GrafTech International Ltd (EAF) 2003 Q4 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the GrafTech Fourth 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. (Caller instructions.) As a reminder, this conference is being recorded on Thursday, February 12, 2004. I would now like to turn the conference over to Miss Elise Garofalo, Director of Investor Relations. Please go ahead ma’am.

Thanks Kristin. Good morning everyone, and welcome to our call. At this time, each of you should have received a copy of our press release. If you haven’t, please call [Julie Draxler] at 302-778-8244, and we can fax or email you a copy. Before we get started, I’d like to remind all of you that both this release and this call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Please note the cautionary language of our forward-looking statements contained in our release. That same language applies to this call. Also, to the extent we discuss any non-GAAP information, you will find reconciliations either in our press release or on our Web site at www.Graftech.com in the Investor Relations section.

This morning on the call we have Craig Shular, Chief Executive Officer; Scott Mason, President of our Synthetic Graphite Business; John Wetula, President of our Advanced Energy Technology Business; and Corrado De Gasperis, Chief Financial Officer. At this point, I’d like to hand the call over to Craig.

Thank you Elise. Good morning everyone, and thank you for joining GrafTech’s conference call. I’d like to start off by reviewing a few fourth quarter highlights. Net income before special charges was $6m, or $0.07 per share, as compared to a loss of $0.02 per share in the ’02 fourth quarter. Net sales and gross profit improved 20% versus the same period last year.

The improvements were mainly due to our graphite electrode business, where both sales volumes and average prices increased. Graphite electrode sales volume was 53,100 metric tons, or 12% higher than 2002. The average sales price was approximately $2,400, versus approximately $2,100 in the ’02 fourth quarter. In our other business segment, sales were $17m, as compared to $13m in the same period last year.

Higher sales increased gross profits by $1m, although gross margin percent was lower on a quarter over quarter basis, due to higher energy cost, product mix, timing of shipments, and timing of shipments in the advanced carbon materials business. The shortfall in gross profit we’re talking about in this segment is approximately $1m. However, as you see, the gross margin percents are volatile, due to the smaller size of this segment.

Looking at the total year, however, sales were up over 26% to $75m versus ’02, and gross profit dollars increased to $17m from a $10m level. In 2004, this segment results will vary quarter to quarter. However, we expect another good year. During the fourth quarter, we recorded a $32m charge for the provisional payment of the EU Graphite Electrode Antitrust Fine. This charge was recorded as a result of the $72m payment we posted with the EU.

As you recall, in 2001 GrafTech was fined Euro 50.4m. And we appealed that fine. While an appeal is pending, the EU requires payment of the fine, or security in the form of a letter of credit. Following our recent convertible bond and subsequent discussions with the EU, we posted a provisional payment of $72m. The $72m will bear an interest of 2.1% a year until the appeal is concluded.

Even though the payment is provisional, it is required under GAAP to record a charge to cover the full amount posted. This payment does not negatively impact our appeal challenging the fine. And we expect the court to rule on our appeal this year. Economically, this was the right thing for us to do. An LC would have cost us about 2%, and conversely we’re picking up a little over 2% on the interest income side.

Following the provisional payment to the EU, we have a 53m antitrust reserve remaining on our balance sheet. This mainly relates to the payment, due to the Department of Justice, which has quarterly payment terms spread out through 2007.

Turning to 2003 overall results and achievements, as you will recall, early in ’03 we set out four key objectives for our team. One, returning to profitability; two, achieving cost savings targets of $16m; three, commercializing advantage technologies; and lastly, strengthening our capital structure.

I’d like to talk a little bit about each one of these. On the returning of profitability and the cost savings program, in ’03, net income before special charges and other income was $18m, or $0.24 per share, as compared to a net loss of $14m or a $0.25 per share loss in ’02. Net sales increased 20% to $713m versus ’02.

Graphite electrode sales volume increased 11% to 2,600,000 metric tons. And graphite electrode sales prices were up 12%, to $2,345 per metric ton. During the year, each of our graphite electrode production facilities set all time production and safety records – a superb year on that front. In addition, through de-bottlenecking and productivity improvements, we increased our annual graphite electrode capacity from 200,000 metric tons to 220,000 metric tons – an excellent accomplishment by the team.

