GrafTech International Ltd (EAF) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the GrafTech third quarter conference call. At this time, all participants are in a listen-only mode. Following today's presentation instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press star, followed by the zero.

As a reminder, this conference is being recorded today, Thursday, October 24th, 2002.

I would now like to turn the conference over to Ms. Elise Garofalo, Director of Investor Relations. Please go ahead, ma'am.

Thanks. Good morning, everyone, and welcome to our conference call. At this time, each of you should've received a copy of our press release. If you haven't, you can call Linda Drews (ph) at 302-778-8244 and we can fax or email you a copy right away.

Before we begin, I'd like to remind all of you that both this release -- our release and this conference call contain forward-looking statement as defined in the Private Securities Litigation Reform Act of 1995. Please note the cautionary language about forward-looking statements contained in our release and our quarterly report. That same language applies to this conference call.

Today on the call I have Gil Playford, Chairman and CEO; Craig Shular, President and Chief Operating Officer; Scott Mason, Executive Vice President of GTI and President of our AET Division; Corrado De Gasperis, Vice President and Chief Financial and Information Officer.

At this point, I'd like to hand the conference over to Gil Playford.

Good morning, everyone, and thanks a lot, Elise.

The results for our third quarter were released this morning and they were the same as the preliminary results that came out on October 15th. We had a loss in the third quarter of 8 cents per share. The sales for the third quarter were $154 million, 2 percent lower than a year ago and 4 percent lower than the second quarter. The gross margin for the company this quarter was 22.3 percent; gross margin in Q2 was essentially the same at 22.5 percent. The gross profits percentage from quarter to quarter was also about the same at 22 percent for both of the divisions, Graphite Power Systems and Advanced Energy Technology.

The -- probably the main reason why our earnings were below expectations for the third quarter was in the area of graphite electrode production costs. Our production cost per ton were slightly higher in the third quarter from the second, whereas, we had expected it to be lower and the prime reasons for those additional costs really came from how we have been sourcing our products to our customers and some of the transitionary costs that we were incurring in moving product from plant to plant and from plants to customers.

We have, as you know, closed two facilities within the last 12 months - the Tennessee plant last year and the Italian plant this year. We are also increasing our capacity at the largest site in the world in Monterrey, Mexico, a 20,000-ton capacity increase that will be completed at the end of the first quarter of next year. And we're also running all of our other electrode plants flat out. In fact, we had to acquire some tonnage in the market place -- in the competitive marketplace to meet our total sales demand for the third quarter, which also added to our cost per ton. This expansion that I referred to in Mexico, along with better throughput and our other sites, should allow us to reach a new level with fewer sites at about 210,000 tons of annual capacity by the middle of next year.

You may recall that when we took out the two plants, the US plant in Tennessee and the Italian plant, that that removed about 60,000 tons of high cost capacity from our plant network. We are now replacing that with much lower cost capacity, and that will go long ways towards meeting our cost targets that we have in graphite electrodes. We also have updated our savings plan for you, and our latest update is $80 million of annual savings by 2005. We expect our annual savings this year to be about $10 million, $30 million next year, and $60 million in 2004.

Many of the programs that are the backbone of these savings have been implemented, the plant closure in Italy, the redesign of our US benefit plans. We have made a complete overhaul in our legal tax structure that will generate future tax savings. We've done aggressive outsourcing of many of our financial and IT functions that will save future overhead. I think another point I would like to make to you, because we've been getting a number of questions about these cost savings and especially the ones that relate to graphite electrode production, that these numbers that we have here on the basis of the current level of production. And this quarter, we sold about 40 -- 45,000 tons or so.

And that's an annualized rate of 180,000 tons and you'll see that when you look at the history of this business for us that we're really operating at the trough. And as we improve our production capability in fewer but larger plants, we're going to be able to produce and sell closer to 210,000-ton rate overtime. We've calculated these saving of, you know, based on the current production level.

As we do produce and sell more, we will be able to achieve more savings. We have not put that into this plan. We deliberately want to make this a conservative plan and I think, also in light of a lot of uncertainty that, I think, we all are seeing now in the global economy, we thought being conservative was the right route to take here with regard to updating this plan.

Let me now turn to AET, Advanced Energy Technologies. The sales for the quarter was $28 million same as last quarter $28 million and $31 million in the third quarter of last year and gross margins as I mentioned are about 22 percent and I'm going to have Scott Mason, who's with us today comment further, more on AET in a few minutes.

On the corporate side of company, our SG&A was $20 million this quarter. We've been at that rate now for about a year or so. As much of our effort towards streamlining the support infrastructure of this company is going to pay off starting next year and over the following years, which is incorporated in our savings plan. Interest expense was 15 million, 2 million lower than second quarter. We entered into a 10-year, $250 million interest rate swap agreement and that allowed us to increase our exposure to floating rates and that was the prime reason for the lower interest expense for Q3. And we expect now that we would be at that annualized rate of $15 million and therefore this year we're estimating interest expense to be $60 million.

With regard to cash flow, the cash flow in the quarter net cash was consumed up about $44 million net cash used in operations. This requires, I think, a thorough explanation because much of that is in the nature of timing. Let me further explain that. In interest, now that we've gone away from monthly payments to our bankers, to semiannual payments to our bondholders, we make our interest payment to our bondholders in February and August. And so we made a $26 million payment in August.

We also made a $3 million payment to our Bancgroup (ph) in third quarter. So, we had $29 million of cash interest payment in the third quarter. And as I mentioned earlier, we account for about 15 million per quarter. So our cash payment is actually double of what we accounted for. So of course, in the fourth quarter, our cash payments and interest will be very, very low and that will give a -- create a positive working capital effect through our accounts payable. We have the same phenomenon in taxes. We have mentioned to you a number of times that the tax investment that we made to move a number of our subsidiaries offshore in order to better utilize our foreign tax credits and to generate the future tax savings, that tax investment of about $11 million, that payment was made in Q3.

We also made about $4 million settlement payment -- series of settlement payments over a 4 or 5 year period in Q3 plus our normal cash taxes of $4 million or $5 million a quarter. So, once again, this is a working capital, I know that changes from quarter to quarter. You know, of the $19 million of taxes that we did pay in the quarter, I would say, you know, 5 million to 6 million would be kind of a more of a normalized number of something maybe that you would expect in Q4 which would also create a change -- a positive change in working capital.

