What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-02-23 · 472 added, 527 removed, 1020 unchanged (49% of the section changed)

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(Unless otherwise noted, all dollars are presented in thousands)

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of GrafTech International Ltd.:

To the stockholders and the Board of Directors of GrafTech International Ltd.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of GrafTech International Ltd.

and its subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Critical Audit Matter Description

On April 23, 2018, the Company entered into a tax receivable agreement (the "TRA") that provides the sole pre-IPO stockholder, the right to receive future payments from the Company for 85% of the amount of cash savings, if any, in U.S.

federal income tax and Swiss Federal and Cantonal tax that the Company and its subsidiaries realize as a result of the utilization of certain deferred tax assets attributable to periods prior to the IPO.

The Company’s TRA liability was $40.9 million as of December 31, 2020.

The determination of the TRA liability required management to make significant estimates and assumptions related to forecasted revenues and taxable income in the appropriate taxing jurisdiction, which are the primary drivers of utilization of the deferred tax assets.

Given the significant estimates and assumptions related to forecasted revenues and taxable income in the appropriate jurisdictions, auditing the TRA liability required a high degree of auditor judgement and an increased extent of effort, including the need to involve our income tax specialists.

On April 23, 2018, the Company entered into a Tax Receivable Agreement that provides the sole pre-IPO stockholder, the right to receive future payments from the Company for 85% of the amount of cash savings, if any, in U.S.

federal income tax and Swiss Federal and Cantonal tax that the Company and subsidiaries realize as a result of the utilization of certain deferred tax assets attributable to periods prior to the IPO.

The Company’s Tax Receivable Agreement liability was $19.3 million as of December 31, 2021.

The determination of the Tax Receivable Agreement liability required management to make significant estimates and assumptions related to forecasted revenues and taxable income in the appropriate taxing jurisdiction, which are the primary drivers of utilization of the deferred tax assets.

Given the significant estimates and assumptions related to forecasted revenues and taxable income in the appropriate jurisdictions, auditing the Tax Receivable Agreement liability required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasted revenues and taxable income included the following, among others:

• Tested the effectiveness of controls over the calculation and recording of the TRA liability, including those over the forecasts of revenues and taxable income.

• With the assistance of our income tax specialists, we evaluated whether the sources of management’s estimated taxable income were of the appropriate character and sufficient to utilize the deferred tax assets under the relevant tax law and tested the mathematical accuracy of the calculation used to determine the TRA liability.

• Tested the effectiveness of controls over the calculation and recording of the Tax Receivable Agreement liability, including those over the forecasts of revenues and taxable income.

• We evaluated management’s ability to accurately estimate revenues and taxable income by comparing actual results to management’s historical estimates and evaluating whether there have been any changes that would affect management’s ability to continue accurately estimating revenues and taxable income.

• We tested the reasonableness of management’s estimates of revenues and taxable income by jurisdiction by comparing management’s forecast to:

◦ Historical revenues, cost of sales, and income

◦ Historical revenues and income

◦ Schedule of future revenues resulting from contracts with certain customers

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Deferred income taxes 40,674 43,428

Related party payable - tax receivable agreement 19,098 62,014

Related party payable - tax receivable agreement long-term 15,455 19,098

Commitments and contingencies – Note 12

Stockholders’ (deficit) equity:

Stockholders’ equity (deficit):

Preferred stock, par value $ 0.01 , 300,000,000 shares authorized, none issued

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Additional paid – in capital 761,412 758,354

Accumulated other comprehensive (loss) income ( 19,641 ) ( 7,361 )

Accumulated other comprehensive loss ( 7,444 ) ( 19,641 )

Accumulated deficit ( 733,199 ) ( 1,070,770 )

Total stockholders’ (deficit) equity ( 329,385 ) ( 691,073 )

Total stockholders’ equity (deficit) 23,402 ( 329,385 )

Total liabilities and stockholders’ equity $ 1,412,318 $ 1,432,712

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Operating income 508,074 588,609 974,045

Other expense 3,330 5,203 3,361

Related party tax receivable agreement (benefit) expense ( 21,090 ) 3,393 86,478

Other (income) expense, net ( 16,451 ) 3,330 5,203

Related party Tax Receivable Agreement expense (benefit) 231 ( 21,090 ) 3,393

Interest expense 68,760 98,074 127,331

Interest income ( 872 ) ( 1,750 ) ( 4,709 )

Income from continuing operations

before provision for income taxes 510,045 842,827 902,808

Income before provision for income taxes 456,406 510,045 842,827

Provision for income taxes 68,076 75,671 98,225

Net income from continuing operations 434,374 744,602 853,888

Income from discontinued operations, net of tax — — 331

Net income $ 388,330 $ 434,374 $ 744,602

Basic income per share:

Basic income per common share:

Net income per share $ 1.46 $ 1.62 $ 2.58

Net income from continuing operations per share 1.62 2.58 2.87

Weighted average shares outstanding 267,916,483 289,057,356 297,748,327

Diluted income per share:

Weighted average common shares outstanding 266,251,097 267,916,483 289,057,356

Diluted income per common share:

Net income per share 1.46 1.62 2.58

Diluted net income from continuing operations per share 1.62 2.58 2.87

Weighted average diluted shares outstanding 267,930,644 289,074,601 297,753,770

Weighted average common shares outstanding 266,317,194 267,930,644 289,074,601

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Net income $ 388,330 $ 434,374 $ 744,602

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustments, net of

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31,802 ( 18,848 ) 4,810

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

12,197 ( 12,280 ) ( 1,561 )

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Depreciation and amortization 65,716 62,963 61,819

Related party Tax Receivable Agreement (benefit) expense ( 21,090 ) 3,393 86,478

Related party Tax Receivable Agreement Expense (benefit) 231 ( 21,090 ) 3,393

Deferred income tax provision ( 3,657 ) 20,241 17,503

Loss on extinguishment of debt — 8,329 —

Non-cash interest expense 6,192 6,344 5,320

Stock-based compensation 16,631 2,665 2,146

Interest expense 12,051 6,192 6,344

Other charges, net 7,107 7,861 19,685

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Cash flow from financing activities:

Short-term debt (reductions) borrowings, net ( 146 ) — ( 12,607 )

Credit Facility reductions — — ( 45,692 )

Refinancing fees and debt issuance costs ( 6,278 ) — ( 27,326 )

Proceeds from the issuance of long-term

debt, net of original issue discount 500,000 — 2,235,000

Repayment of 2012 Senior Notes — — ( 304,782 )

Short-term debt reductions, net ( 142 ) ( 146 ) —

Debt issuance and modification costs ( 3,109 ) ( 6,278 ) —

Proceeds from the issuance of long-term debt — 500,000 —

Principal payments on long-term debt ( 400,000 ) ( 896,214 ) ( 350,140 )

Repurchase of common stock - related party — — ( 250,000 )

Repurchase of common stock - non-related party ( 50,000 ) ( 30,099 ) ( 10,868 )

Payment for taxes related to net share settlement of equity awards ( 71 ) — —

Principal payments on long-term debt ( 896,214 ) ( 350,140 ) ( 56,372 )

Payments for taxes related to net share settlement of equity awards ( 4,077 ) ( 71 ) —

Dividends paid to non-related party ( 7,439 ) ( 8,603 ) ( 20,613 )

Dividends paid to related party ( 3,206 ) ( 22,272 ) ( 78,010 )

Related-party promissory note repayment — — ( 750,000 )

Other - primarily interest rate swap settlements ( 3,819 ) — —

Net cash used in financing activities ( 471,792 ) ( 463,683 ) ( 709,631 )

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Income taxes 63,791 73,971 99,278

Non-cash financing activities:

Dividend payable - Promissory Note** — — 750,000

* Net change in working capital due to the following components:

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Interest payable 371 430 62

Decrease (increase) in working capital $ 86,438 $ ( 47,687 ) $ ( 177,754 )

** During the second quarter of 2018, we declared a $ 750 million dividend in the form of a Promissory Note that was a non-cash transaction.

See Note 5 "Debt and Liquidity" for details.

Net change in working capital $ ( 16,377 ) $ 86,438 $ ( 47,687 )

See accompanying Notes to the Consolidated Financial Statements

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Other comprehensive income (loss):

Commodity derivatives income (loss), net of tax of $ 715

Commodity derivatives income, net of tax of $( 3,418 )

— — — 11,830 — 11,830

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— — — ( 6,371 ) — ( 6,371 )

Total other comprehensive income — — — ( 26,089 ) — ( 26,089 )

Common stock repurchased and retired (from related party) ( 11,688,311 ) ( 117 ) ( 32,844 ) — ( 192,039 ) ( 225,000 )

Total other comprehensive loss — — — ( 1,561 ) — ( 1,561 )

Repurchase of common stock - related party ( 19,047,619 ) ( 190 ) ( 53,524 ) — ( 196,286 ) ( 250,000 )

Repurchase of common stock - non-related party ( 1,004,685 ) ( 10 ) ( 2,825 ) — ( 8,033 ) ( 10,868 )

Stock-based compensation — — 2,146 — — 2,146

Dividends paid to related party stockholder ($ 5.14 per share)

Dividends paid to related party ($ 0.34 per share)

— — — — ( 78,010 ) ( 78,010 )

Dividends paid to non-related party stockholders ($ 0.9345 per share)

Dividends paid to non-related party ($ 0.34 per share)

— — — — ( 20,613 ) ( 20,613 )

Related-party promissory note repayment — — — — ( 750,000 ) ( 750,000 )

Balance as of December 31, 2019 270,485,308 $ 2,705 $ 765,419 $ ( 7,361 ) $ ( 1,451,836 ) ( 691,073 )

Net income — — — — 434,374 434,374

Other comprehensive income (loss):

Commodity and interest rate derivatives income (loss), net of tax of $( 3,418 )

Other comprehensive (loss) income:

Commodity and interest rate derivatives loss, net of tax of $ 4,250

— — — ( 15,594 ) — ( 15,594 )

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Total other comprehensive loss — — — ( 12,280 ) — ( 12,280 )

