GrafTech International Ltd (EAF)

[BuddyGuise]

Net sales for the Engineered Solutions segment increased 15 percent to $70 million in the third quarter of 2013 compared to $61 million in the third quarter of 2012. Higher sales in our advanced consumer electronics product offerings drove the increase in revenue.

Mr. Shular commented, "Our Engineered Solutions business had its second consecutive quarter of $70 million in sales. We expect the majority of the start-up expenditures to be behind us and therefore target double-digit operating income margins for the segment in the fourth quarter as production ramps up for new products."

Total pre-tax costs for the rationalization plan are estimated to be approximately $105 million, approximately $30 million of which will be cash outlays to be paid in the fourth quarter of 2013 and through the first half of 2014, and funded through working capital improvements in 2014. The remaining $75 million are non-cash costs, which primarily reflect the write-off of assets, and will be expensed throughout the wind-down period. We incurred approximately $18 million of expense related to these initiatives in the third quarter and we expect approximately $51 million of additional expense based on our current estimates to be recognized in the fourth quarter of 2013.

The rationalization plan will also focus on reducing inventory levels across our production network, and along with the completion of the wind-down agreement for third party supply of needle coke to us, is expected to generate working capital improvements of approximately $100 million. The majority of the cash improvement, approximately $75 million, will be reflected in 2014 with the remaining $25 million expected to be realized in 2015. Going forward, we will utilize our advantaged, integrated supply chain to further reduce working capital requirements and optimize cash flow generation.