Graftech International Ltd. · NYSE:EAF
Graftech International — Proxy Contest (April 2014)
31 slides from Graftech International's proxy contest presentation, Apr 28, 2014
Slide 1: Redefining the Board
April 28, 2014 Redefining the Board SaveGrafTech.com
Slide 2: Legal Disclaimer
Legal Disclaimer 1 On April 22 , 2014 , Nathan Milikowsky, Daniel Milikowsky, NM GTI Investments LLC, The Daniel Milikowsky Family Holdings, LLC, The Daniel and Sharon Milikowsky Family Foundation, Inc . , and The Rebecca and Nathan Milikowsky Family Foundation (“Save GrafTech”), filed a definitive
Slide 3: Table of Contents
Table of Contents I. GrafTech’s Underperformance II. GrafTech’s Attempt to Whitewash Underperformance III. Addressing GrafTech’s Misinformation Campaign 2
Slide 4: I. GrafTech's Underperformance
I. GRAFTECH’S UNDERPERFORMANCE Redefining the Board
Slide 5: The Call to "Save GrafTech" is Urgent
The Call to “Save GrafTech” is Urgent 0 50 100 150 200 250 300 350 400 450 500 0 50 100 150 200 250 300 350 400 450 500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Graphite Electrode Shipments (metric tons in thousands) Global EAF Steel Production (metric tons in millions) Global EAF Productio
Slide 6: GrafTech's Chronic Underperformance Relative to Peers
GrafTech’s Chronic Underperformance Relative to Peers 5 GrafTech’s performance relative to peers has been abysmal Selected Minimill Index 2 10 - Year TSR - 237.0% - 54.5% - 393.6% - 168.8% - 358.4% 5 - Year TSR - 12.8% +36.7% - 176.8% - 91.1% - 43.4% 3 - Year TSR - 54.2% - 14.0% - 30.2% - 34.5% - 59
Slide 7: 10-Year Total Shareholder Return
10 - Year Total Shareholder Return +100.5% - S&P 500 +196.6% - Selected Peer Group +343.2% - Selected Minimill Index - 100% - 50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 500% 550% 600% Jan - 04 Jan - 05 Jan - 06 Jan - 07 Jan - 08 Jan - 09 Jan - 10 Jan - 11 Jan - 12 Jan - 13 Jan - 14 6 - 15.1%
Slide 8: 5-Year Total Shareholder Return
5 - Year T otal Shareholder Return - 50% 0% 50% 100% 150% Jan - 09 Jan - 10 Jan - 11 Jan - 12 Jan - 13 Jan - 14 +21.1% +125.8% - S&P 500 +37.8% - Selected Peer Group +64.5% - Selected Minimill Index 7 Source: Bloomberg Note: TSR as of January 7, 2014 (the day prior to Save GrafTech’s 13D/A filing) w
Slide 9: 3-Year Total Shareholder Return
3 - Year Total Shareholder Return - 29.2% - 13.0% - 8.7% +11.0% +54.1% - S&P 500 +20.6% - Selected Minimill Index - 75% - 50% - 25% 0% 25% 50% 75% Jan - 11 Apr - 11 Jul - 11 Oct - 11 Jan - 12 Apr - 12 Jul - 12 Oct - 12 Jan - 13 Apr - 13 Jul - 13 Oct - 13 Jan - 14 8 - 43.1% Source: Bloomberg Note: TS
Slide 10: Hypothetical $100,000 Investment in GrafTech Versus Peers
Hypothetical $100,000 investment in GrafTech Versus Peers 9 Source: Capital IQ $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Total Shareholder Return with $100,000 investment made in January 2004
Slide 11: EBITDA Projections Compared with Actual Performance
EBITDA Projections Compared with Actual Performance 10 Source: SEC filings; Capital IQ Transcripts; Q1 2011 Earnings Call (April 27, 2011); Q1 2012 Earnings Call (April 26, 2012); Q1 2013 Earnings Call (April 25, 2013); Q1 2014 Earnings Call (April 24, 2014) Management 1Q Conference Call Projections
Slide 12: GrafTech's Q1 2014 Earnings Call Continued the Trend of Poor Results
$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 Q1 ’11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’12 Q2 ’12 Q3 ’12 Q4 ’12 Q1 ’13 Q2 ’13 Q3 ’13 Q4 ’13 Q1 ’14 LTM Earnings Per Share Earnings Per Share 11 The call to “Save GrafTech” is urgent Source: Capital IQ Note: LTM Diluted EPS Excluding Extra Items; Q4 2013 and Q1
Slide 13: The Company's April 2014 Presentation Used Inappropriate Peers
12 The Company’s April 2014 Investor Presentation used inappropriate peers in what we believe was an attempt to whitewash the Board’s dreadful performance
Slide 14: II. GrafTech's Attempt to Whitewash Underperformance
II. GRAFTECH’S ATTEMPT TO WHITEWASH UNDERPERFORMANCE Redefining the Board
Slide 15: Peer Group Selection
Peer Group Selection SaveGrafTech’s selection of GrafTech’s peers was based on their graphite electrode production capacity and whether graphite electrodes is their core business 14 ▪ Ticker: TSE:5301 ▪ Headquartered in Japan ▪ Founded in 1918 ▪ 100,000 metric ton production capacity ▪ Ticker: DB:SG
Slide 16: The Company Has Selected Inappropriate Peers
The Company Has Selected Inappropriate Peers The Company has selected as their “Industry Peers” SGL Carbon, Tokai Carbon, Graphite India, HEG Limited, IBIDEN, Showa Denko, Mersen , Toyo Tanso , and Nippon Carbon We believe IBIDEN , Showa Denko, Mersen , Toyo Tanso , and Nippon Carbon are not compara
Slide 17: Peer Group Selection: Correct Peer Group vs Inappropriate Peers