Common stock repurchased and retired (from related party) ( 19,047,619 ) ( 190 ) ( 53,524 ) — ( 196,286 ) ( 250,000 )

Common stock repurchased and retired (from non-related party) ( 1,004,685 ) ( 10 ) ( 2,825 ) — ( 8,033 ) ( 10,868 )

Repurchase of common stock - non-related party ( 3,328,574 ) ( 33 ) ( 9,700 ) — ( 20,366 ) ( 30,099 )

Stock-based compensation 42,411 — 2,665 — — 2,665

Dividends paid to related party stockholder ($ 0.34 per share)

Payments for taxes related to net share settlement of equity awards ( 10,598 ) — ( 30 ) — ( 41 ) ( 71 )

Dividends paid to related party ($ 0.115 per share)

— — — — ( 22,272 ) ( 22,272 )

Dividends paid to non-related party stockholders ($ 0.34 per share)

Dividends paid to non-related party ($ 0.115 per share)

— — — — ( 8,603 ) ( 8,603 )

Adoption of ASC 326 — — — — ( 2,026 ) ( 2,026 )

Balance as of December 31, 2020 267,188,547 2,672 758,354 ( 19,641 ) ( 1,070,770 ) ( 329,385 )

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Other comprehensive income (loss):

Commodity and interest rate derivatives income (loss), net of tax of $ 4,250

Commodity and interest rate derivatives income, net of tax of $( 6,662 )

— — — 24,525 — 24,525

Commodity derivatives reclassification adjustments, net of tax of $ 879

Commodity derivatives and interest rate swap reclassification adjustments, net of tax of $( 1,970 )

— — — 7,277 — 7,277

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— — — ( 19,605 ) — ( 19,605 )

Total other comprehensive loss — — — ( 12,280 ) — ( 12,280 )

Common stock repurchased and retired (from non-related party) ( 3,328,574 ) ( 33 ) ( 9,700 ) ( 20,366 ) ( 30,099 )

Total other comprehensive income — — — 12,197 — 12,197

Repurchase of common stock - non-related party ( 4,658,544 ) ( 46 ) ( 13,091 ) — ( 36,863 ) ( 50,000 )

Stock-based compensation 1,009,545 11 16,620 — — 16,631

Dividends paid to related party stockholder ($ 0.115 per share)

Options exercised 33,500 — 351 — — 351

Payments for taxes related to net share settlement of equity awards ( 317,340 ) ( 4 ) ( 822 ) — ( 3,251 ) ( 4,077 )

Dividends paid to related party ($ 0.04 per share)

— — — — ( 3,206 ) ( 3,206 )

Dividends paid to non-related party stockholders ($ 0.115 per share)

Dividends paid to non-related party ($ 0.04 per share)

— — — — ( 7,439 ) ( 7,439 )

Common stock withheld for taxes on equity award settlement ( 10,598 ) — ( 30 ) — ( 41 ) ( 71 )

Adoption of ASC 326 ( 2,026 ) ( 2,026 )

Balance as of December 31, 2021 263,255,708 $ 2,633 $ 761,412 $ ( 7,444 ) $ ( 733,199 ) $ 23,402

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(the “Company”) is a leading manufacturer of high-quality graphite electrode products essential to the production of electric arc furnace ("EAF") steel and other ferrous and non-ferrous metals.

References herein to “GTI,” “we,” “our,” or “us” refer collectively to GrafTech International Ltd.

References herein to “GTI,” “we,” “our,” or “us” refer collectively to the Company.

and its subsidiaries.

On August 15, 2015, GTI became an indirect wholly owned subsidiary of Brookfield Asset Management Inc.

(“Brookfield”) through a tender offer to our former stockholders and subsequent merger transaction.

Brookfield has since distributed portions of its GrafTech common stock to the owners in the Brookfield consortium and sold portions of GrafTech common stock, resulting in the reduction in Brookfield's ownership of outstanding shares of GrafTech common stock to 55.3 % as of December 31, 2020.

See Note 14 "Stockholders equity" and Note 17 "Subsequent events" for more information.

(together with its affiliates, “Brookfield”).

In April 2018, we completed our initial public offering ("IPO") of 38,097,525 shares of our common stock held by Brookfield at a price of $ 15.00 per shares.

We did not receive any proceeds related to the IPO.

Our common stock is listed on the NYSE under the symbol “EAF.” Brookfield has since distributed a portion of its GrafTech common stock to the owners in the Brookfield consortium and sold shares of GrafTech common stock in public and private transactions, resulting in Brookfield's ownership of outstanding shares of GrafTech common stock decreasing to 55.3 % as of December 31, 2020 and 24.3 % as of December 31, 2021.

See Note 14, "Stockholders Equity (Deficit)," for more information.

The Company’s only reportable segment, Industrial Materials, is comprised of our two major product categories:

graphite electrodes and needle coke products.

Needle coke is the key raw material to producing graphite electrodes.

The Company's vision is to provide the highest quality graphite electrodes at the lowest cost while providing the best customer service all while striving to be the lowest cost producer.

Petroleum needle coke is a key raw material used in the production of graphite electrodes.

The Company's vision is to provide highly engineered graphite electrode services, solutions and products to electric arc furnace operators.

Summary of Significant Accounting Policies

The Consolidated Financial Statements include the financial statements of GrafTech International Ltd.

and its wholly owned subsidiaries.

The Consolidated Financial Statements include the financial statements of the Company and its wholly owned subsidiaries.

All intercompany transactions have been eliminated in consolidation.

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Historically, these reversals have been insignificant.

Additionally, when termination fees are invoiced under certain provisions of the longer-term take-or-pay sales agreements, they are accounted for as an element of variable consideration that is constrained, i.e.

Additionally, when termination fees are invoiced under certain provisions of the LTAs, they are accounted for as an element of variable consideration that is constrained, i.e.

not recognized, until collected.

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The allocation of the transaction price to the performance obligations remains unchanged if stand-alone selling prices change after contract inception.

Changes to longer-term take-or-pay contracts are reviewed to assess whether there has been a change in volume, price or both and whether any additional volumes are at their stand-alone selling price to determine whether the contract modification should be accounted for as (1) part of the existing contract, (2) the termination of the existing contract and the creation of a new contract or (3) a separate contract.

Changes to LTAs are reviewed to assess whether there has been a change in volume, price or both and whether any additional volumes are at their stand-alone selling price to determine whether the contract modification should be accounted for as (1) part of the existing contract, (2) the termination of the existing contract and the creation of a new contract or (3) a separate contract.

Under the most commonly negotiated terms, the accounting is such that it treats these modified contracts as the termination of the existing contract and the creation of a new contract.

Inventories are stated at the lower of cost or market.

Cost is principally determined using the “first-in first-out” (“FIFO”) and average cost, which approximates FIFO, methods.

Elements of cost in inventory include raw materials, direct labor and manufacturing overhead.

Cost is principally determined using the FIFO and average cost, which approximates FIFO, methods.

Elements of cost in inventory include raw materials, energy costs, direct labor, manufacturing overhead and depreciation of manufacturing fixed assets.

We allocate fixed production overheads to the costs of conversion based on normal capacity of the production facilities.

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Expenditures for replacements and betterments are capitalized and the replaced assets are retired.

Gains and losses from the sale of property are included in cost of sales or other expense (income), net.

Gains and losses from the sale of property are included in cost of sales or other (income) expense, net.

We depreciate our assets using the straight-line method over the estimated useful lives of the assets.

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Depreciation expense was $ 55.0 million, $ 51.5 million and $ 49.7 million in 2021, 2020 and 2019, respectively.

Capital expenditures within accounts payable totaled $ 8.9 million and $ 11.5 million as of December 31, 2020 and 2019, respectively.

Accounts payable associated with capital expenditures totaled $ 15.7 million and $ 8.9 million as of December 31, 2021 and 2020, respectively.

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company determines if an arrangement is a lease at inception.

When an arrangement contains a lease, we then determine if it meets any of the criteria to be classified as a finance lease.

Leases with a term of 12 months or less are not recorded on the balance sheet.

Right of Use ("RoU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

RoU assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term.

In order to compute the lease liability, when the rate implicit in the lease is not readily determinable, we discount the lease payments using our estimated incremental borrowing rate for secured fixed rate debt over the same term, derived from information available at the lease commencement date.

Our lease term includes the option to extend the lease when it is reasonably certain that we will exercise that option.

Lease and non-lease components are treated as a single lease component, except for leases of warehouse space where they will be accounted for separately.

Leases may include variable lease and variable non-lease components costs, which are accounted for as variable lease expense in the income statement.

Accounts Receivable

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Allowance for Doubtful Accounts

We adopted the new credit losses standard in 2020 introducing the Current Expected Credit Losses ("CECL") accounting model, using a lifetime of expected credit losses measurement objective for the recognition of credit losses at the time the financial assets originates or acquired.

We recognize credit losses at the time the financial assets originate or are acquired using a lifetime of expected credit losses measurement.

Our expected losses are adjusted each period for changes in expected lifetime credit losses.

Prior to adoption of the CECL standard, the allowance for doubtful accounts was based on judgment to assess the likelihood of collection of receivables, including the current creditworthiness of each customer, related aging of the past due balances and the facts and circumstances surrounding any non-payment.

We evaluated specific accounts when we became aware of a situation where a customer may not be able to meet its financial obligations.

Receivables are charged off when amounts are determined to be uncollectible.

Deferred Debt Issuance Costs

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Derivatives are recorded at fair value in prepaid expenses and other current assets, other long-term assets, other current liabilities and other long-term obligations in the consolidated balance sheets.

We also formally assess, both at inception and at least quarterly thereafter, whether a derivative used in a hedging transaction is highly effective in offsetting changes in either the fair value or the cash flows of the hedged item.

When it is determined that a derivative ceases to be highly effective or that the hedged transaction is no longer probable of occurring, we discontinue hedge accounting.

We also formally assess, both at inception and at least quarterly

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

thereafter, whether a derivative used in a hedging transaction is highly effective in offsetting changes in either the fair value or the cash flows of the hedged item.