Our capital expenditures for the quarter were $12 million. We are at 32 million for the year and our estimate for the full year is above $50 million for cap ex. We did take advantage of a slight reduction in LIBOR during the quarter, as we marked to market our 10-year swap agreements, and that allowed us to do a reset, which generated $10 million of cash. Putting all of that together, we did close off the quarter with a draw down of our revolver of $18 million. Our revolver has the capacity of 200 million euro, which at today's exchange rates is pretty close to $200 million of revolver credit facility, and our next scheduled principal payment is on our senior secured bank credit facility is in 2007 since the bonds we have are 10-year bonds and they were issued this year.

With respect to debt management program -- and I'm just going to speak about non-business activities here -- but with regard to our non-business activities, we see a program of about $75 million which we had talked about earlier in January. We had hoped that we would start seeing some of that money come in this year but with the economic environment as such, that things are slower than what we had hoped for. We are still hopeful that we would be able to achieve 50 million of those savings in 2003 and 25 million in 2004. With respect to our debt level for the fourth quarter given the number of working capital items I had talked about and our forecast for Q4 from our businesses, I would expect that our net debt at the end of the year should be pretty close to where we are at the end of September.

Also, based on our business plans and outlook for fourth quarter that -- we believe that we will remain in compliance with our senior secured bank credit facility covenants. We did have some commentary on antitrust in our preliminary earnings, and let me just give you a little more background on that, because I know that there's been a lot of questions that have come into -- to our IR department with regard to that issue, because there was quite a bit of publicity about this in Europe with respect to the EU's investigation on specialty graphite and the potential that GTI along with other graphite specialty producers could be fined.

As we had discussed and disclosed back in May, based on our early cooperation with the EU being one of the initial people in with EU to discuss that situation that it's our assessment that we would benefit -- if we were fined, we would benefit from a 100 percent reduction. And therefore, we're not assuming that there would be any fine payable by the company, and therefore have not made any adjustment in our antitrust reserve.

With regard to the status of our third party lawsuit against our former owners, we are still waiting for Judge Daniel's decision. He definitely will be making a decision on the motion to dismiss. It's frustrating for us, as it is sure for you -- for us to still wait for that decision. We believed that we would hear from him by now, and we are checking with the -- with his office every week to see what the status is.

I think at that point, I'm going to now turn it over to Craig, and he will comment on GPS. And then Scott will do AET, and then I'll wrap this thing up with an outlook statement. And then, we'll open it up to our questions.

Thank you, Gil. I will talk about two of the key industries we service, the steel and aluminum industries. Generally, steel production rates have remained steady for the quarter, other than the usual August slowdown in Europe. US steel service inventories increased during the quarter, and we are monitoring them closely. Our graphite electrode business continues to run at capacity. Q3 sales volume was 45,900 metric tons, an approximate 9 percent improvement over Q3 last year. Quality improvements across our entire product line have assisted us in this growth in volume and market share. We are at the front end of building our graphite electrode sales book for 2003.

And as previously announced, we are working hard to execute on a $200 per ton price increase in all our major markets. It is currently too early to comment on prices for next year, as the bidding process is just beginning.

Q3's electrode costs were $1,676 per ton, $10 higher than Q2 cost. Our costs were adversely affected about $50 in the quarter basically due to three factors. Firstly, higher than expected transitioning costs incurred as we closed our higher cost plants in the US and Italy and moved our production to low cost plants in Mexico, Brazil and South Africa. These costs include extra distribution cost and additional overtime, both which were further exacerbated by the Q3 summer slowdown in our European graphite electrode plant. These items added approximately $25 per metric ton to our cost.

Secondly, we sourced approximately 1000 metric tons of products from our competitors to meet customer needs. This increased our cost about $15 per metric ton. Finally, currency impacted our costs adversely about $10 per ton. The majority of the aforementioned costs, approximately $40 per ton, were offset by higher operating efficiencies from our lower cost plants in Mexico, South Africa and Brazil.

Looking forward to Q2, we will continue to ramp up our production at the low cost facilities. And in Q4, each of our graphite electrode facilities will set production records. We expect graphite electrode costs to come in under 1650 per metric ton in Q4. On the aluminum front, our customers continue to perform at high operating rates; and our cathode business, where we are number one in the world, has done very well in servicing and securing business at new aluminum startups and regular ongoing replacement business.

In the third quarter, our cathode sales were 18 percent year over year up versus Q3 last year. Our business is currently sold out until the middle of next year. We continue to enhance the competitive advantage we've built into our global production platform, and our team continues to drive for cost savings and productivity improvement. The previously announced expansion of our Monterrey, Mexico, facility is proceeding on schedule and will be completed by the end of Q1 next year. When completed, this will be the largest graphite electrode plant in the world and further leverage upon, which we believe, is already -- and we will leverage further upon this, which we already believe is the lowest graphite electrode plant in the Americas.

With that, I'll pass it on to Scott.

Thank you, Craig. AET was flat third quarter versus the second quarter of this year. And as we had described in the second quarter conference call, we see the core businesses in the AET division as essentially bottoming out. We saw in the third quarter the same softness in Europe that we had seen in the first two quarters of the year for demand and no real recovery in the North American markets. Products, which go into the semiconductor, the telecommunication industries, and the electronic related industries, are all moving very slow at this point.

In the third quarter, AET was awarded a contract valued at approximately $6 million to supply graphite products for -- of the Australian Magnesium Corporation's new Stanwell Magnesium Project. This is a new plant being built to supply magnesium into the auto industry. Ford has committed to 50 percent of the production of this new operation, and this contract will affect our -- mostly affect our '04 revenues -- excuse me, '03 revenues.

In October, DaimlerChrysler announced plans to sell 60 Mercedes Benz A Class fuel cell vehicles next year. Our GRAFCELL advanced flexible graphite will be included in the fuel cell power systems for these vehicles. This is a second commercial PEM fuel cell application to date. As previously announced, our products were included in the first commercial application, and this was DaimlerChrysler's 30 buses, which are expected to be shipped and be operating in 10 European cities in 2003.

We've also -- we are also very encouraged with the announcements by several of the Japanese auto companies in early July and throughout July. And they announced they were introducing either on schedule or ahead of schedule their first commercial automobiles with fuel cell engines. This signals, we believe, the continued development of this exciting industry -- that we have a very strong position there. The electronic thermal management business, our new products for dissipating heat, continues to expand in commercial opportunities. We, as previously announced, had put in place a specific facility to bidders prototype components for these applications.