Complimenting our sales improvement was a cost savings program where we achieved $16m of annual cost savings for 2003, which brings our total cost savings program over the past two years to $30m. Gross profit increased over 24% to $168m, as compared to ’02. EBITDA for the year was $117m, as compared to $79m in 2002. All of these items contributed to our $32m improvement in net income over 2002.

On the advantage technologies front, as you know, we had good success in our electronic thermal management business – ETM. This year we delivered several ETM sales order wins with key industry leaders. We’ve given you those lists over the years. They have been from Sony, IBM, Intel, Samsung, etc. They have been in a host of applications, from laptops to flat screen TVs, to digital cameras.

In addition, in the fourth quarter we’re pleased to announce that we’ve picked up our first cell phone approvals. And they are at Sharp and NEC. Net sales for 2003 of ETM products were $2m, up from about a half a million in the prior year. And, as you know, we are targeting $8m for 2004. Our emphasis on commercialization remains strong. And we continue to add staff, both on the sales front, and the R&D front, to our ETM team.

On a capital structure side, as you know, we have done a number of things over the course of the year to improve and strengthen our capital structure. Actions during the year included our equity offering and about $24m in asset sales. As a result, net debt at the end of 2003 was $483m, as compared to $706m at the end of ’02. Also in January, we completed a very successful $225m convertible bond offering, with a coupon of 1-5/8, an excellent deal for us.

Finally, turning to outlook, in ’04 we expect the economies around the world to continue the recovery we saw in the second half of last year, most notably, the Americas and Asia. The European recovery is lagging a bit, as it often does, behind the Americas. But our overall order book for graphite electrodes is strong in all major regions. We expect earnings for the year to be between $0.06 and $0.75 per share. The improvement over ’03 will be driven by approximately 9% higher graphite electrode prices, and 5% higher graphite electrode sales volume.

For the first quarter, we expect earnings per share in the range of $0.09 to $0.11. Graphite electrode volume will be approximately 50,000 metric tons. And, recall Q1 is historically our weakest volume quarter in the year. On the graphite electrode market front, we continue to see tightness in the supply/demand balance. And we have recently announced a global price increase. We increased prices of graphite electrodes by $150 per metric tons in North and South America, Africa and Asia. And we increased prices by Euro 115 per metric ton in Europe, [inaudible] and the Middle East.

That concludes our prepared remarks. And let’s open it up for q-and-a please.

Thank you sir. (Caller instructions.) Our first question comes from [Brett Levy] with Royal Bank of Canada. Please pose your question.

Hey guys. Another good quarter.

Good morning [Brett]. Thank you. How are you today?

Fine. A couple of other questions regarding ’04 and just sort of the timing of certain things. I noticed the biggest chunk of your targeted cost saves are supposed to come through during the year relate to financial outsourcing and some of those elements. Can you talk about the magnitude, the approximate timing across the quarters, and what some of the major elements of the cost cutting programs for ’04 will look like?

Yeah, thanks [Brett]. Sure can. Firstly, one of the items is the voluntary severance program and special severance program that we executed last year. As you recall, over the course of last year, that gave us about $6-7m of benefit, as those employees left the payroll. ’04 will be the first full year we have all those employees off the payroll. And so in ’04, we expect something close to $12m in savings as a result of that program. So on that program, the heavy lifting is done. And those employees have left the payroll. And that, as you know, is a major chunk.

In addition to that, you’re right. We’re doing some outsourcing, some back-room activities, receivables, payables – some of those normal outsourcing items, where there is some opportunities for us. We also have a large block of items in productivity improvements in our production platform. I think over the last couple years we’ve shown a good track record here. And we expect to continue that throughout the course of the year. And those would be the main buckets.

Obviously interest expense, tax, we continue to work on. You’ve seen interest expense come down over the years from $60m level to kind of a $45m level. And I think ’04 will probably be $40m or so. And on the tax rate, you’ve seen our tax rate come down to something that’s been close to 40%, down to something closer to 35%, or perhaps maybe even less.