When it is determined that a derivative ceases to be highly effective or that the hedged transaction is no longer probable of occurring, we discontinue hedge accounting.

Foreign Currency Derivatives

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All commodity contracts are carried at fair value and are treated as cash flow hedges to the extent they are effective.

Changes in their fair values are included in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets until settlement.

Realized gains and losses resulting from settlement are first recognized in accumulated other comprehensive income (loss) and are recorded in cost of sales on the Consolidated Statements of Operations when the underlying hedged item is realized.

Changes in their fair values are included in accumulated other comprehensive loss in the Consolidated Balance Sheets until settlement.

Realized gains and losses resulting from settlement are first recognized in accumulated other comprehensive loss and are recorded in cost of sales on the Consolidated Statements of Operations when the underlying hedged item is realized.

Interest Rate Swap Contracts

We have entered into interest rate swap contracts that are "pay variable, receive fixed" with maturities of either two or five years .

The Company’s risk management objective was to fix its cash flows associated with the risk in variability in the one-month U.S.

LIBO Rate for a portion of our outstanding debt under the 2018 Term Loan.

We have entered into interest rate swap contracts that are "pay fixed, receive variable" with maturities of either two or five years .

The Company’s risk management objective was to fix its cash flows associated with the risk in variability in the one-month USD LIBOR for a portion of our outstanding debt under the 2018 Term Loan Facility (as defined in Note 5, "Debt and Liquidity").

It is expected that these swaps will fix the cash flows associated with the forecasted interest payments on this notional amount of debt.

All interest rate swaps are carried at their fair value and are treated as cash flow hedges.

Changes in their fair value are in included in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets until settlement.

Changes in their fair value are included in accumulated other comprehensive loss on the Consolidated Balance Sheets until settlement.

Realized gains and losses resulting from the settlement are recognized in interest expense in the period of settlement.

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The Company treats taxes due on future U.S.

inclusions in taxable income related to Global Intangible Low Tax Income ("GILTI") as a current period expense when incurred (the “period cost method”).

inclusions in taxable income related to Global Intangible Low Tax Income ("GILTI") as a current period expense when incurred.

See Note 13, "Income Taxes" for more information.

Related Party Tax Receivable Agreement

On April 23, 2018, the Company entered into a tax receivable agreement (the "TRA") that provides Brookfield, as the sole pre-initial public offering ("IPO") stockholder, the right to receive future payments from us for 85 % of the amount of cash savings, if any, in U.S.

federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses ("NOLs"), previously taxed income under Section 959 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), foreign tax credits, and certain NOLs in Swissco (collectively, the "Pre-IPO Tax Assets").

Related Party Tax Receivable Agreement

On April 23, 2018, the Company entered into a Tax Receivable Agreement that provides Brookfield, as the sole pre-IPO stockholder, the right to receive future payments from us for 85 % of the amount of cash savings, if any, in U.S.

federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses ("NOLs"), previously taxed income under Section 959 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), foreign tax credits, and certain NOLs in Swissco (collectively, the "Pre-IPO Tax Assets").

In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to LIBOR plus 1.00 % per annum.

The term of the TRA commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.

Retirement Plans and Postretirement Benefits

We use actuarial methods and assumptions to account for our defined benefit pension plans and our postretirement benefits.

We immediately recognize the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each year with a mark-to-market adjustment ("MTM Adjustment") and whenever a plan is remeasured (e.g.

due to a significant curtailment, settlement, etc.).

Pension and postretirement benefits expense includes the MTM adjustment, actuarially computed cost of benefits earned during the current service period, the interest cost on accrued obligations, the expected return on plan assets based on fair market values, and adjustments due to plan settlements and curtailments.

The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.

The Tax Receivable Agreement liability is recorded based on the best estimate of the utilization of Pre-IPO Tax Assets and is revised annually in the fourth quarter or earlier if and when significant changes in the forecast are identified.

Retirement Plans and Post-Employment Benefits

We use actuarial methods and assumptions to account for our defined benefit pension plans and our post-employment benefits.

We recognize in earnings the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each year with a mark-to-market adjustment ("MTM Adjustment") and whenever a plan is remeasured (e.g., due to a significant curtailment, settlement, etc.).

Pension and post-employment benefits expense includes the MTM Adjustment, actuarially computed cost of benefits earned during the current service period, the interest cost on accrued obligations, the expected return on plan assets and adjustments due to plan settlements and curtailments.

Contributions to the qualified U.S.

retirement plan are made in accordance with the requirements of the Employee Retirement Income Security Act of 1974.

Postretirement benefits and benefits under the non-qualified retirement plan have been accrued, but not funded.

The estimated cost of future postretirement life insurance benefits is determined by the Company with assistance from independent actuarial firms using the “projected unit credit” actuarial cost method.

Such costs are recognized as employees render the service necessary to earn the postretirement benefits.

We record our balance sheet position based on the funded status of the plan.

Additional information with respect to benefits plans is set forth in Note 11, “Retirement Plans and Postretirement Benefits.”

Additional information with respect to benefits plans is set forth in Note 11, “Retirement Plans and Post-Employment Benefits.”

Stock-based Compensation

The Company recognizes stock-based compensation expense based on the grant date fair value of the award over the period during which an employee is required to provide service in exchange for the award.

Stock-based awards include stock options, restricted stock units ("RSUs") and deferred share units ("DSUs").

The fair value of RSUs and DSUs is primarily based on the closing market price of a share of the Company's common stock on the date of grant, modified as appropriate to take into account the features of such grants.

Stock options are granted with an exercise price equal to the closing price of the Company's common shares on the date of grant.

The fair value of stock options is determined using a Black-Scholes option-pricing model, which incorporates assumptions regarding the expected volatility, the expected option life, the risk-free interest rate, and the expected dividend yield.

The Company accounts for forfeitures as they occur.

See Note 3, "Stock-Based and Other Management Compensation" for additional information.

Environmental, Health and Safety Matters

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The accrued liability relating to environmental remediation was $ 4.9 million as of December 31, 2021 and 2020.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Our environmental liabilities do not take into consideration possible recoveries of insurance proceeds.

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We translate the financial statements of foreign subsidiaries, whose local currency is their functional currency, to U.S.

dollars using period-end exchange rates for assets and liabilities and weighted average exchange rates for each period for revenues, expenses, gains and losses.

dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenues, expenses, gains and losses.

Differences arising from exchange rate changes are included in accumulated other comprehensive loss on the Consolidated Balance Sheets until such time as the operations of such non-U.S.

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dollar, we remeasure non-monetary balance sheet accounts and the related income statement accounts at historical exchange rates.

Resulting gains and losses arising from the fluctuations in currency for monetary accounts are recognized in other (income)

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

expense, net, in the Consolidated Statements of Operations.

Resulting gains and losses arising from the fluctuations in currency for monetary accounts are recognized in other (income) expense, net, in the Consolidated Statements of Operations.

Gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in earnings as incurred.

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These loans are subject to remeasurement gains and losses due to changes in currency exchange rates.

Certain of these loans had been deemed to be essentially permanent prior to settlement and, as a result, remeasurement gains and losses on these loans were recorded as a component of accumulated other comprehensive income (loss) in the stockholders’ equity section of the Consolidated Balance Sheets.

One of these loans has been deemed to be essentially permanent prior to settlement and, as a result, remeasurement gains and losses on this loan were recorded as a component of accumulated other comprehensive loss in the stockholders’ equity (deficit) section of the Consolidated Balance Sheets.

The remaining loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency (gains) losses in other (income) expense, net, on the Consolidated Statements of Operations.

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The annual goodwill impairment testing may begin with a qualitative assessment of potential impairment indicators in order to determine whether it is necessary to perform the quantitative goodwill impairment test.

In 2020, ASU No.

2017-14 simplified the accounting for goodwill impairment removing the second step of the good will impairment test.

Prior to adopting the new guidance, the impairment test for goodwill used a two-step approach, which was performed at the reporting unit level.

Step one compares the fair value of the reporting unit to its carrying value.

The fair value for each reporting unit with goodwill is determined in accordance with accounting guidance on determining fair value, which requires consideration of the income, market, and cost approaches as applicable.

If the carrying value exceeded the fair value, there is potential impairment and step two must be performed.

Step two compared the carrying value of the reporting unit’s goodwill to its implied fair value (i.e., fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets).

If the implied fair value of goodwill is less than the carrying amount of goodwill, an impairment is recognized.

Other amortizable intangible assets, which consist primarily of trademarks and trade names, customer-related intangibles and technological know-how, are amortized over their estimated useful lives using the straight line or sum-of-the-years digits method.

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Amortization of deferred maintenance costs totaled $ 4.6 million, $ 6.0 million and $ 5.1 million in 2021, 2020 and 2019, respectively.

Earnings per share

The calculation of basic earnings per share is based on the number of common shares outstanding after giving effect to the stock split effected on April 12, 2018 and common stock repurchases.

Diluted earnings per share recognizes the dilution that would occur if stock options or restricted shares were exercised or converted into common shares.

See Note 15, “Earnings Per Share”.

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Earnings per share

The calculation of basic earnings per share is based on the weighted average number of common shares outstanding.

Diluted earnings per share recognizes the dilution that would occur if stock options or restricted shares were exercised or converted into common shares.

See Note 15, “Earnings per Share”.

Use of Estimates

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generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses.

Significant estimates and assumptions are used for, but are not limited to inventory valuation, pension and other post-retirement benefits, allowance for doubtful accounts, contingent liabilities, accruals and valuation allowances, asset impairment, and environmental-related accruals.

Significant estimates and assumptions are used for, but are not limited to inventory valuation, pension and other post-employment benefits, allowance for doubtful accounts, contingent liabilities, accruals and valuation allowances, asset impairment, and environmental-related accruals.

Actual results could differ from our estimates .

Reclassifications and Adjustments

Certain items previously reported in specific financial statement captions within the Consolidated Statements of Cash Flows have been reclassified between lines within cash flow from operations to conform to the current presentation.

