8) million to a profit of $23 million when excluding specific adjustments. Key adjustments impacting the 2003 results included:
- Restructuring and Impairment: $19 million (2003) vs. $16 million (2002).
- Antitrust Reserve Adjustment: $29 million favorable adjustment in 2003 (none in 2002).
- Gain on Sale of Discontinued Operations: $(1) million in 2003 (none in 2002).
- Tax Settlement Adjustment: $(6) million in 2002 (none in 2003).
- Other (Income) Expense, Net: $(7) million in 2003 vs. $(6) million in 2002.
Management Commentary and Risks
Management states that the non-GAAP measures (income excluding special items) are used to provide useful information regarding operating profitability and are utilized in decision-making activities. The company asserts that the excluded items are not primarily related to core operational activities. However, the filing includes a cautionary note that these non-GAAP measures should not be considered in isolation or as a substitute for GAAP net income. Additionally, the company notes that its calculation method may not be comparable to methods used by other companies.
Investor Verification Checklist
- Verify the full details of the $29 million antitrust reserve adjustment in the Form 10-K to understand the nature of the liability release.
- Review the Form 10-K for the specific breakdown of the $19 million restructuring and impairment charges.
- Confirm the company's actual revenue and cash flow figures, as they are not disclosed in this 8-K summary.
- Assess the sustainability of the non-GAAP profit of $23 million given the heavy reliance on the antitrust reserve adjustment.