Peer Group Selection Correct Peer Group Not Appropriat e Peers 16 Company Core Business 1 Graphite Electrode Capacity 2 Graphite Electrodes 195,000 MT Graphite Electrodes 100,000 MT Graphite Electrodes 180,000 MT Graphite Electrodes 80,000 MT Graphite Electrodes 98,000 MT Petro - Chemicals 127,000 M
Slide 18: Peer Group Selection: 5-Year TSR of Inappropriate Peers
17 Source: Bloomberg (as of the Company’s selected period end date of December 31, 2014); weighted by market cap; GrafTech Investor Presentation (April 2014) The 5 - Year TSR of GrafTech’s inappropriate additions to the peer group underperformed GrafTech by 11.6% Peer Group Selection Is it a coincid
Slide 19: The Company Selected an Inappropriate Date to Stop the Clock
The Company Selected an Inappropriate Date to Stop the Clock 18 The Company selected the end of its fiscal year as the date to stop the clock on its total shareholder return Why did the Company leave out 3 - and 10 - year TSR? We believe the appropriate date to use is January 7, 2014, which reflects
Slide 20: GrafTech Cherry-Picks Dates and Omits Key Information
GrafTech Cherry - Picks Dates and Omits Key Information We believe revenues from the acquisition of C/G Electrodes and Seadrift account for much of the Company’s revenue growth, and this table ignores the steady decline in revenues from 2011 to 2014 We believe declines in Operating Cash Flow and Mar
Slide 21: GrafTech Has Been Unable to Strengthen Its Business Model
Nov. 30, 2010 GTI closed the acquisition of 81.1% of Seadrift and 100% of C/G Electrodes for $853mm Jun. 30, 2008 GTI closed the acquisition of 18.9% of Seadrift for $135mm Feb. 9 , 2011 GTI closed the acquisition of Micron Research for $7mm Oct. 31, 2011 GTI closed the acquisition of Fiber Material
Slide 22: Global EAF Production Rises, GrafTech's Shipments Fall
Global EAF Production Rises, GrafTech’s Shipments Fall • The Company’s Presentation states that “demand appears to be strengthening” • The Electrode Market has been growing for decades, yet GrafTech has been selling fewer electrodes GrafTech’s shipments are declining despite a growing EAF steel mark
Slide 23: GrafTech's Stated Goals and Projections
GrafTech’s Stated Goals and Projections Throughout GrafTech’s Presentation, the Company states what we believe to be absurd and unscientific projections about what the Company may do in the future 22 Source: GrafTech April 2014 Presentation, page 14 Source: GrafTech April 2014 Presentation, page 22
Slide 24: GrafTech's Failed Plan to Reduce Inventory
GrafTech’s Failed Plan to Reduce Inventory Q1 2014 inventory was $491 million GrafTech knew about the P66 contract – this was not a surprise - and yet they still managed to bloat inventories 23 2012 average inventory was $542 million Source: GrafTech April 2014 Presentation, page 16
Slide 25: GrafTech's Governance Culture
GrafTech’s Governance Culture 24 We believe this was a r eaction to Save GrafTech’s involvement, and, we wonder why the Board would designate Mary Cranston as Chairman before the newly constituted Board was seated Board was extremely stale prior to Save GrafTech’s involvement Source: GrafTech April
Slide 26: Management's Own Data Refute Absurd Projections
Management’s Own Data Refute Absurd Projections In their haste to prove that market retreat will somehow build shareholder value, the Company’s math reveals expected shipment volumes to DECLINE AGAIN in 2014 from 2013A: 255K x 77% = 196 K shipments To 2014E: 195K x 90% = 176 K shipments How likely a
Slide 27: III. Addressing GrafTech's Misinformation Campaign
III . ADDRESSING GRAFTECH’S MISINFORMATION CAMPAIGN Redefining the Board
Slide 28: Board Wasting Shareholder Funds on Personal Attacks
Instead of engaging in a substantive discussion about the performance and strategy of the business, the current Board is wasting shareholder funds to make unsubstantiated personal attacks against Mr. Milikowsky and members of his family
Slide 29: Mr. Milikowsky's Offer of Independent Law Firm Review
Mr. Milikowsky offered to have an independent law firm review the findings of the Company’s investigation, confident that those findings did not support the Company’s conclusions If the Company were confident in the findings of its own investigation, why did it reject Mr. Milikowsky’s offer? And why
Slide 30: Nathan Milikowsky, Save GrafTech Nominee, Quote
“I have nothing to hide from anyone – GrafTech, lawyers, regulators, or shareholders. The Company has already engaged in an investigation, yet has presented no evidence to substantiate their public statements about me.” - Nathan Milikowsky, Save GrafTech Nominee
Slide 31: A Record of Underperformance That Speaks For Itself
0 50 100 150 200 250 300 350 400 450 500 0 50 100 150 200 250 300 350 400 450 500 Graphite Electrode Shipments (metric tons in thousands) Global EAF Steel Production (metric tons in millions) Global EAF Production Global EAF Production, Excluding China GrafTech Graphite Electrode Shipments A Record