Subsequent Events

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See Note 17, "Subsequent Events" for further details.

Recent Accounting Standards

Recently Adopted Accounting Standards

In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350).

This guidance was issued to simplify the accounting for goodwill impairment.

The guidance removes the second step of the goodwill impairment test, which requires that a hypothetical purchase price allocation be performed to determine the amount of impairment, if any.

Under this new guidance, a goodwill impairment charge will be based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

2017-04 is effective beginning January 1, 2020.

The Company adopted ASU No.

2017-04 on January 1, 2020, with no impact to our financial position, results of operations or cash flows.

In January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-01, Reference Rate Reform (Topic 848):

Scope , which amended Topic 848 reference rate reform to clarify the scope and availability of expedients for certain derivative instruments affected by reference rate reform.

We have elected various optional expedients in Topic 848 related to hedging relationships and expect to make future elections related to contract modifications and other hedging relationships.

The future election and application of these expedients are not expected to have a material impact on our financial position, results of operations and cash flows.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 is intended to improve consistent application of Topic 740 and simplify the accounting for income taxes.

This pronouncement removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance.

ASU 2019-12 is effective for annual and interim reporting periods beginning after December 15, 2020, with early adoption permitted.

The Company adopted ASU 2019-12 on January 1, 2021, with an immaterial effect on our financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU No.

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2016-13 resulted in a cumulative-effect adjustment of $ 2.0 million included as an adjustment to our accounts receivable reserve and to retained earnings on January 1, 2020.

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU No.

2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).

This pronouncement contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

ASU 2020-04 can be elected for both interim and annual periods from March 12, 2020 through December 31, 2022.

We plan to adopt ASU 2020-04 as of January 1, 2023.

The adoption of ASU 2020-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

ASU 2019-12 is intended to improve consistent application of Topic 740 and simplify the accounting for income taxes.

This pronouncement removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance.

ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020, with early adoption permitted.

The C ompany is currently evaluating the effects of this on our financial position, results of operations or cash flows.

GRAFTECH INTERNATIONAL LTD.

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(Dollars in thousands)

Graphite Electrodes - Long-term agreements $ 1,069,772 $ 1,437,354 $ 1,341,557

Graphite Electrodes - Short-term agreements and spot sales 123,845 260,979 395,928

Graphite Electrodes - LTAs $ 1,040,214 $ 1,069,772 $ 1,437,354

Graphite Electrodes - Non-LTAs 258,426 123,845 260,979

By-products and other 47,148 30,744 92,460

Total Revenues $ 1,345,788 $ 1,224,361 $ 1,790,793

Effective the first quarter of 2019, the Graphite Electrodes revenue categories include only graphite electrodes manufactured by GrafTech.

The revenue category “By-products and Other” now includes re-sales of low-grade electrodes purchased from third-party suppliers, which represent a minimal contribution to our profitability.

For comparability purposes, the prior period has been recast to conform to this presentation.

The Graphite Electrodes revenue categories include only graphite electrodes manufactured by GrafTech.

The revenue category “By-products and other" also includes re-sales of low-grade electrodes purchased from third-party suppliers, which represent a minimal contribution to our profitability.

Contract Balances

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These contract liabilities are recorded as current or long-term deferred revenue, depending on the lag between the pre-payment and the expected delivery of the related products.

Deferred revenue or contract assets originate from contracts where the allocation of the transaction price to the performance obligations based on their relative stand-alone selling prices results in the timing of revenue recognition being different from the timing of the invoicing.

Additionally, deferred revenue or contract assets originate from contracts where the allocation of the transaction price to the performance obligations based on their relative stand-alone selling prices results in the timing of revenue recognition being different from the timing of the invoicing.

In this case, deferred revenue is amortized into revenue based on the transaction price allocated to the remaining performance obligations and contract assets are realized through the contract invoicing.

Contract assets as of December 31, 2020 were $ 2.7 million, of which $ 1.5 million and $ 1.2 million are included in "Prepaid expenses and other assets" and "Other long-term assets," respectively, on the Condensed Consolidated Balance Sheets.

There were no contract assets as of December 31, 2019.

Current deferred revenue is included in "Other accrued liabilities" and long-term deferred revenue is included in "Other long-term obligations" on the Condensed Consolidated Balance Sheets.

Contract assets as of December 31, 2021 were $ 1.2 million, which are included in "Prepaid expenses and other current assets", on the Consolidated Balance Sheets.

Contract assets as of December 31, 2020 were $ 2.7 million, of which $ 1.5 million and $ 1.2 million are included in "Prepaid expenses and other current assets" and "Other assets," respectively, on the Consolidated Balance Sheets.

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table provides information about deferred revenue from contracts with customers (in thousands):

The following table provides information about deferred revenue from contracts with customers.

Current deferred revenue is included in "Other accrued liabilities" and long-term deferred revenue is included in "Other long-term obligations" on the Consolidated Balance Sheets.

Current deferred revenue Long-Term deferred revenue

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Revenue recognized ( 6,270 ) —

Revision of estimates — ( 694 )

Reclassification between long-term and current ( 1,804 ) 1,804

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The estimated revenues do not include contracts with original duration of one year or less.

During the challenging market conditions in 2020, we were able to work with our customers to develop mutually beneficial solutions to their challenges, including volume commitments.

We have negotiated long-term sales agreement ("LTA") modifications with many of these customers.

W e also worked to preserve our rights under the LTAs in a few arbitrations that arose from some non-performance and other disputes during the year.

As a result of recent contract modifications, as well as on-going discussions with many of our customers, the remaining revenue associated with our LTAs is expected to be approximately as follows:

The remaining revenue associated with our LTAs is expected to be approximately as follows:

2022 2023 through 2024

(Dollars in millions)

Estimated LTA revenue $ 910 -$ 1,010

$ 350 -$ 450 (1)

(1) Includes expected termination fees from a few customers that have failed to meet certain obligations under their LTAs.

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For the year 2022 and beyond, the contractual revenue amounts above are based upon the minimum volume for those contracts with specified ranges.

The actual revenue realized from these contracted volumes may vary in timing and total due to the credit risk associated with certain customers facing financial challenges and non-performance on contracts, as well as customer demand related to contracted volume ranges.

The actual revenue realized from these contracted volumes may vary in timing and total due to contract non-performance, arbitrations, credit risk associated with certain customers facing financial challenges and customer demand related to contracted volume ranges.

In addition to the expected remaining revenue to be recognized with the LTAs, the Company recorded $ 1,040.2 million, $ 1,069.8 million and $ 1,437.4 million of revenue pursuant to these contracts in the year ended December 31, 2021, 2020 and 2019, respectively.

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(3) Stock-Based and Other Management Compensation

Our Omnibus Equity Incentive Plan permits the granting of options, and other stock-based awards (including restricted stock units and deferred share units).

As of December 31, 2020, the aggregate number of shares authorized under the plans since their initial adoption was 15,000,000 .

Our Omnibus Equity Incentive Plan permits the granting of options and other stock-based awards (including restricted stock units ("RSUs") and deferred share units ("DSUs")).

As of December 31, 2021, the aggregate number of shares authorized under the plan since its initial adoption was 15.0 million.

Shares issued upon vesting of awards or exercise of options are new share issuances.

Upon the vesting or payment of stock awards, an employee may elect receipt of the full share amount and either pay the resulting taxes or sell shares in the open market to cover the tax obligation.

The number of stock-based awards granted by our Board of Directors for the years ended 2020, 2019 and 2018 were as follows:

2020 2019 2018

Stock options 308,875 229,250 979,790

Deferred share units 58,207 31,829 42,243

Restricted stock units 334,062 260,640 6,740

Accounting for Stock-Based Compensation

Upon the vesting or payment of stock awards, an employee may elect receipt of the full share amount and either pay the resulting taxes or have the Company withhold shares to cover the tax obligation.

At December 31, 2021, 12.1 million common stock shares were available for future issuance.

Stock-based compensation expense was $ 16.6 million, $ 2.7 million and $ 2.1 million in 2021, 2020 and 2019, respectively.

A majority of the expense, $ 14.6 million in 2021, $ 2.3 million in 2020 and $ 1.9 million in 2019 was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales.

As of December 31, 2020, unrecognized compensation cost related to non-vested stock options, deferred share units and restricted stock units represents $ 7.9 million, which will be recognized over a weighted average period of 3.4 years.

As of December 31, 2019, unrecognized compensation cost related to non-vested stock options, deferred share units and restricted stock units represents $ 7.6 million, which will be recognized over a weighted average period of 3.8 years.

Deferred Share Units and Restricted Stock Units.

Compensation expense for deferred share units and restricted stock unit awards is based on the closing price of our common stock on the date of grant, less forfeitures or cancellations of awards throughout the vesting period, which generally range between one and five years .

The weighted average grant date fair value of deferred share units and restricted stock units was approximately $ 8.84 per share during 2020.

Deferred share units and restricted stock unit awards activity under the Omnibus Equity Incentive Plan for 2020 was as follows:

of Shares Weighted-

Outstanding unvested as of December 31, 2019 282,716 $ 12.83

Granted 392,269 8.84

Cancelled ( 45,760 ) 12.24

Vested ( 104,737 ) 10.30

Outstanding unvested as of December 31, 2020 524,488 $ 10.41

During 2020, we granted 392,269 shares of deferred share units and restricted stock units to certain directors, officers and employees at prices ranging from $ 6.48 to $ 10.66 .

Of the total deferred share units granted, 58,207 were granted to our independent directors in lieu of cash retainers and vested immediately upon grant.

The remaining deferred share units and restricted stock units vest over a period of one to five years .

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense for 2021 includes $ 14.7 million, recorded in the second quarter of 2021, due to the Change in Control accelerated vesting provisions of certain of our awards.

For the purpose of these grants, a Change in Control occurred when Brookfield and any affiliates thereof ceased to own stock of the Company that constitutes at least thirty percent ( 30 %) or thirty-five percent ( 35 %), as applicable, of the total fair market value or total voting power of the stock of the Company.