And during the third quarter, we shipped over 26 ETM prototype components to customers. Year to date this brings our number up to over 60. We have currently approximately 20 active projects ongoing, 9 of which are in the product-testing phase. We are also encouraged by our thermal interface materials -- have achieved 58 application approvals formally by customers, and we continue to develop that market. Our technology development programs are on track and in fact ahead of schedule here. We filed 11 new US patents in the third quarter, bringing our year to date number up to around 40 US patents. The filings for the Q3 were largely related to fuel cell applications, industrial heat management applications and sealing applications. Overall, it brings our patent application and patent application right filings to more than 300 worldwide and issued patents to more than 177 - Gil.

Thanks a lot Scott. Turning to outlook -- and this is, quite frankly, a little early in the quarter for us to be too refined for the fourth quarter. We feel pretty good, however, with our electrode volume, cost and price; and that's why we put in the news release that we think our volume is going to be in the range of 47,000 to 48,000 tons.

With the continuing ramp-up of our capability of production capacity, you know, we are going to be able to make that amount or maybe even a little more. So that's good for -- good sign for us that we are getting pretty close to the, you know, 50,000 ton per quarter production rate going into next year. And as Craig said, for the various reasons that he outlined that we'd expect a cost improvement in graphite electrodes fourth quarter over third quarter.

In AET, a good part of AET's business is in especially graphite and European conditions are pretty tough out there, so that's why we think AET would be flat quarter-to-quarter. So, we're saying that, you know, we see earnings improving, you know, at least 4 cents off the 8 cents loss going into the fourth quarter. Hopefully, we can do better than that.

For next year, I think all of us are pretty unsure. And I'm not just talking about steel or aluminum or ferroalloys or graphite electrodes, I think there is just a lot of uncertainty about the global economy in all segments for many, many reasons that all of you are very familiar with. In our specific industries and talking with our customers, and we do that a lot, I just came back from the Elafa (ph) conference with Craig where we met a lot of -- met many of our Latin American customers, many of them are quite bullish about steel for next year. So, you get a lot of mixed reviews from our customer based upon next year's business.

So, our sales forecast is actually much closer to our capability of producing, as that 210,000 ton rate is more a second half of 2003 rate, and -- so we have a forecast of 190,000 tons next year and certainly we can produce that and listening to our customers so that's what we're hearing from them. And we just wanted to put in a word of caution that if the economy goes all the hell next year for all of us that would first hurt steel and will graphite electrodes for all electrode producers not only us. We're confident on our costs. As I said, we -- across targets or as before and it will depend very much on volume levels as we go out in the next couple of years.

We are going to have a conference, a face-to-face presentation in New York on November 21st in the afternoon. We wanted to do that to update you all on our business plans and our strategies and also give you the opportunity face-to-face to ask us as many questions as you have. I think we have a very effective communication forum to get to know the business a little bit better than what you can on these kinds of conference calls. So we look forward to seeing you on November 21st in New York in the afternoon.

So thank you very much for being patient, and we'll now open the floor to your questions.

Thank you, sir. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press star, followed by the 1 on your pushbutton phone. If you would like to decline (ph) from the polling process, please press star followed by the 2. You will hear a three-tone prompt acknowledging your selection. Your questions will be pulled in the order they are received. If you're using speaker equipment, you will need to lift the handset before pressing the numbers.

One moment, please, for our first question.

Our first question comes from Bruce Hine (ph). Please state your company name followed by your question.

Hi, guys.

Hi Bruce, how are you?

(inaudible). Just with regard, Gil, may be to pricing next year, it sounds like you mentioned it's kind of early but can you give us a sense of -- with regard to the - it sounds like you're relatively tight, you had to broker some business, but what do you think of the industry in terms of their tightness?

And secondly, is it 10 percent or 200 bucks a ton? Is that fully across the board, and which of your competitors have gone along with that?

I'll give a part of the answer; then I'll turn it to Craig, okay. But the industry is very tight right now. We are, obviously -- and I think we've good enough competitive information to say that the other participants in the industry are also running that capacity. So we see a very high operating level right now in the industry.

And I think that one must be careful when looking at revenue per ton, and I've commented on this on many conference calls from the past versus price increase. You can't just go and take a 10 percent price increase and say revenue per ton, you know, goes up 10 percent, because there are a lot of other factors that come into play. You know, you have the product mix, you have customer mix, you have geographic mix. And the other thing too is that you have export sales and you have home market sales, and so you don't always have price increases the same in every single market.

So the only intelligent way to talk about pricing is really to talk about it region by region to give you a better assessment of what the average influence would be on your total revenue, which of course is what you would like to know. I think at that point I'll ask Craig to further add to that.

Bruce -- just to build on that, Bruce, most of the major competitors have announced the similar $200 per metric ton increase. SGL, SDK have all announced similar increases. And as Gil said, the GE industry appears to be tight, globally. You asked about will it be worldwide? Well, surely the efforts are maximum in the Americas, in Europe, Middle East, Russia, and et cetera. Asia, I would say, if you ask me where is there lesser effort?

In Asia, we have a very small share, and there are four Japanese producers all based in Japan that battle for that volume out there. And right now that looks like that's going to continue to be somewhat of a battle out there. As we said earlier, it's very early in the book building process, and it's too early to comment on price. We have a number of bids out in the market, as we speak. And so our team will do the best to execute on these increases.

And Craig, the US and Europe represent -- is it about two-thirds in total?

That's right. That's right.

And when do you feel like you know, kind of, what's going to happen ...

Well ...

... next year? And then, is the contracts -- as I understood them, were mostly set other than if there's (inaudible) changes dramatically, you may get a chance. Is that how it works?

Bruce, most of the contracts in, let us say roughly, 65 to 70 percent are a 12-month contracts that's driven by the steel customers. They delineate that in their bid request, and so we'll get a lot of annual contracts. And as far as visibility, we probably don't get good visibility right until the end of the year or the first half of January. Each of the customers has it's own bid strategy. A couple has come out so far; it's early. The majority would come out in December and, perhaps, even the first half of January depending on their own purchasing strategies.

A wild card in here will be, of course, the global outlook. Many of our customers adjust their outlook for next year during the Christmas holiday season. We'll get -- we and they will get better visibility to their steel book in December. So I would say, probably, in first half of January, we should have visibility to what the book looks like for next year.

Okay. And then, just the second question was on the cost side. Maybe you can give us some more examples, if you would, of some of the inefficiencies you mentioned, some of the distribution costs; and over time, maybe you can give an example of how that kind of worked in and whether that was a cross haul of five regions for now or five before this?

Sure, Bruce. First, I'll let you know, you know, two of our plants are in Europe. And, of course, during the third quarter, all of Europe slows down. So for us to be a company running at full capacity when those two plants slow down, it forces us to do a lot of inefficient things to service our customer base.