So those would be the main buckets. As far as timing [Brett], I would think that most of those will be spread out relatively evenly over the course of the year. Perhaps there might be a little weighting Q2, Q3, Q4, with a little bit less of that in Q1.

All right. And then the absolute magnitude of that program? I mean I know you said you’ve gotten to $30m over two years. What type of number do you hope to report by the end of ’04 on that number?

We are targeting an additional $30m for this year. So we have an aggressive program. And we have a team that’s working very hard on it.

All right. And then my sense is that the contract negotiation period is mostly done. Can you guys talk about the percentage of your volume that will be on contracts? And I know you talked in rage selling price ranges. But I mean can you talk a little bit about where you guys particularly place new product particularly well, and where obviously there was weakness?

Sure. The book is about 85% fixed. As you know, most of that happens in Q4, a January type period for the upcoming year. That process has gone well. And, as we’ve released and articulated earlier, the average price will be about $25.50. As far as execution of that in volumes, the volumes in the Americas look good. And in Asia, the volumes look good. Europe, as I said, the recovery there is lagging a bit. I don’t want to mislead you and say that it’s going down. But it’s level to slightly up in Europe. We expect to see some of that come up the back half of the year.

As far as your question on the execution of the price increase, the Americas, I think, went very well. Europe, where we do have a high price when you convert it into dollar terms, because of the strong Euro, got less increase than what we would have liked. And then Asia, I think, with the demand – and it was one of the lowest priced regions in the world, we had pretty good success there on the price increase. So the price increase was broad-based. Every market had a price increase. And the only one that perhaps had less than what we would have liked was the European arena.

Alrighty. And it looks as if – and maybe you can talk about this in terms of both cap ex and potential acquisitions – it looks like pro forma for this latest transaction, especially after the green shoe, you have left yourself with some financial flexibility. Can you guys talk about sort of what you guys are looking to expand or potential cap ex and uses of cash strategically for the coming years?

Yeah [Brett], as you know, last year cap ex was 41. And we’re targeting about 45 for this year. You’re absolutely right. We’ve built some very nice, flexible – flexibility into our financial position. And we will be looking in mainly two areas. It will be to continue to grow our competitive advantage that we have in our industry leading businesses. And so you will see continued work there to grow our capabilities, reliabilities, quality of our products, and of course some of the productivity improvements we talked about.

And in addition to that, as we’ve dialogued, we continue, as always, to look for opportunities that may present themselves on the acquisition front. We don’t have anything current actively, we’d like to talk about. But we continue to look to opportunities. Of course, today the balance sheet, and what was accomplished last year, has opened up some of those horizons for us. And our team will continue to look for the right opportunity. And if we see it, and it fits our competitive advantage and our production platform, I think you’ll see us try and execute on something on that front.

And last question, and then I’ll pass the ball. Obviously you guys have managed to open up your factories and run them all flat out here. Can you talk about sort of the global capacity situation? Any sort of shut-downs and any additional capacity you guys see coming?

You’re right. We continue to run high level. We would look for about 210,000 metric tons of electrode sales this year. Capacity right now is 220. Our team continues to work on that. And of course, the team’s mission will be to grow that capability. And as far as any other major swings in capacity out there, we haven’t seen any major ones out there. I am sure the other competitors are trying to do similar things to their operations. But there – we haven’t seen any really step changes out there, either up or down in capacity the last couple quarters.

Okay. Thanks guys.

Thanks [Brett]. Have a good day.

Thank you. Our next question comes from [Kevin Cohen] with Credit Suisse First Boston. Please pose your question sir.

Good morning. Most of my questions have been answered. But if you could comment on current spot prices in North America, Europe and Asia, as well as potential asset sales in 2004 please? Thanks.