Out of the $ 14.7 million recorded with the Change in Control, $ 0.9 million accelerated at the 35 % ownership level and the remaining $ 13.8 million accelerated at the 30 % ownership level.

The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based compensation awards are exercised or vest.

We recognized $ 1.8 million of tax benefits in 2021, compared to $ 0.5 million of tax benefits in both 2020 and 2019 relating to the issuance of common stock for the exercise/vesting of equity awards.

Stock Options.

Non-qualified stock options may be granted to our employees and directors.

Stock options vest over a five year period, with one-fifth of the award vesting on the anniversary date of the grant in each of the next five years and expire 10 years from the date of grant.

Option exercises are satisfied through the issuance of common shares.

Compensation expense for stock options is based on the estimated fair value of the option on the date of the grant.

We calculate the estimated fair value of the option using the Black-Scholes option-pricing model.

During 2020, we granted 308,875 options to certain of our officers and employees.

The weighted average fair value of the options granted in 2020 was $ 3.11 .

During 2019, we granted 229,250 options to certain of our officers and employees.

The weighted-average fair value of the options granted in 2019 was $ 5.13 .

During 2018, we granted 979,790 options to certain of our officers and employees.

The weighted-average fair value of the options granted in 2018 was $ 6.08 .

The weighted average assumptions used in our Black-Scholes option pricing model for options granted in 2021, 2020 and 2019 were as follows:

For the Year Ended

December 31,2020 For the Year Ended

December 31,2019 For the Year Ended

December 31,2018

2021 2020 2019

Dividend yield 0.32 % - 0.35 %

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Expected Volatility .

For 2020, we estimated the volatility of our common stock at the date of grant based on the historical volatility of the company’s stock.

For 2021 and 2020, we estimated the volatility of our common stock at the date of grant based on the historical volatility of the Company’s stock.

The volatility factor we use is based on our historical closing prices since our stock has been publicly traded.

For the years 2019 and 2018, we estimated the volatility of our common stock at the date of grant based on the historical volatility of comparable companies over the most recent period commensurate with the expected life of the award.

For 2019, we estimated the volatility of our common stock at the date of grant based on the historical volatility of comparable companies over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate.

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We determined the expected term of the grants using the “simplified” method as described by the SEC, since we do not have a history of stock option awards to provide a reliable basis for estimating such term.

The stock options vest over a five year period, with one-fifth of the award vesting on the anniversary date of the grant in each of the next five years .

Options outstanding at December 31, 2020, have a weighted average remaining contractual life of 7.9 years, a weighted average remaining vesting period of 2.9 years, and an aggregate intrinsic value of $ 0.5 million.

There were no options exercised during 2020, 2019 or 2018.

Stock options outstanding and exercisable under our plans at December 31, 2020 are:

Options Outstanding Options Exercisable

Range of Exercise Prices Number

Outstanding Weighted

Life in Years Weighted

Prices Number

Exercisable Weighted

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes activity related to stock options during 2021:

of Options Weighted-

Price Per Share Aggregate Intrinsic Value (thousands) Weighted Average Remaining Term (Years)

Outstanding at December 31, 2020

1,248,935 $ 13.66

Stock option awards activity under the Omnibus Equity Incentive Plan for 2020 was as follows:

of Shares Weighted-

Granted 479,500 $ 11.49

Exercised ( 39,700 ) $ 10.67

Forfeited or expired ( 72,015 ) $ 14.02

Outstanding at December 31, 2021

1,616,720 $ 13.08 $ 972,123 7.6 years

Vested and Expected to vest as of December 31, 2021 1,616,720 $ 13.08 $ 972,123 7.6 years

Exercisable at December 31, 2021

1,500,800 $ 12.79 $ 972,123 7.6 years

Outstanding options have exercise prices ranging from $ 7.28 per share to $ 20.00 per share.

A summary of the status and changes of stock options and the related average price per share follows:

of Options Weighted-

Grant Date Fair Value

Outstanding unvested as of December 31, 2020

906,361 $ 4.94

Granted 479,500 6.50

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Outstanding unvested as of December 31, 2021

As of December 31, 2020, we had 303,583 options expected to vest in the next year.

There were 342,574 options exercisable as of December 31, 2020.

115,920 $ 6.64

We recognized stock-based compensation expense of $ 5.9 million, $ 1.1 million and $ 1.2 million in 2021, 2020 and 2019, respectively, relating to stock options.

As of December 31, 2021, there was $ 0.5 million of total unrecognized compensation cost related to unvested stock options, which is expected to be amortized over a weighted average period of 1.4 years.

The total fair value of shares vested was $ 6.6 million in 2021 and $ 1.1 million in both 2020 and 2019.

There were 39,700 options exercised during 2021.

No options were exercised during 2020 or 2019.

Cash received from option exercises during 2021 was $ 0.4 million.

RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period.

Compensation expense for RSUs is based on the closing price of our common stock on the date of grant, less forfeitures or cancellations of awards throughout the vesting period.

RSUs vest over a five year period, with one-fifth of the award vesting on the anniversary date of the grant in each of the next five years .

A summary of the status and changes of shares subject to RSU awards for employees and the related average price per share follows:

of Shares Weighted-

Outstanding unvested as of December 31, 2020

502,770 $ 10.28

Granted 515,960 11.49

Cancelled ( 16,795 ) 10.78

Vested ( 999,239 ) 10.88

Outstanding unvested as of December 31, 2021

2,696 $ 13.96

During 2021, 2020 and 2019, we recognized stock-based compensation expense of $ 10.0 million, $ 1.0 million and $ 0.5 million, respectively, relating to RSU awards for employees.

The total fair value of RSU awards vested during 2021 and 2020 was $ 10.8 million and $ 0.6 million, respectively.

No RSUs vested in 2019.

As of December 31, 2021, less than

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Incentive Compensation Plans

We have a global incentive program for our worldwide salaried and hourly employees, the Incentive Compensation Program (the “ICP”), which includes a stockholder-approved executive incentive compensation plan.

The ICP is based primarily on adjusted earnings before income taxes, depreciation and amortization.

The balance of our accrued liability for ICP was $ 8.9 million at December 31, 2020 and $ 6.9 million as of December 31, 2019.

$ 0.1 million of expense with respect to non-vested RSUs has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1.3 years.

DSUs are granted to our independent directors in lieu of cash retainers and vest immediately upon grant.

All whole DSUs will be settled in shares of our common stock after the Director's termination of service on the Board and any fractional shares will be settled in cash.

During 2021, we granted 61,351 DSUs to our independent directors with a weighted-average grant date fair value of $ 11.48 per share.

During 2021, 2020 and 2019, we recognized stock-based compensation expense of $ 0.7 million, $ 0.6 million and $ 0.4 million, respectively, relating to DSU awards.

The total fair value of DSU awards vested during 2021, 2020 and 2019 was $ 1.0 million, $ 0.5 million and $ 0.4 million, respectively.

Annual Cash Incentive Plan

We have a global annual cash incentive program for the majority of our worldwide salaried and hourly employees, the Short-Term Incentive Program (the “STIP”).

In 2021, the STIP is based primarily on the performance metric of adjusted EBITDA, a non-GAAP financial measure.

Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report for additional information, as well as a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

The balance of our accrued liability for the STIP was $ 10.9 million at December 31, 2021 and $ 8.9 million as of December 31, 2020.

(4) Segment Reporting

Our Industrial Materials segment manufactures high-quality graphite electrodes essential to the production of EAF steel and other ferrous and non-ferrous metals.

Our Industrial Materials segment, our only reportable segment, manufactures high-quality graphite electrodes essential to the production of EAF steel and other ferrous and non-ferrous metals.

Petroleum needle coke, a crystalline form of carbon derived from decant oil, is a key raw material used in the production of graphite electrodes.

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(a) Long-lived assets represent fixed assets, net of accumulated depreciation.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(5) Debt and Liquidity

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(Dollars in thousands)

2018 Credit Facility (2018 Term Loan and 2018 Revolving Facility) $ 943,708 $ 1,843,750

2020 Senior Notes $ 500,000 —

2018 Term Loan Facility $ 543,708 $ 943,708

2020 Senior Secured Notes 500,000 500,000

Other Debt 429 615

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Long-term Debt $ 1,029,561 $ 1,420,000

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2018 Credit Agreement

On February 12, 2018, the Company entered into a credit agreement (the “2018 Credit Agreement”) among the Company, GrafTech Finance Inc.

(“GrafTech Finance”), GrafTech Switzerland SA (“Swissco”), GrafTech Luxembourg II S.à.r.l.(“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co-Borrowers”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A.

as administrative agent (the "Administrative Agent") and as collateral agent, which provides for (i) a $ 1,500 million senior secured term facility (the “2018 Term Loan Facility”) and (ii) a $ 250 million senior secured revolving credit facility (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, the “Senior Secured Credit Facilities”), which may be used from time to time for revolving credit borrowings denominated in dollars or Euro, the issuance of one or more letters of credit denominated in dollars, Euro, Pounds Sterling or Swiss Francs and one or more swing line loans denominated in dollars.

GrafTech Finance is the sole borrower under the 2018 Term Loan Facility while GrafTech Finance, Swissco and Lux Holdco are Co-Borrowers under the 2018 Revolving Credit Facility.

On February 12, 2018, GrafTech Finance borrowed $ 1,500 million under the 2018 Term Loan Facility (the "2018 Term Loans").

The 2018 Term Loans mature on February 12, 2025.

The maturity date for the 2018 Revolving Credit Facility is February 12, 2023.

The proceeds of the 2018 Term Loans were used to (i) repay in full all outstanding indebtedness of the Co-Borrowers under our previous credit agreement and terminate all commitments thereunder, (ii) redeem in full our previously held 2012 Senior Notes at a redemption price of 101.594 % of the principal amount thereof plus accrued and unpaid interest to the date of redemption, (iii) pay fees and expenses incurred in connection with (i) and (ii) above and the Senior Secured Credit Facilities and related expenses, and (iv) declare and pay a dividend to the sole pre-IPO stockholder, with any remainder to be used for general corporate purposes.