And as you've all seen, we've been growing our volume in the last couple of years. We've been growing our market share. The quality across the entire product line is much better. So the last thing we want to do is a short ship or disappoint some customers or allow one of our competitors to get into one of our shops and give him the opportunity to become a hero. So we shipped an awful lot of product intercompany to make orders. We even bought from competitors -- as you know, of course not our first choice -- but we bought from competitors again to allow us to supply seamlessly our key customers.

And recall, we went from eight plants down to six plants; and we're producing about the same tons here in the fourth quarter in six plants as we did in eight plants, a tremendous transition to low-cost facilities and a tremendous transition to try and do seamlessly with global customers.

Okay. And out of the 30 million -- I guess, I'm assuming -- 10 in this year to 30 is a cumulative number. So there maybe net 20 next year or -- but what -- maybe you can give us a piece of 10. What I'm really looking for is how much was interest and taxes of the 10 and/or might be that amount for the 30 million next year? So we can, kind of, figure out what might be, on an operating basis, your expectation for next year in terms of ...

Yes, you know, virtually all of the 10 is from an operating basis, you know; and interest expense this year is about the same as last year. And as we are losing money, there are no tax savings.

Okay. Okay. I'll pass it on to someone else. Thank you.

Thank you, Bruce.

Our next question comes from Michael Gambardella with JP Morgan. Please go ahead with your question.

Yes, good morning. Couple of questions. One -- you know, you've closed down operations up in Canada, the US and Italy. Could you give us some specifics on what the status of the real estate sales are of these properties?

Mike, we're working very hard on those real estate sales. We've had a number of buyers into the facilities. We do not have any formal bids on them. We have delineated the properties, specked it out; and we will continue to push that very hard. I think some of the uncertainties in the global economy is causing some people to pause, but we have people coming in literally every other month to look at the facilities around the world in the excess land we have.

I thought you had mentioned on a previous conference call -- it may have been the last one -- that the plant in Italy, you kind of had a firm number with someone with some really keen interest.

Yes, that's right. We have a keen interest -- and we have an indicative number, I wouldn't say a firm number -- but we'd like to get a keener interest by bringing the parties involved. And that's what we're doing at the moment to try to get this into more of a bidding situation so that we could get a better price.

And second question, in terms of just a follow-up for Bruce's question on the pricing, you know, I think, if you don't get a price increase in this environment, you'll never get one. I mean steel production is running pretty strong. Steel prices in the US, which is a leading indicator of steel production, is way up. You have Trico (ph) being brought back on. You have other capacity being brought back on that wasn't in the mix for the past 12 months. And globally, steel prices are up and steel production is up.

So I just can't imagine that you won't be able to get a price increase, but you sound kind of hesitant about this whole pricing scenario, going forward.

Well, Mike, we're being cautious. You know, as we said we have maximum effort in this area. And, of course, all your observations are absolutely correct. But we're being a bit cautious because, as you know, coming to at the end of the year, many of the steel companies reassess their book December typically. It can be a soft period for the producers.

The US producers -- and you're correct -- are doing quite well; elsewhere, around the world, it's not necessarily the case. Section 201 has given the US producers an awful lot of benefits. So we are being cautious on this, and there has not been a price increase for quite sometime in this industry, which adds to our cautionism in this area.

And can you give us any indication of some of the -- your smaller competitors who have historical been a bigger price discounters or what they are doing in the marketplace recently?

Again, it's early, but, you know, let's speak to one that you've raised before on other conference calls; and that's the carbon graphite assets, who have struggled through bankruptcy. And, of course, anyone in that condition is always a bit of a wild card. One would suspect that they also -- because of their financial condition and all the market conditions and tightness in the graphite electrode industry could also require price increase. But again there are financially distressed situation, and time will tell how they play it.

Anyone overseas that you're concerned about in terms of the competitors?

Not really. The Indian producers are a relatively small factor globally. Their volumes are relatively small, and they're spread all around the world. And their position in the Americas is relatively small. So I would say they're not a major factor. And then, of course, the small Chinese producers are in terrible condition, and their quality really is not a threat at this stage.

And one final question. Do you expect these purchases from your competitors to continue into the fourth quarter?

We will have a bit more to go in the fourth quarter, and then we expect it to be completely done.

And just a final question on that. From the procedure standpoint, why would you have made the announcement -- the pre-announcement on the earnings miss without having the backup to quantify why you missed?

Well -- maybe you could just clarify that question so we give you a proper answer there.

I was -- I'm just curious as to why you came out with the earnings announcement that you're going to miss the quarter ...

Yes.

... without having the specifics behind why you missed? Being able to say, well, our costs were up by $50 because of this, this, and that.

Yes.

You kind of left the market with lot of uncertainly, and I think the stock price paid the penalty for that.

Yes, yes, the -- once we knew, okay, that earnings per share was going to miss the expectation of the street, we had to get that out right away. Our reporting and accounting systems and analysis that's required always lags our EPS estimates. So quite frankly, we didn't have the analysis and all the explanation to give on the 15th of October, but we felt obligated to get the EPS number out at the time.

Okay.

And I think that's even further strongly encouraged now in this today's environment that you just must get it out quickly, okay, whereas maybe in earlier environment you would take a few more days to get the analysis so you can get -- give the better informed explanation.

Okay, Gil, thanks.

Welcome.

Our next question comes from Robert Perry (ph) with Kenot Capital (ph). Please go ahead with your question.

Hello. I've got a couple of questions. Just going back to the cash flow for the quarter, I'm just trying to get the numbers that you gave out to add, you know, I guess, I'm getting about 16 million of EBITDA, interest expense on the income statement 15. So that -- at least correct me up (ph), let's call it a net zero. You've got 14 million of timing difference in interest, then 11 million of timing difference in the taxes, 4 million-settlement payment, 4 million to 5 million of additional cash tax, 12 million of cap ex.

That right there that gets me to the 44 million used cash that you cite but then at the end you did mention this $10 million positive inflow from hedge which actually take me back under that 44 million cash used by $10 million. What part am I missing or am I -- have not understood you explanation correctly?

Okay, Craig is with us. So he can answer that question.

I think that, you know, all the components that you outlined from right on, I think that there was some other non cash performance of income that were subtracted from the cash from operation and I think you could see that on the face of the cash flow statement, the tax press release and it should make up the majority of your difference.

Can you point me to that?

Yes, I mean, if you look at the cash flow for the three months ended September 30th?

Yes.