Sure. On the spot price, I’ll talk to you about spot price post this increase. All right? As you know, we’ve announced the $150 per ton in the dollar denominated regions. And then Euro 115 in those Euro invoiced regions. And so, after this increase, spot price in the Americas is $26.50. And in – I am sorry, $27.50 in the Americas. And in the European arena it would be up around 23.50 to 23.75 Euro. And in Asia, it would be about $24.50 U.S. So broad based, and roughly equivalent to $150 in each of these major markets.

Okay.

On the asset sales, we expect another $25m for this year. Our team is working hard on those. And we will report those as they are completed, as we did on the $24-25 million that we executed on last year.

Great. Thanks a lot.

Thank you.

Thank you. Our next question comes from [Robert Lagupo] with CIBC World Markets. Please pose your question sir.

Hi. Good morning. I just had a few quick questions. One is to follow up on the asset sale question. The $24-25m, is that actually less than what you were anticipating prior? And, if so, are those businesses that you’ve decided to keep? And if so, which areas?

Robert, yeah. We were kind of trying to get to $30m last year. We even said we have one that we’re working on. It didn’t get done by the end of Q4. But I think you should look for us to have that one done in either Q1 or Q2. And that one obviously is in the $7m type range – again, non-strategic assets that will be sold. So that’s the answer from the $25-30 last year.

This year we’re targeting $25m. We’ve looked at higher numbers there. But I’ll tell you, our team has done a lot of work on some of the smaller businesses last year. And right now, what we see is some of the smaller businesses we’ve been in will extract some pretty good value, and enhance the value of them. So right now we’re targeting $25m for ’04.

And those businesses that you’ve been able to extract value, that’s on the AET side predominantly?

No. That would be on kind of the carbon refractory side. It’s a business that we have had some pretty good success in ’03. It’s a business that, let’s say had a focus that was in the U.S. markets. And we’ve been able to grow that business, and really give it a global picture in ’03, with some good success. So we’ve enhanced the value of it. And it’s doing some very nice returns for us right now.

And just as a follow-up, on the thermal management side, can you give us a sense of what the progression has been over the last several quarters, and what you expect the penetration or success in the next few quarters, and how you expect the business from a sales perspective to kind of ramp up over 2004?

Yeah. It continues to go very good. Every quarter has been better than the prior quarter. Q1 this year is going to be our biggest quarter. And Q1, as you know, last year we had about $2m in sales. And, just to give you a feel for the ramp-up, Q1 this year could be equal or greater than everything we had last year. So the ramp up is in good place, and continues nicely.

Great. Terrific. Thank you.

Thank you.

Thank you. Our next question comes from David Mitchell with William Blair. Please pose your question sir.

Yeah, good morning guys.

Good morning David. How are you today?

Good. A couple of questions, just to elaborate on the last topic, on the ETM side. My recollection was that the $8m guidance, which was the same that you had when you did the common stock offering last year, was based on orders that you felt were in hand for 2004.

That’s correct.

So we’ve had a lot of water under the bridge since then. Is that number not changed in terms of orders in hand since that time?

The $8m target, we would like to stay at this point in time. Obviously we feel extremely comfortable with the $8m. Q1, as I said in the prior question, should be at or above the entire sales for last year. So the ramp up is proceeding well. And we said in the fourth quarter last year that we would update that $8m probably around the middle of the year. And our team is on target to do that. So we’ll come back out to the market, and refresh that $8m. To your point, could that possibly be larger? And we would like to address that in the middle of the year, as we conclude on some sales orders and some more successes.

Okay. Great. And then can you help us understand a little bit the energy cost per ton, what they were in 2003, where they are today, and what’s implicit in your guidance for ’04?

Well, like everybody last year, we had some increases on natural gas, and some of the petroleum-based products. We tried to offset a lot of that with productivity improvements. We have a pretty good hedge program on natural gas. And I would say approximately 60% of our exposure is hedged at attractive prices. So, barring any major spikes there, we should have that in pretty good handle here out through all of the winter months and the spring.

And the petroleum-based products, I think we’ll probably see a couple percent increase over the course of the year. So I guess net/net, nothing major there. It’s like everybody. It’s a nuisance. It’s a couple percent increase – something we have to manage. But it’s something we’re going to try and digest in the productivity improvement program.