See Note 7 "Interest Expense" for a breakdown of expenses associated with these repayments.

In connection with the repayment of our previous credit agreement and redemption of our previously held 2012 Senior Notes, all guarantees of obligations under the previous credit agreement, the 2012 Senior Notes and related indenture were terminated, all mortgages and other security interests securing obligations under the previous credit agreement were released and the indenture were terminated.

Borrowings under the 2018 Term Loan Facility bear interest, at GrafTech Finance’s option, at a rate equal to either (i) the Adjusted LIBO Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 3.50 % per annum or (ii) the ABR Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 2.50 % per annum, in each case with one step down of 25 basis points based on achievement of certain public ratings of the 2018 Term Loans.

Borrowings under the 2018 Revolving Credit Facility bear interest, at the applicable Co-Borrower’s option, at a rate equal to either (i) the Adjusted LIBO Rate, plus an applicable margin initially equal to 3.75 % per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.75 % per annum, in each case with two 25 basis point step downs based on achievement of certain senior secured first lien net leverage ratios.

In addition, the Co-Borrowers will be required to pay a quarterly commitment fee on the unused commitments under the 2018 Revolving Credit Facility in an amount equal to 0.25 % per annum.

For borrowings under both the 2018 Term Loan Facility and the 2018 Revolving Credit Facility, if the Administrative Agent determines that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate and such circumstances are unlikely to be temporary or the relevant authority has made a public statement identifying a date after which the LIBO Rate shall no longer be used for determining interest rates for loans, then the Administrative Agent and the Co-Borrowers shall endeavor to establish an alternate rate of interest, which shall be effective so long as the majority in interest of the lenders for each Class (as defined in the 2018 Credit Agreement) of loans under the 2018 Credit Agreement do not notify the Administrative Agent otherwise.

Until such an alternate rate of interest is determined, (a) any request for a borrowing denominated in dollars based on the Adjusted LIBO Rate will be deemed to be a request for a borrowing at the ABR Rate plus the applicable margin for an ABR Rate borrowing of such loan while any request for a borrowing denominated in any other currency will be ineffective and (b) any outstanding borrowings based on the Adjusted LIBO Rate denominated in dollars will be converted to a borrowing at the ABR Rate plus the applicable margin for an ABR Rate borrowing of such loan while any outstanding borrowings denominated in any other currency will be repaid.

All obligations under the 2018 Credit Agreement are guaranteed by GrafTech Finance and each domestic subsidiary of GrafTech, subject to certain customary exceptions, and all obligations under the 2018 Credit Agreement of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code) are guaranteed by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech ("Luxembourg Parent"), Luxembourg Holdco and Swissco (collectively, the "Guarantors").

2018 Term Loan and 2018 Revolving Credit Facility

In February 2018, the Company entered into a credit agreement (the “2018 Credit Agreement”), which provides for (i) a $ 2,250 million senior secured term facility (the “2018 Term Loan Facility”) after giving effect to the June 2018 amendment (the “First Amendment”) that increased the aggregate principal amount of the 2018 Term Loan Facility from $ 1,500 million to $ 2,250 million and (ii) a $ 250 million senior secured revolving credit facility (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, the “Senior Secured Credit Facilities”).

GrafTech Finance Inc.

(“GrafTech Finance”) is the sole borrower under the 2018 Term Loan Facility while GrafTech Finance, GrafTech Switzerland SA (“Swissco”) and GrafTech Luxembourg II S.à.r.l.

(“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co-Borrowers”) are co-borrowers under the 2018 Revolving Credit Facility.

The 2018 Term Loan Facility and the 2018 Revolving Credit Facility mature on February 12, 2025 and February 12, 2023, respectively.

As of December 31, 2021 and 2020, there was no debt outstanding on the 2018 Revolving Credit Facility and there was $ 3.3 million and $ 3.6 million of letters of credit drawn against the 2018 Revolving Credit Facility, respectively.

The 2018 Term Loan Facility bears interest, at our option, at a rate equal to either (i) the Adjusted LIBO Rate (as defined in the 2018 Credit Agreement), plus an applicable margin equal to 3.00 % per annum following an amendment in February 2021 (the “Second Amendment”) that decreased the Applicable Rate (as defined in the 2018 Credit Agreement) by 0.50 % for each pricing level or (ii) the ABR Rate (as defined in the 2018 Credit Agreement), plus an applicable margin equal to 2.00 % per annum following the Second Amendment, in each case with one step down of 25 basis points based on achievement of certain public ratings of the 2018 Term Loan Facility.

The Second Amendment also decreased the interest rate floor from 1.0 % to 0.50 % for the 2018 Term Loan Facility.

The 2018 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Adjusted LIBO Rate, plus an applicable margin initially equal to 3.75 % per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.75 % per annum, in each case with two 25 basis point step downs based on achievement of certain senior secured first lien net leverage ratios.

In addition, we are required to pay a quarterly commitment fee on the unused commitments under the 2018 Revolving Credit Facility in an amount equal to 0.25 % per annum.

The Senior Secured Credit Facilities are guaranteed by each of our domestic subsidiaries, subject to certain customary exceptions, and by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech, Luxembourg HoldCo, and Swissco (collectively, the “Guarantors”) with respect to all obligations under the 2018 Credit Agreement of each of our foreign subsidiaries that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)).

All obligations under the 2018 Credit Agreement are secured, subject to certain exceptions, by:

(i) a pledge of all of the equity securities of each domestic Guarantor and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65 % of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.

The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the 2018 Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation,

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

All obligations under the 2018 Credit Agreement are secured, subject to certain exceptions and Excluded Assets (as defined in the 2018 Credit Agreement), by:

(i) a pledge of all of the equity securities of GrafTech Finance and each domestic Guarantor (other than GrafTech) and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65 % of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of GrafTech Finance and each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.

The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.

The 2018 Term Loans amortize at a rate equal to 5 % per annum of the original principal amount of the 2018 Term Loans payable in equal quarterly installments, with the remainder due at maturity.

The Co-Borrowers are permitted to make voluntary prepayments at any time without premium or penalty, except in the case of prepayments made in connection with certain repricing transactions with respect to the 2018 Term Loans effected within twelve months of the closing date of the 2018 Credit Agreement, to which a 1.00 % prepayment premium applies.

GrafTech Finance is required to make prepayments under the 2018 Term Loans (without payment of a premium) with (i) net cash proceeds from non-ordinary course asset sales (subject to customary reinvestment rights and other customary exceptions and exclusions), and (ii) commencing with the Company’s fiscal year ending December 31, 2019, 75 % of Excess Cash Flow (as defined in the 2018 Credit Agreement), subject to step-downs to 50 % and 0 % of Excess Cash Flow based on achievement of a senior secured first lien net leverage ratio greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00 and less than or equal to 1.25 to 1.00, respectively.

Scheduled quarterly amortization payments of the 2018 Term Loans during any calendar year reduce, on a dollar-for-dollar basis, the amount of the required Excess Cash Flow prepayment for such calendar year, and the aggregate amount of Excess Cash Flow prepayments for any calendar year reduce subsequent quarterly amortization payments of the 2018 Term Loans as directed by GrafTech Finance.

and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.

The 2018 Term Loan Facility amortizes at a rate of $ 112.5 million a year payable in equal quarterly installments, with the remainder due at maturity.

The Co-Borrowers are permitted to make voluntary prepayments at any time without premium or penalty.

GrafTech Finance is required to make prepayments under the 2018 Term Loan Facility (without payment of a premium) with (i) net cash proceeds from non-ordinary course asset sales (subject to customary reinvestment rights and other customary exceptions and exclusions), and (ii) commencing with the Company’s fiscal year ended December 31, 2019, 75 % of Excess Cash Flow (as defined in the 2018 Credit Agreement), subject to step-downs to 50 % and 0 % of Excess Cash Flow based on achievement of a senior secured first lien net leverage ratio greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00 and less than or equal to 1.25 to 1.00, respectively.

Scheduled quarterly amortization payments of the 2018 Term Loan Facility during any calendar year reduce, on a dollar-for-dollar basis, the amount of the required Excess Cash Flow prepayment for such calendar year, and the aggregate amount of Excess Cash Flow prepayments for any calendar year reduce subsequent quarterly amortization payments of the 2018 Term Loan Facility as directed by GrafTech Finance.

As of December 31, 2021, we have satisfied all required amortization installments through the maturity date.

The 2018 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to GrafTech and restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions.

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The 2018 Credit Agreement also contains customary events of default.

First Amendment to 2018 Credit Agreement

On June 15, 2018, the Company entered into a first amendment (the “First Amendment”) to its 2018 Credit Agreement.

The First Amendment amended the 2018 Credit Agreement to provide for an additional $ 750 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”) to GrafTech Finance.

The Incremental Term Loans increased the aggregate principal amount of term loans incurred by GrafTech Finance under the 2018 Credit Agreement from $ 1,500 million to $ 2,250 million.

The Incremental Term Loans have the same terms as those applicable to the 2018 Term Loans, including interest rate, payment and prepayment terms, representations and warranties and covenants.

The Incremental Term Loans mature on February 12, 2025, the same date as the 2018 Term Loans.

GrafTech paid an upfront fee of 1.00 % of the aggregate principal amount of the Incremental Term Loans on the effective date of the First Amendment.

The proceeds of the Incremental Term Loans were used to repay, in full, the $ 750 million of principal outstanding on previously existing debt.

On February 13, 2019, we repaid $ 125 million on our 2018 Term Loan Facility.

On December 20, 2019, we repaid $ 225 million on our 2018 Term Loan Facility.

Through the year 2020, we made total repayments for $ 820 million on our 2018 Term Loan Facility, a significant portion of such repayments was funded by the cash obtained from the 2020 Senior Notes issued on December 22, 2020.

Additionally, during 2020, we executed several transactions to repurchase a total of $ 80 million of principal of our 2018 Term Loan facility.