Would you delineate, you know, under the reconciling item that all be in that section. In terms of, you know, the net non-cash is about three or four, five pieces there. The word income tax is better off (ph).

Well, is it safe that the 10 million GAAP that I'm not seeing is also just in other use of working capital?

It would be -- no -- it would more non-cash earnings that would be backed out of the number.

But I started from EBITDA, so is that -- are those non-cash earnings in EBITDA -- so -- of my 16 million EBITDA calculation?

Yes, they would be in the EBITDA.

So 10 million of the 16 million of EBITDA is non-cash?

There was about -- I would -- I'm not sure 10 million -- and just -- let me just ask you, did you include the cash from the swap in your analysis as well?

Correct. Yes, when I take your -- when I just take EBITDA minus interest on the face of the income fee for the 15 million I add all the timing differences and take up tax, cap ex and add back the hedge gains of cash, I get a $34 million cash use as opposed to 44 million.

Maybe what I would suggest -- because this has been reviewed with our auditors. So this is a correct presentation, but you know, that we do a detailed reconciliation and provide it to this gentleman after the call.

Okay, then just few other quick ones? The effect -- the higher cost per tons, I know you mentioned that, you know, you're going to need -- going to buy some products from competitors in the fourth quarter?

A very, very, very small amount. It's really a just a bit of the spillover from the third quarter.

I mean, it was the transition though all complete by 09/30 or not?

In terms of the buy back, in terms of the purchase of competitor stock?

As if -- from the standpoint of is all the products that was being switched from higher cost facilities now being made in the Mexico.

Yes. That's right. The Italian plant isn't producing the product any more.

At this time?

So all of the product is now being produced by the low-cost plants.

So, as of 09/30, that was the case.

But, you know -- but what is continuing to cause some inefficiency is we won't really be -- we won't eliminate all the inefficiencies until we get the Mexican plant right up to the 60,000 tons. Okay. Because -- simply because then we're going to get the full benefit and flexibility of product size and also to be able to serve pretty well the entire US market out of Mexico.

At the moment, we're still transferring a fair amount of products from Europe into the US. So once the Mexican plant gets up to 60,000, you know, we'll be eliminating a lot of distribution costs and simplifying the product mix. So we want to have a real clean and thorough throughput, you know, until that capacity increase is finished in Q1.

And the 60,000 metric tons is actual production or effective capacity?

That should be actual production.

And what is currently the capacity at the Mexico plant?

That's about 40,000.

... we needed the bottleneck ...

Some is the bottleneck, and some is additional furnaces.

Okay. Thanks.

So a part of the cap ex dollars that, you know, that we're spending this year, part of that $50 million program is directed towards this expansion.

Did that answer your question, sir?

Yes. I'm done. Thank you.

Thank you. Our next question comes from Lavonne Ronrenin (ph) with Hockey Capital (ph). Please go ahead with your question.

Good morning, everybody.

Good morning.

I wondered, Craig, if you could repeat. You mentioned some actual cost per ton information on GE for the quarter. And do you kind of rammed (ph) to I guess the three -- I guess different things that kind of cause that number to kind of spike up in the quarter. I didn't get that and all that information as you were saying it. Could you just kind of repeat what you said there?

Sure, Lavonne, thank you. Thanks for the question. The first category was higher than expected transitioning cost. And this was -- you know, as we move from the high cost plant to low the cost plants, we've got additional distribution costs. We've talked about some of the examples. We've moved a lot of product around the world. We've moved a lot of product from Europe over to the US. That will pretty much all go away, once Mexico is on stream.

We also had a lot of overtime costs. And both overtime and distribution were exacerbated because two of our plants, the European plants, really slow down in the August holiday, as all of Europe does. And so that totaled about $25 per ton, Lavonne. The second category we talked about was the approximate 1000 metric tons that we purchased from competitors to service our customer needs. And that increased our cost per ton by about $15. And then, Lavonne, the last quarter category we talked about was the impact of currency on our cost. And our costs were adversely affected by about $10 per ton.

And what would -- you had actually mentioned an actual number for the cost per ton in the quarter?

Well, yes. The cost came in at 1,676; and we said, for next quarter, we expect them to be below 1,650.

Gil, if you could just expand a little bit on -- just so I can understand a little bit better -- the whole issue of it? If I'm looking at a somewhat 10-percent price increase, what that actually means on an average price per ton that you should actually realize? And why I shouldn't kind of take it and say, "Well, if it's, you know, 2,100 bucks this quarter; it's going to be 2,300 bucks next quarter"? I just want to make sure I understand that properly.

Yes. Yes. Well, you know, I think it's just then also the nature of negotiations that when you announce the 10 percent price increase or someone else announces a 10 percent price increase and you get into the negotiation -- especially, with large customers too that have, you know, large volume requirements -- you know, maybe a 10 percent price increase for that customer could be a 7-percent price increase. Right. It all -- it really varies from customer to customer. So, you know, it's -- there is no rule of thumb.

All I'm saying is that whatever increase is announced, you shouldn't assume that that is the maximum amount, which you're going to get; it's going to be somewhat less than that.

Sure.

And then the next thing you have to look at is, you know, is that for 12 months of business or is that for 6 months of business? So, you know, is this a business that is only going to have one price increase per year or two prices increase per year and so on? So you really then have to, you know, take a rule of thumb. You know, is a 10 percent equivalent to a 5 percent increase or is it equivalent to 7 percent increase or what? That's really what I meant.

Okay. And in terms of cathode volumes, any sense as to where we are today in terms of production? And how much more volume are we going to be picking up as we bring (inaudible) on?

Perhaps, you're confusing two items. Our cathodes are made at other facilities ...

I'm sorry.

... not in Mexico, and our cathode volume is slated for a record year. As you saw, this quarter, we were 18 percent year-over-year, better than Q3 of last year. And the business remains very strong and is booked completely out until the middle of next year.

Good enough. Thanks.

You're welcome.

Thank you, Lavonne.

Our next question comes from Andrew O'Connor with Strong Capital. Please go ahead with your question.

Morning, gentlemen. Morning, Alice (ph).

Morning.

Gil, related to the lawsuit with Mitsubishi, is the court obligated to make a ruling by a particular date? And was GrafTech successful? Can you remind me was the company successful in clearing the technical motions to dismiss this lawsuit or is that what we're currently waiting for? Thanks.

Yes. Thanks Andrew. The answer is no to your first question. And these motions to dismiss are technical in nature. So, that's what we are speaking about. So, this is the first stage of the process. The -- if the judge deems that there are no technical reasons to halt this lawsuit and force us to take it to appeal, then we go into discovery. And then, discovery usually would lead into summary judgment, and that could lead into trial or there could be arbitration or there could be settlement.