But you don’t want to quantify?

We would rather not. We generally don’t do that in our cost structure for competitive reasons. But I think you should think that the petroleum-based products, natural gas, energy, probably two, maybe three percent we might see. But I think our message to you is we believe that’s manageable. We’ve demonstrated the capability to manage that last year, with productivity improvements. But it will be a nuisance. We’re going to have a little noise around that, like everybody else, quarter over quarter, and as we proceed forward. But I think in the earnings guidance we’ve given, that’s manageable.

Okay. Just one last attempt on my part to try to pull it out further. Can you at least give us a sense of, in the cost structure of a graphite electrode, is energy your single biggest cost? Where does it rank?

No. Petroleum-based products would be our single largest. And that would be roughly around 30-35% of the cost of an electrode. So it would be various petroleum-based products. And so you’ve seen oil in the 30-30 plus range all last year. It’s roughly in that range, bouncing around in that range this year. So this year, as I said, we may see a couple percent increase, in that arena, on that 35% of our cost structure.

Okay. All right. Thank you.

Thank you David.

Thank you. Our next question comes from Mr. Michael Hahn with Merrill Lynch. Please pose your question sir.

Hello. I was hoping that maybe you could just talk a little bit about what’s the potential for the cell phone products that you talked about versus some of the other opportunities in the thermal management group? And the timing on when you expect the cell phone stuff to ramp up. Thanks.

Thanks Michael. The cell phone is another application. Within each of those two companies I mentioned – NEC and Sharp – we’ve got a couple different applications in there around the small LCD screen and the battery pack. And NEC and Sharp, of course, are two of the smaller players in the segment. Obviously we’re working on the others, the largers in that space, the Nokias, the Samsungs.

And initially I think you should look at that as relatively small to us. I think when we get some good penetration in there, we might see that grow as much as a half a million dollars a year. So it’s a smaller application. It’s high volume. But obviously within a cell phone, the space of it, it’s a small product. And I think near-term you should think that could ramp up to half a million dollars in sales.

Okay. So what’s the – well what would the relative revenue per phone be versus some of the other consumer products, like the large screen TVs.

Michael, we’ve been approached with that kind of questioning on the pricing, per these different applications. And because these different applications are completely different market segments for us, and in cell phones and in flat screen TVs there is a number of competitors with various price points, we’ve tried to stay away from that.

What we’ve said is that the $8m in sales we’re targeting for this year, that it has – our best margins. They have good margins there. But we’ve really not given any guidance in between these different product applications, for competitive reasons, for customer reasons. We just don’t think it benefits us. So cell phones you should look at high volume, a lot of volume out there. Probably less revenue for us – near term, this year, could it be a half a million? It could be a half a million this year or so. And obviously the laptop, the flat screens, digital cameras, those are bigger segments for us.

Okay. And then could you just maybe talk about the quantity of other deals that you’re working on, or other potential applications, and maybe other new products in this area?

In the other areas we’re working, we have some other laptop producers that we don’t have in our portfolio yet. And we continue to work with them and solve some of their thermal requirements. So I think there is plenty of room in the laptops, whether it be the Dells and Apples of the world. We’re still – we’re working with those folks. As you’ve seen, we have not announced any on those. So there is good up side there.

On the flat screen side, we’ve announced Samsung. Obviously there is three or four other large players there, like LG, Panasonic. Obviously we’re working with those folks. And so I think there is plenty of up side in those product lines, and those applications.

And then in terms of new applications for graphite that you’re working on? What new technologies, similar to this, or not so similar to this?

Well right now, I would say the major focus in electronic thermal management is in that space we’ve talked about. One, because there are such good opportunities. And we have such a value-add product. So, as you’ve seen, we’ve been able to get in the door. We’ve been able to get product approvals. We’ve been able to get contracts with industry leaders. And in some cases, we have the number one in that segment. And the number one might only be 20% of the global volume. So now we’re working with the number two, three and four in that space.