2020 Senior Notes

On December 22, 2020, GrafTech Finance issued $ 500 million aggregate principal amount of 4.625 % Senior Secured Notes due 2028 (the “2020 Senior Notes”) at an issue price of 100 % of the principal amount thereof in a private offering to

2020 Senior Secured Notes

In December 2020, GrafTech Finance issued $ 500 million aggregate principal amount of 4.625 % senior secured notes due 2028 (the “2020 Senior Secured Notes”) in a private offering.

The 2020 Senior Secured Notes and related guarantees are secured on a pari passu basis by the collateral securing the Senior Secured Credit Facilities.

All of the proceeds from the 2020 Senior Secured Notes were used to partially repay borrowings under our 2018 Term Loan Facility.

The 2020 Senior Secured Notes pay interest in arrears on June 15 and December 15 of each year, with the principal due in full on December 15, 2028.

Prior to December 15, 2023, up to 40 % of the 2020 Senior Secured Notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 104.625 % of the principal amount thereof, together with accrued and unpaid interest, if any.

The 2020 Senior Secured Notes may be redeemed, in whole or in part, at any time prior to December 15, 2023 at a price equal to 100 % of the principal amount of the notes redeemed plus a premium together with accrued and unpaid interest, if any, to, but not including, the redemption date.

Thereafter, the 2020 Senior Secured Notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.

The indenture governing the 2020 Senior Secured Notes (the “Indenture”) contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain asset sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets.

Pursuant to the Indenture, if our pro forma consolidated first lien net leverage ratio is no greater than 2.00 to 1.00, we can make restricted payments so long as no default or event of default has occurred and is continuing.

If our pro forma consolidated first lien net leverage ratio is greater than 2.00 to 1.00, we can make restricted payments pursuant to certain baskets.

The Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or GrafTech Finance, all outstanding 2020 Senior Secured Notes will become due and payable immediately without further action or notice.

If any other type of event of default occurs and is continuing, then the trustee or the holders of at least 30 % in principal amount of the then outstanding 2020 Senior Secured Notes may declare all of the 2020 Senior Secured Notes to be due and payable immediately.

GRAFTECH INTERNATIONAL LTD.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the “Securities Act”) and to non-U.S.

persons outside the United States under Regulation S under the Securities Act.

The 2020 Senior Notes were issued pursuant to an indenture, dated as of December 22, 2020 (the “Indenture”), among GrafTech Finance, as issuer, the Company, as a guarantor, the other subsidiaries of the Company named therein as guarantors and U.S.

Bank National Association, as trustee and notes collateral agent.

The 2020 Senior Notes are guaranteed on a senior secured basis by the Company and all of its existing and future direct and indirect U.S.

subsidiaries that guarantee, or borrow under, the credit facilities under its 2018 Credit Agreement.

The 2020 Senior Notes will also be secured on a pari passu basis by the collateral securing the term loans under the 2018 Credit Agreement.

GrafTech Finance, the Company and the other guarantors granted a security interest in such collateral, consisting of substantially all of their respective assets, as security for the obligations of GrafTech Finance, the Company and the other guarantors under the 2020 Senior Notes and the Indenture pursuant to a collateral agreement, dated as of December 22, 2020 (the “Collateral Agreement”), among GrafTech Finance, the Company, the other subsidiaries of the Company named therein as grantors and U.S.

Bank National Association, as collateral agent.

The 2020 Senior Notes bear interest at the rate of 4.625 % per annum, which accrues from December 22, 2020 and is payable in arrears on June 15 and December 15 of each year, commencing on June 15, 2021.

The 2020 Senior Notes will mature on December 15, 2028, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the Indenture.

GrafTech Finance may redeem some or all of the 2020 Senior Notes at the redemption prices and on the terms specified in the Indenture.

If the Company or GrafTech Finance experiences specific kinds of changes in control or the Company or any of its restricted subsidiaries sells certain of its assets, then GrafTech Finance must offer to repurchase the 2020 Senior Notes on the terms set forth in the Indenture.

The Indenture contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain assets sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets.

The Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or GrafTech Finance, all outstanding 2020 Senior Notes will become due and payable immediately without further action or notice.

If any other type of event of default occurs and is continuing, then the trustee or the holders of at least 30 % in principal amount of the then outstanding 2020 Senior Notes may declare all of the Senior Notes to be due and payable immediately.

The entirety of the proceeds from the 2020 Senior Notes were used to partially repay our 2018 Term Loan Facility.

(6) Goodwill and Other Intangible Assets

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There has been no change in the carrying value of goodwill for the years 2020 and 2021.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes acquired intangible assets with determinable useful lives by major category which are included in "Other assets" on our Consolidated Balance Sheets:

As of December 31, 2020 As of December 31, 2019

As of December 31, 2021

As of December 31, 2020

Amount Accumulated

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Interest incurred on debt $ 56,731 $ 83,555 $ 121,010

Related Party Promissory Note interest expense — — 5,090

2012 Senior Note redemption premium — — 4,782

Accretion of fair value adjustment on 2012 Senior Notes — — 19,414

Accretion of original issue discount on 2018 Term Loans 5,340 2,196 1,455

Amortization of debt issuance costs 9,179 4,125 3,476

Accretion of original issue discount on 2018 Term Loan Facility 3,387 5,340 2,196

Amortization of debt issuance and modification costs 8,642 9,179 4,125

Total interest expense $ 68,760 $ 98,074 $ 127,331

Interest rates

The 2020 Senior Notes issued on December 22, 2020 carry a fixed interest rate of 4.625 %.

The 2018 Credit Agreement had an interest rate of 4.50 % as of December 31, 2020, 5.30 % as of December 31, 2019 and 6.02 % as of December 31, 2018.

The Old Revolving Facility and Old Term Loan Facility, both of which were repaid on February 12, 2018, had an interest rate of 4.56 % and 4.58 %, respectively, as of the date of the repayment.

The 2012 Senior Notes issued on November 20, 2012, which were also repaid on February 12, 2018, had a fixed interest rate of 6.375 % (See Note 5 "Debt and Liquidity").

In December 2020, the proceeds from the issuance of the $ 500 million 2020 Senior Notes were used to repay $ 500 million of principal on the 2018 Term Loan.

The repayment of the 2018 Term Loan was accounted for as a partial debt extinguishment and triggered $ 3.2 million of accelerated accretion of the original issue discount and $ 5.2 million of accelerated amortization of the debt issuance costs.

The 2020 Senior Notes were accounted for as new debt and the related debt issuance costs were deferred.

As a result of our February 12, 2018 refinancing, we paid a prepayment premium for the redemption of our 2012 Senior Notes totaling $ 4.8 million.

The accretion of the August 15, 2015 fair value adjustment to our 2012 Senior Notes issued on November 20, 2012, totaling $ 19.4 million in 2018, included accelerated accretion of $ 18.7 million resulting from the prepayment.

Amortization of debt issuance costs included $ 0.3 million of accelerated amortization related to the refinancing.

The 2020 Senior Secured Notes carry a fixed interest rate of 4.625 %.

The 2018 Term Loan Facility had an interest rate of 3.50 % as of December 31, 2021, 4.50 % as of December 31, 2020 and 5.30 % as of December 31, 2019.

See Note 5, "Debt and Liquidity" for details of these transactions.

In 2021 we made prepayments for a total of $ 400 million under our 2018 Term Loan Facility.

In connection with this, we recorded $ 2.3 million of accelerated accretion of the original issue discount and we recorded $ 3.7 million of accelerated amortization of the debt issuance costs.

We also recorded $ 1.6 million of modification costs related to the 2018 Term Loan Facility repricing in the first quarter of 2021.

See Note 5, "Debt and Liquidity" for details of the Second Amendment.

In December 2020, the proceeds from the issuance of the $ 500 million 2020 Senior Secured Notes were used to repay $ 500 million of principal on the 2018 Term Loan Facility.

The repayment of the 2018 Term Loan Facility was accounted for as a partial debt extinguishment and triggered $ 3.2 million of accelerated accretion of the original issue discount and $ 5.2 million of accelerated amortization of the debt issuance costs.

The 2020 Senior Secured Notes were accounted for as new debt and the related debt issuance costs were deferred.

The Company has several interest rate swap contracts to fix our cash flows associated with the risk in variability in the one-month U.S.

London Interbank Offered Rate ("USD LIBOR") for a portion of our outstanding debt.

See Note 8, " Fair Value Measurements and Derivative Instruments" for details of these transactions.

(8) Fair Value Measurements and Derivative Instruments

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• Level 1 – based upon quoted prices for identical instruments in active markets,

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

• Level 2 – based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations of all of whose significant inputs are observable, and

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Cash and cash equivalents, short-term notes and accounts receivable, accounts payable and other current payables – The carrying amount approximates fair value because of the short maturity of these instruments.

Debt – The fair value of our debt as of December 31, 2020 and December 31, 2019 was $ 1,453.1 million and $ 1,812.8 million, respectively.

Debt – The fair value of our debt as of December 31, 2021 and 2020 was $ 1,051.6 million and $ 1,453.1 million, respectively.

The fair values were determined using Level 3 inputs.

Foreign currency derivatives – Foreign currency derivatives are carried at market value using Level 2 inputs.

We had an outstanding loss of $ 0.1 million as of December 31, 2020 and an outstanding gain of $ 0.2 million as of December 31, 2019.

Foreign currency derivatives – Foreign currency derivatives are carried at fair value using Level 2 inputs.

We had an outstanding gain of $ 0.4 million as of December 31, 2021 and an outstanding loss of $ 0.1 million as of December 31, 2020.

Commodity derivative contracts – Commodity derivative contracts are carried at fair value.

We determine the fair value using observable, quoted refined oil product prices that are determined by active markets and therefore classify the commodity derivative contracts as Level 2.

We had outstanding unrealized gains of $ 0.6 million and outstanding unrealized losses of $ 2.8 million as of December 31, 2020 and outstanding unrealized gains of $ 0.5 million and outstanding unrealized losses of $ 4.1 million as of December 31, 2019.