So, the first gate is always motion to dismiss, which are always filed by the defendant. They're going to argue on technical grounds that our lawsuit has no basis. And that's what we're speaking about here, and there is no way in which plaintiff, okay, can compel or force in our judicial system, a decision by a judge to do it within a certain period of time.

Okay, thanks for that clarification. And then secondly, I wanted to know for your graphite electrode sales and your forecast for '03, 190,000 tons; do you guys anticipate any significant shift in sales by geography in 2003 versus '02? It's my sense that for '02, Europe will account for about 35 percent of sales, the US 20 percent, and then the rest of the world 45 percent. Again, any shift next year?

We don't expect any shift. The geography should be the same. And as we said earlier, our entire product line has gone through a very nice upgrade in quality, and those sales should fall pretty much in the same countries and geographies.

So, what percent of the 190,000 would be in China next year?

Let's speak to all of Asia Pacific. Asia Pacific is only about 6 to 7 percent of our sales.

Okay. And then, can we talk about China more explicitly or ...

Please. China, year over year, we're going to be up probably 50 percent plus in our sales. The China steel market has been doing extremely well the first three quarters...

Right.

... sets records each quarter. And as I said, we're up 50 percent year over year.

Thanks very much.

Thank you.

Our next question comes from Jeff Blanchard with RBC Investment Management. Please go ahead with your question.

Good morning, guys. Just one question on the cash flow statement. If you just take a look at it in the first section, maybe I missed this, but again the other non-cash charges of $26 million for first nine months, could run through that? And then secondly, you know, on the next line. So, roughly what would your guesstimate be for the net working capital changes you define it for the year?

Okay. First on the other non-cash items through the nine months that's primarily two components. We had about $16 million of currency gains that were unrealized majority in the last quarter Q2 which we had delineated in the announcements which are add backs to the earnings and then we had made some significant changes in our US retirement plan which currently are resulting in a benefit to our cost.

Of course, the cash benefit will follow later as our payments for both, you know, defined benefit and post-retirement decrease significantly but currently they are not cash and that was about 9 million to 10 million. So, the majority of that are those two items through the first nine months.

So, that number will look like 26 million for the year and then next year, that will go back to zero or there still be some positive benefits that are non cash that you have to take out?

Currently, the currency items, we don't forecast as procuring. Although, we always have some amount of movement there -- never, you know, never to the magnitude that of last quarter. And then in terms of the benefit plans, we would expect about, you know, 2 million a quarter but continuously reducing, you know, over a period of about three or four years.

So, there roughly next year a $6 million to $8 million number that is a benefit to reported income but then get struck out in the cash flow statement.

All other things being equal, that's right.

Okay. And again, the working capital number for the year?

The working capital for the -- number for the year, if you break it down into the components, you know, the one item that Gil referred to that is now, you know, systematically volatile as our interest payable. And so we would expect a positive affect of that on the fourth quarter and then probably offset to some degree on receivables and inventory as Craig mentioned. You know, we build up the higher production level and higher volume. So, I think we would be looking for a net positive during the fourth quarter.

Got it. But so, this -- the number will come down somewhat at the print for year-end.

Right.

Okay. What specific scheduled settlement payments are there, either at the end of this year and in '03-'04?

We don't have any material scheduled payments for the rest of this year. We've $5 million due to the department of justice, in April and there's probably couple of million of miscellaneous residual payment that will also occur in '03 and of course, we have not yet resolved the appeal for the European Union and until that is resolved we would not expect any payment.

Okay. And again, what is the most restrictive covenant?

I think we have two financial covenants that we attend to. The interest coverage ratio and the senior secured leverage ratio both under our bank credit facility. We were successful in restructuring both those covenants during the recapitalization in the first half of the year, and I think, that if you looked at the two ratios, interest coverage is probably one that is a little tighter. I think, they're both by definition are equally restrictive to the extent that they got tight.

But we don't foresee, you know, liquidity constraints from those ratios and, I think, it's probably also important and no doubt that our calculation for those ratios, although, they do tend to be your traditional, you know, interest versus EBITDA and EBITDA over leverage.

Two key things. One, it's for us it's senior secured leverage not total leverage and then secondly, both the EBITDA and the interest component of the calculation of how adjustments to that as per the definition of the agreement. Now, that information is public and certainly you can look it up and that doesn't necessarily mean that you'll be able to then calculate those that we don't necessarily disclose all other components of those calculations such that you could do that on ongoing basis.

But just add a little bit of color on it. You know, for EBITDA as an example, on any litigation expenses against our former parents, any non-cash or nonrecurring item were down would be, you know, would be not counted against us on EBITDA calculation. So -- and those are irrelevant to the part of our activities in the recent years. Also the interest component excludes certain fees for refinancing of which we had -- we've had some. It also includes computed interests on that the Department of Justice that requires us -- or the accounting requires us to calculate.

So, I just cautioned that the basis of financials probably would not be representative as to our position and, you know, reiterating those outlook that we believe were in compliance?

Great. Okay. Thank you.

Our next question comes from Raja Mukherjee (ph) with Octagon Credit Investors. Please go ahead with your question.

Hi. Most of my questions have been answered. Just one quick question. If you could just maybe talk a little bit about your cap ex budget for 2003 and beyond? I guess, some of the incremental cap ex this year was from the Mexican plant, which I believe won't be there, but is there anything else in terms of discretionary for '03?

Well, '03 year - yes, I think you are right. You know, there will be some money spilled over into '03 if the Mexican expansion isn't going to be finished until the end of the first quarter. But we don't have any major projects teed up for next year and so that we can manage our capital spending to react, okay, to project the cash flow for the company. So that's the capability that we have and we can move pretty quickly to either ratchet down capital if so required or to spend capital to support our business strategy of making more revenue and more profit.

So we don't have any major capital that's needed to sell 190,000 tons of product next year. And if we felt that we could sell 210,000 tons or more, we would probably spend some capital to some of our other plants, but they are not major projects. In AET, it's a very low investment in these technologies both in R&D and capital; still, a lot of development work that needs to be done. We are really, you know, high priority on commercial sales with what's already been invested and what we can already produce.

So we have, I think, a lot of control over our capital spending and it could be in the range of, you know, 30 million to 35 million or 50 million to 55 million depending on the cash flow prognosis.

I guess, based on the volume target for next year which I guess somewhere around 190,000. If I assume that, lets say, volumes are at that level for the year then is it safe to assume this range of 30 to 35 at that volume level?