So right now that’s where we’re spending most of our time, because we’ve got such an outstanding performing product. And there is a tremendous demand and need there. As we go forward, our R&D and marketing teams are going to identify some other opportunities we don’t see today. Some of those, obviously, are in the pipeline. It would be premature to talk about those. But this entire thermal management market that we’ve targeted is about $300m. So it’s a large market. We believe we’ve got the best performing product for that $300m market. And, as we’ve said, the target is $8m now. And we’d like to refresh that mid-year. And we’re off to a good ramp-up so far this year.

Okay. Thank you very much.

Thank you Michael.

Thank you. Our next question comes from [Martin Lewinsky] from Bank of Austria. Please pose your question sir.

Yes, hello. I’ve got two questions regarding Europe. The first one is did you win or lose market shares from competitors? Or has nothing changed. That’s the first question. And the second question is the outlook for Europe for 2004, for graphite electrodes.

Okay. Good. On the market share front, year over year, ’02 to ’03, we increased our graphite worldwide market share from about 19% in ’02 to 21% - maybe slightly above 21% - in ’03. And, as we’ve built the book here for ’04, we don’t see any slippage whatsoever in that 21% market share. So at worst, our market share is 21%. The book, as we said, is still another 15% to go. We haven’t seen any major shift in market share. So we would expect to come in in ’04 probably around 21, maybe 22% market share.

On the graphite outlook for Europe, the European market, let’s say is flat. We haven’t seen the big pick-up that we started to see in Q3 and Q4 last year that we saw in the Americas, and especially Asia. So the book for this year versus last year looks about the same. It looks like about the same volume. We haven’t seen any slippage.

But in dialoguing with some of our customers, and looking at what some of the analysts are reporting, we think we may see some pick up in the second half of this year in Europe. There is still customers there, who have done a lot to improve their shops. There has been some good consolidation of steel producers the last couple years in Europe. And so we think they are well positioned as those economies start to turn a bit, to have a good second half of ’04. But our volume right now looks a lot like the volume did last year in Europe.

Okay. So there was also no shift in market share from Europe I guess?

No. We didn’t see any major. It looks the same. And the economies are so far performing pretty much the same. Perhaps the second half of this year, we may see an up-tick in Europe.

Okay. Thanks a lot.

Thanks Martin.

Thank you. Our next question is from [Mark] with [Healing Circle]. Please pose your question.

Thank you. Can you give us an update on the litigation with Dow and Mitsubishi?

I sure can. As we announced, the Judge on our case dismissed our case. And, as we released, we intend to appeal that. We are working on the appeal. And the appeal was filed, in fact, yesterday. So we have very quickly formulated the appeal. And it has been formally filed yesterday. And we would expect the court probably to take this year – maybe we hear something in Q4. It might even be Q1 next year on our appeal. We believe, as we said earlier, we have a strong case. All the heavy lifting on this has been done. And the appeal will cost us perhaps something around $200,000. So we’re going to go ahead and work on this appeal. It’s in the Q. It’s filed. And we should hear something towards the end of the year or Q1 next year.

Just two follow-ups. Is it the same law firm that you had been using at the end of the process on the first suit? And secondly, is there any specific time table? Or can it be drawn out as the last case had been, or the initial case had been?

It’s absolutely the same law firm, Piper Rudnick. And the reason I say we believe and expect it could be Q4 this year, Q1 next year, that’s the typical time frame in the appeal court. And generally, you go back, based on history, generally they’re not long, drawn out. Generally these are looked at in a more efficient manner than our experience in the lower court. So we would expect Q4 this year, Q1 next year.

Thank you very much.

Thank you.

Thank you. Our next question comes from [Michael Corsiano] with [Skinwood] Capital. Please pose your question sir.

Yes, a couple questions on Asia. Could you talk about your business there, and some of the mini-mill construction that you were seeing? And also, any signs of either capacity additions or irrational behavior by any of the electrode competitors in China or India?

On the steel side in Asia, we continue to see a good strong demand. We continue to see new EAF construction in China. And our China sales continue to grow very nicely year over year. And I believe ’04 will be another record year for us in China sales.

As far as the competitors in the arena, we haven’t seen any different behavior from them over the last couple years. The industry executed price increases, as you know. We’ve talked about, and I – we haven’t really seen any different kind of behavior from competitors. They’re good competitors. They make a good product. And those types of competitors make us a better company.

And two other questions. One, any signs of electrode inventory builds at the mill at all – mill level, either U.S., Europe or Asia? And also, just if you could comment on your needle coke supply, given your 10% increase in electrode capacity for ’04.

Surely. On the graphite electrode inventory that’s out there in the pipeline, we see absolutely no build-up. If anything, it is on the shorter side. Inventory levels in the trader are lower than normal. So there is no bubble of graphite electrode out there. In fact, the second half of last year, the typical call would be from a customer, why is my inventory so low? So there is no bubble of graphite electrode out there in the trade that we see at all.

On the supply of coke, we are very comfortable with the supply of our coke in ’04, as we were in ’03. We believe we are the world’s largest buyer of this petroleum coke, being the industry leader in graphite electrodes. And historically, and last year, and this year, we don’t see any shortage for ourselves on coke.

Thank you.

Thank you.

Thank you. Our next question comes from [Michael Stern] with [Cincaddi] Advisors. Please pose your question sir.

A couple of quick questions on the antitrust fines, if you will. The Euro fines, while you’re appealing them, you sort of prepaid the fines. Are there outstanding DOJ fines, or any other fines that you are either appealing or need to post LCs for?

There are no outstanding DOJ fines that we need to post LCs or we’re appealing. The outstanding, as we said in the conference call dialogue, is that 52.5 – 53 million outstanding. That’s on a very nice payment plan, spread out to 2007. There is no appeal. There is no argument about that. And there is no LC requirements, etc. So that’s on a very nice, orderly payment schedule. And that will be completed in ’07.

So, going forward, you guys aren’t going to need to use your revolver at all for any antitrust related funds?

We don’t expect to.

Okay. And the other question, also bank related, is there is still a little piece of the term loan outstanding. Is that right?

No. We completely paid that down.

Okay. That’s completely paid down?

That’s completely paid down.

Okay. Great. Thanks.

Thank you.

Thank you. Our next question is a follow-up question from [Kevin Cohen] with Credit Suisse First Boston. Please pose your question sir.

Thanks. A quick follow-up, just in terms of scrap prices and availability. We’ve read a lot about that. And I am just wondering if there has been any effect on mini-mill customers of GrafTech, or for the industry just in terms of being able to produce a deal. Thanks.

Kevin, good point. Yes, scrap prices have been rising, and rising rapidly. And so I think globally you’ve seen mini-mills feel that pain. And what they’ve done is have several price increases on their steel. They’ve had some surcharges added on, especially here in the U.S. We haven’t seen any of our customers impacted by it. Our customers have not had to slow down production. They’ve not had to cut shifts. So our customers continue to run very well. They’re getting the scrap they need. They’re paying much more for it. But, on the other hand, they have of course increased their prices substantially to cover it.

Great. Thanks a lot.

Thank you Kevin.

Thank you. (Caller instructions.) Our next question is a follow-up question from [Robert Lagupo] with CIBC World Markets. Please pose your question sir.

Hi. I just had one follow-up question. Just actually a follow-up related to the mini-mill construction in Asia. Can you also give us a sense globally on aluminum smelting capacity and what you’re seeing here, just as it relates to cathodes?

In ’04, we don’t see any out of the ordinary new aluminum smelting capacity. So the aluminum producers continue to have good production of their existing facilities. We haven’t seen any major step changes out of the normal increases in capacity they have. They have a few projects on the board, around the world. And those projects are on scheduled construction programs. And so we, [Robert], don’t look for any step change in aluminum smelting new capacity for ’04.

Great. Thank you very much.

Thank you.

Thank you. Management, at this time there are no further questions. Please continue with any further remarks that you would like to make.

All right Kristin, thank you very much. And again, I’d like to thank everyone for their questions, and attending our call. And I look forward to talking to you next quarter. Thank you. Have a good day.