I think, you know, there's a lot of -- you know there's a lot of things that come into cash flow generation issue not more than just that volume, right.

Right.

But if we have an improving year which is our forecast then we think we could afford something in the 40s.

Okay.

And if the economic environment gets worse and affects everybody in the industry, we can move into the 30s.

Okay.

Quite quickly.

Thank you.

I think as we have demonstrated in some our quarterly capital spending numbers.

Our next question comes from Bob Schenosky with CIBC World Markets. Please go ahead with you question.

Thanks. Good afternoon. Couple of questions, Gil. First up, you talked about $50 a ton, additional cost in the third quarter. Given that you got the EU facilities back up and running in the fourth quarter, you mentioned you are going to buy much less tonnage on the outside; and you mentioned that you'll be saving about $26 a ton. Can you account for the other 24 of additional costs that you anticipate in the quarter?

Yes, I think -- since, Craig cited all those numbers, he really should answer your question, Bob.

Yes. Okay. Bob, we'll still have some of the transitioning costs. There were still be product moving -- a lot of product, in fact, moving from Europe and some of our other plants into the US markets. That, of course, will be much better serviced from Mexico; and of course, Mexico's volume will not be up until the beginning of next year.

So we're going to still have those kinds of activity. We expect them to be smaller. We won't have the August slowdown, which aggravated this situation. But we still expect to have some of those items that will be going away when the Mexican operations are up and running.

Okay. But I'm still trying to get my arms around -- you know, you mentioned that was $25 a ton in the quarter.

That's right.

Is it going to be 20 in the fourth quarter, 10 in the fourth quarter?

Well, that -- you know, that's a tough one to ask to me. You know, we were at 1676 in Q3, and I believe we're going to be below 1650 in Q4. And so built in that 1650 and below number are some inefficiencies. And then, I think looking forward we will continue on our cost reduction program and drive to get it down below 1600 and so forth.

Okay. I don't want to beat this down. But in that number, are you implying another $10 a ton in currency?

Yes. Yes, we are. We're assuming currency flat another $10 in Q4. Correct.

And then, how much would you -- you had $15 a ton on the thousand tons that you bought. You didn't mention how many you are buying in the fourth quarter, but what do you anticipate that cost component to be?

That could be -- that could be 8 to 10 bucks. You know, again -- you know, that's -- it's not our first choice, but we do not want to let a competitor into one of our customer shops through this transition period. We've been able to conduct it very seamlessly for our customers. Quality has been superb at the customer shop. And we want to run right in with the Mexican product. So it's seamless with the customer, and we'll continue to grow that volume to the 190.

Okay. Given that implies about half to two-thirds of the cost, would that imply that you're looking at 5 to 750 tons -- 500 to 750.

That's right. You know, it could be that kind of number.

That's right. Okay, thanks. And I just have a couple more if you would. I just want to better understand. You know, you came out late in the quarter, given your lead times in this business and knowing that you were going to have down facilities in the quarter in Europe, can you help us understand, you know, why it took as long as it did through the quarter to fully understand what the cost were going to be?

And, you know, coming out then on October 15th as opposed to knowing that demand was very good because the capacity utilization and these costs, you know, as you thought about building the budget for the quarter that these would have been some of the issues already built in?

I think, one for the reason for this, you know, in this business, especially in the third quarter -- the last month the quarter is huge and September was a big, big month compared to a very, very slow August and the second reason -- so, you know, we're still waiting for September's results.

The second reason is that we're still, you know, living with despaired accounting system - we have different accounting systems and different accounting systems at different plants and so on and that's what's been addressed. It has been addressed over the last two years but the full scale transformation of JD Edwards, which is now being implemented plant by plant, starting this month to be completed next year where we'll have complete transparency for all of our costs.

So we have a much, much better handle of predicting what they are as they happen. But quite frankly, Bob, we're just not there yet.

Okay, Gil, can you offer us the sense of the magnitude in September shipments versus the August shipments?

I don't have that data.

Bob, there would have been probably, you know, 20 percent higher in the final month and again it's -- you remember most of our customers in Europe are slowed down in August.

Right.

And then they come back at first week -- week of September so there is a large pickup. So, it's as much as 20 percent.

Okay, and if I get (ph) just a couple of quick ones. On the cathode business, which is sold out through the first half of next year, can you give us a sense of pricing, first half '03 versus first half '02?

Pricing -- prices are up 1 percent to 2 percent over the year and so we have increased prices at selected accounts, as has the overall marketplace. And going into next year, we aren't planning for any significant price increases there. We'll look and see how the aluminum producers continue to run, and if we see opportunities in the marketplace to increase again, we will do so.

Okay. And then you mentioned in Andy O'Connor's question on market share if you're maintaining market share does that imply that you're not going to be going after all the new startups that are going to happen next year in the US?

No, the new startups are a key area that we are very successful in, and I remember, we are going from a 180-type volume to 190,000 - metric (ph).

It's on aluminum electrodes.

Yes Bob.

Yes, I'm sorry. No, I'm sorry on that. I switched programs on aluminum electrode notes.

Yes, that's what I thought. Just to clarify. You'll recall we're going from 180,000 tons to a 190,000 tons on electrodes, so we are increasing and its coming from a couple of areas. The new startups is one of our strength. We have the largest customer tech service force in the industry. So often times we get the majority of new startups. So, we're definitely going after those aggressively.

And then secondly, our product, across the entire range is performing very, very well. We've put a lot of money into the product in the last three, years and field performance is up.

Okay. So you could see the US shift up a little bit.

Always, absolutely. Yes.

Okay. Great. Thanks I appreciate all that. And just one, just to make sure, Scott's still awake. Scott, what could be the earliest benefit for the heat sink products that you could start to do something, you know, that's material in profitability? And what do you think the magnitude in that business could turn out to be for you?

Hi. Well, that's an interesting set of questions to have a crystal ball on. Let me start with the -- I could give you some background and then try to fill in the -- fill in around your questions the best I can. We really, only a year ago, announced the ability to do some very interesting things with graphite for -- with the thermal applications and electronics. And the process we went into was essentially first a selling cycle where you introduce the products to the customer. There is an education process going on, because they're frankly quite used to using aluminum and copper in the current applications.

Then, you go through a design stage with them where you design something -- generally speaking, something that is like what they use today. So they could get a relative comparison whether be it heat sinks, spreader, or what not. And then, ultimately, the real opportunity because it's -- it will be very difficult in a limited year run. As most electronic devices are to break into, you really get into the next generation device.

Typically, the development process in the next generation device is 12 to 18 months. What we're seeing right now is that's being extended. A lot of the current generation devices are being incrementally modified just to bring out another generation or something that looks a little different. But the real new things that are coming out that we can really make a step change in helping in thermal performance are taking much longer, which has extended the timeline from some of our earlier expectations.

Having said all that, we have had achieved a couple of early component approvals and purchasing events this year, albeit they're relatively small on a revenue level. So I would think in 2003, we'll start to see meaningful contribution out of that end of the business to affect the size of our company. In terms of significant revenue generation, I think, it's further out. It's very, very hard to predict that because some of it is going to be driven by really the upturn in the electronics industry, an industry, which right now, we still see as a very, very slow and, as I mentioned on the new product development, the times being extended.

Right. So with all the cap ex cuts next year in attack, you're probably looking for this maybe to begin to show something in '04 and, with more magnitude, '05, '06?

Yes, I would say that's really where we'd expect significant kick in. But we will have sales next year of a substitutive nature that are going to really start to demonstrate more fully industry wide what we can do in the thermal management area.

Okay, great. Thanks, Scott.

Thanks, Bob. Do we have any more questions?

Yes, our next question comes from Michael Cavarretta (ph) with Frontier Capital. Please go ahead with your question.

Yes. Hi, Gil.

Hi.

Hi. Listen, it's awfully frustrating to see the company losing money in a year, where a) your customer base is experiencing a significantly higher earnings having the currency for change going your way. You've got $10 million in savings year to date that you didn't have a year ago from the plan you guys announced, and you just came off a quarter where demand exceeded supply.

So, I would agree with an earlier call that if you can't get a meaningful price increase this year, I don't see when you would get one. And the question I have is, you know, what are you prepared to do, what would your response be should your customers refuse to accept a meaningful price increase?

Well, I know, we -- and must always look at price, because it's more sensitive to price than anything else in terms of profitability, but continuation of the savings, 10 million to 80 million is going to help our bottom line, and we're at a very low volume year. I mean, the first quarter volume was the lowest in history for this industry. So the volume is just now starting to pick up in the graphite electrode business. So, I think it's realistic to say that we should look forward to more volume, and we certainly should look forward to lower cost to help on the profit line.

I think that, based on the very, very weak financial position of people that we compete with, that they should see the pricing opportunity the same way as we see the pricing opportunity and so, going into next year, you know, we got a hope that that's going to be the case and what Mike said is going to happen, that we're going to turn this thing around and start seeing some price improvement at the same time as getting our cost down and expanding our margins.

But are you prepared to walk away from business without better pricing or you just ...

I think it's important for us, you know, now that we're down to the best plants in the world, okay, and we believe we do have a very big cost advantage, and it's important that -- now that the customers that are with us, the ones that are growing, the big steel customers that we sell to them and that we -- and we sell our cost advantage product to them, because if you don't and you lose share from them, then, it's pretty hard to get them back.

Okay. Well, good luck.

Thank you.

Our next question comes from Bruce Klein with Credit Suisse First Boston. Please go ahead with your question.

I just have a follow-up on regard to the cash restructuring costs, as I understood it was, I think, it supposed to be about 20 million bucks or so, mostly severance in Italy in '02. And I am wondering, if that was fair number and whether there is any spillover in '03? And secondly, the revolverability (ph) is it $182 million or is that just the 200 minus 18, is that a correct number?

Yes, Bruce, this is Corrado, 3.1 is on the 20 million of cash restructuring.

Yes.

And we are tracking. There is about 4 million to 5 million of that would be left to go, you know, in the original program. Majority of those remaining on severance cost associated with, you know, some of the administrative and plant shutdowns. So, you're correct there, and we're tracking on the revolver.

Is that, Corrado, is it four or five left to go this year or will that spillover to next year?

I think we are planning for it this year but certainly there could some spillover.

Okay.

And in terms of the revolver, we have, you know, 200 million Euro revolver, 18 drawn. There are, you know, some federal credits that would be associated with that. Not any, you know, real significant magnitude and so, you know -- firmly speaking the remainder of the facility is available to us.

Can you give us the actual numbers for September?

Yes. The -- at September, we had 18 million drawn, we had about 12 million of letters of credit which fluctuate up and down depending on the associated business, and we had no constraints from a covenant standpoint on -- as to the availability of that facility.

So that's 170. Right?

Right.

And the bank covenants, you said you don't expect to need a waiver in 4Q. Is that what you said?

That's right.

And many other, I mean, you mentioned the customers quality is drawing. Did you -- earlier on the GE side, will also make any comment about the quality of your product as well and secondly or lastly were there any other customer or changes of significance, any major losses or anything in the last several months?

Bruce, we haven't had any major customer losses at all in the last several months. In fact, this year we've done very well, growing our share at the key steel producers around the world. So, it's been a very positive. On the quality side, our quality level is up across the product line as we've said.

One of the most difficult products to make are the large diameter. The industry calls these the super size electrodes. They are 28-inch plus. And our sales in that sector will be up 25 percent year over year, and so the performance has been excellent this year.

Okay. Thanks a lot.

Thank you.

Hey Bruce, one last point on the cash flow, and really indirectly just responding to Robert's question. You know, I think, you know, the difference in trying to get to the use of cash I think is that the interest paid of 29 and the taxes paid of 19 represent only 30 million of the change in working capital for accounts payable that's reflected on the face of the cash flow statement.

And so it's right to say that net, there's an additional use of cash from working capital of 10 million, you know, 20 of that coming from payables, in addition to the interest and taxes. And you wouldn't be able to derive that from the face of the financials because we told you the exact cash payment for interest and taxes in the quarter, not necessarily the change in payables associated with those accounts. So you know, I'll be happy to follow up, but it reconciles to the 44 million.

Okay, thank you.

This concludes today's question and answer session. Please conclude -- please continue with any closing remarks.

Well, thank you very much and thank you for all of your questions. I think we covered a wide waterfront, but not everything that I am sure you would like to know and so please do come to our session in New York on November 21st so we can have a more comprehensive review of the business.

Thanks a lot for calling in, and I look forward to seeing you (ph).

Thank you, sir. Ladies and gentlemen, this concludes today's GrafTech third quarter earnings conference call. If you would like to listen to a replay of today's conference, please dial 1-800-405-2236 or 303-590-3000 followed by access number 502592. Once again, if you would like to listen to a replay of today's conference, please dial 800-405-2236 or 303-590-3000 followed by access number 502592. We thank you for participating. You may now disconnect.