We had outstanding unrealized gains of $ 8.5 million as of December 31, 2021, outstanding unrealized gains of $ 0.6 million and outstanding unrealized losses of $ 2.8 million as of December 31, 2020.

Interest rate swap contracts – Interest rate swap contracts are carried at fair value.

We determine the fair value using the income approach to value the derivatives, using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single discounted present amount reflecting current market expectations about those future amounts.

We had no outstanding unrealized gains and outstanding unrealized losses of $ 11.9 million as of December 31, 2020.

We had outstanding unrealized gains of $ 6.1 million and outstanding unrealized losses of $ 0.1 million as of December 31, 2021.

Additional fair value information related to our Pension funds' assets can be found in Note 11 "Retirement Plans and Postretirement Benefits".

We had no outstanding unrealized gains and outstanding unrealized losses of $ 11.9 million as of December 31, 2020.

Additional fair value information related to our pension funds' assets can be found in Note 11, "Retirement Plans and Post-Employment Benefits".

Derivative Instruments

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Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk.

We do not anticipate nonperformance by any of the counter-parties to our instruments.

We do not anticipate nonperformance by any of the counterparties to our instruments.

Foreign currency derivatives

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These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures such as foreign currency denominated debt, sales, receivables, payables, and purchases.

We had no foreign currency cash flow hedges outstanding as of December 31, 2020 and December 31, 2019 and therefore, no unrealized gains or losses reported under accumulated other comprehensive income (loss).

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We had no foreign currency cash flow hedges outstanding as of December 31, 2021 and December 31, 2020 and, therefore, no unrealized gains or losses reported under accumulated other comprehensive loss.

As of December 31, 2021, we had outstanding Mexican peso, South African rand, euro, Swiss franc and Japanese yen currency contracts, with aggregate notional amounts of $ 99.3 million.

As of December 31, 2020, we had outstanding Mexican peso, South African rand, euro, Swiss franc and Japanese yen currency contracts, with aggregate notional amounts of $ 71.0 million.

The foreign currency derivatives outstanding as of December 31, 2020 had maturity dates from January 2021 to March 2021, and were not designated as hedging instruments.

The foreign currency derivatives outstanding as of December 31, 2021 had maturity dates from January 2022 to April 2022, and were not designated as hedging instruments.

Commodity derivative contracts

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These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In the fourth quarter of 2017, we began to enter into three - to five-year take-or-pay contracts with many of our customers and began to hedge the cash flows related to these contracts.

In the fourth quarter of 2017, we began to enter into LTAs, which are three - to five-year take-or-pay contracts, with many of our customers and began to hedge the cash flows related to these contracts.

As of December 31, 2021, we had outstanding commodity derivative contracts with a notional amount of $ 19.5 million and maturities from January 2022 to June 2022.

As of December 31, 2020, we had outstanding commodity derivative contracts with a notional amount of $ 61.3 million with maturities from January 2021 to June 2022.

Within Accumulated Other Comprehensive income (loss), we had a net unrealized pre-tax loss of $ 2.2 million and a net unrealized pre-tax loss of $ 3.7 million as of December 31, 2020 and 2019, respectively.

Within accumulated other comprehensive loss, we had a net unrealized pre-tax gain of $ 8.5 million and a net unrealized pre-tax loss of $ 2.2 million as of December 31, 2021 and 2020, respectively.

The fair value of these contracts was determined using Level 2 inputs.

In connection with de-designated commodity derivative contracts, we recognized in cost of sales a $ 0.4 million unrealized loss in 2020 and a $ 0.4 million unrealized gain in 2019 as a result of the variation in fair value from the de-designation date.

In connection with de-designated commodity derivative contracts, we recognized no unrealized gains or losses in cost of sales in 2021 and a $ 0.4 million unrealized gain in 2020 as a result of the variation in fair value from the de-designation date.

This resulted from a small portion of our commodity derivative contracts that ceased to qualify for hedge accounting.

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The contracts are "pay fixed, receive variable" with notional amounts of $ 500 million maturing in two years and another $ 500 million maturing in five years .

The Company’s risk management objective was to fix its cash flows associated with the risk in variability in the one-month US LIBO Rate for a portion of our outstanding 2018 Term Loan.

The Company’s risk management objective was to fix its cash flows associated with the risk in variability in the one-month USD LIBOR for a portion of our outstanding debt.

It was expected that these swaps would fix the cash flows associated with the forecasted interest payments on this notional amount of debt to an effective fixed interest rate of 5.1 %, which could be lowered to 4.85 % depending on credit ratings.

In December 2020, in connection with the $ 500 million principal repayment of the 2018 Term Loan Facility, we de-designated one interest rate swap contract of $ 250 million notional maturing in the third quarter of 2021, and in February 2021, we closed the contract and recorded a $ 0.9 million charge in interest expense.

Additionally, in February 2021, the Company modified the three remaining swaps with notional amounts of $ 250 million that matured in the third quarter 2021 and $ 500 million maturing in the third quarter 2024 in order to align their terms to the amended 2018 Term Loan Facility (see Note 5, "Debt and Liquidity" for details of the February 2021 repricing of the 2018 Term Loan Facility).

It is expected that these swaps will fix the cash flows associated with the forecasted interest payments on this notional amount of debt to an effective fixed interest rate of 4.2 %, which could be lowered to 3.95 % depending on credit ratings.

In December 2020, in connection with the $ 500 million principal repayment of the 2018 Term Loan, we de-designated one interest rate swap contract of $ 250 million notional maturing in the third quarter of 2021.

Within accumulated other comprehensive income, we recorded a net unrealized pre-tax loss of $ 11.9 million and a net unrealized pre-tax gain of $ 2.9 million as of December 31, 2020 and 2019, respectively.

The modification triggered the de-designation and re-designation of the swaps.

Because the modified swaps contained an other-than-insignificant financing element at re-designation date, they are considered hybrid instruments composed of a debt host and an embedded derivative and the associated cash (outflows)/inflows are classified as financing (use)/source of cash.

The debt host portion amounted to a liability of $ 7.0 million as of December 31, 2021 with $ 2.6 million included in "Other accrued liabilities" and $ 4.4 million in "Other long-term obligations." The corresponding loss is accounted for in "Accumulated other comprehensive loss" and is amortized over the remaining life of the swaps.

The embedded derivative is treated as a cash flow hedge.

Within accumulated other comprehensive loss, we recorded a net unrealized pre-tax gain of $ 5.9 million and a net unrealized pre-tax loss of $ 11.9 million as of December 31, 2021 and 2020, respectively.

The fair value of these contracts was determined using Level 2 inputs.

The change in the fair value of the de-designated interest rate swap contract from the de-designation date to December 31, 2020, was recorded in interest expense and was immaterial.

Net Investment Hedges

We use certain intercompany debt to hedge a portion of our net investment in our foreign operations against currency exposure (net investment hedge).

In the second quarter of 2020, we discontinued our net investment hedge following a reduction in the investment that materially decreased the currency exposure.

As of December 31, 2019, intercompany debt denominated in foreign currency and designated as a non-derivative net investment hedging instrument was $ 5.5 million.

Within our currency translation adjustment portion of other comprehensive income (loss), we recorded $ 1.2 million in pre-tax gains in 2020, and no gain or loss in 2019, resulting from these net investment hedges.

GRAFTECH INTERNATIONAL LTD.

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Location Fair Value Location Fair Value

As of December 31, 2020 (Dollars in thousands)

As of December 31, 2021

(Dollars in thousands)

Derivatives designated as cash flow hedges:

Commodity derivative contracts Prepaid and other current assets $ 8,469 Other accrued liabilities $ —

Other long-term assets 63 Other long-term obligations 1,898

Other assets — Other long-term obligations —

Interest rate swap contracts Prepaid and other current assets $ — Other accrued liabilities $ 140

Other long-term assets — Other long-term obligations 6,903

Other assets 6,060 Other long-term obligations —

Total fair value $ 14,529 $ 140

1 unchanged sentence

Commodity derivative contracts Prepaid and other current assets $ 518 Other accrued liabilities $ 888

Other long-term assets 369 Other long-term obligations 2,255

Other assets 63 Other long-term obligations 1,898

Interest rate swap contracts Prepaid and other current assets $ — Other accrued liabilities $ 4,080

Other long-term assets $ 2,684 Other long-term obligations $ 72

Other assets — Other long-term obligations 6,903

Total fair value $ 581 $ 13,769

1 unchanged sentence

Location Fair Value Location Fair Value

As of December 31, 2020 (Dollars in Thousands)

As of December 31, 2021

(Dollars in Thousands)

Derivatives not designated as hedges:

Foreign currency derivatives Prepaid and other current assets $ 388 Other accrued liabilities $ 2

Interest rate swap contracts Prepaid and other current assets — Other accrued liabilities 952

Total fair value $ 388 $ 2

2 unchanged sentences

Foreign currency derivatives Prepaid and other current assets $ 6 Other accrued liabilities $ 111

Commodity derivative contracts Prepaid and other current assets 376 Other accrued liabilities —

Interest rate swap contracts Prepaid and other current assets — Other accrued liabilities 952

Total fair value $ 6 $ 1,063

As a result of the settlement of commodity derivative contracts, as of December 31, 2020 and December 31, 2019, net realized pre-tax loss of $ 7.4 million and net realized pre-tax gain of $ 3.5 million, respectively, were reported in accumulated other comprehensive income (loss) and will be released to earnings within the next 12 months.

The realized (gains) losses resulting from the settlement of commodity derivative contracts designated as hedges remain in "Accumulated other comprehensive loss" until they are recognized in the Statement of Operations when the hedged item impacts earnings, which is when the finished product is sold.

As a result of the settlement of commodity derivative contracts, as of December 31, 2021 and December 31, 2020, net realized pre-tax gain of $ 11.5 million and net realized pre-tax loss of $ 7.4 million, respectively, were reported in accumulated other comprehensive income (loss) and will be (were) released to earnings within the following 12 months.

See the table below for amounts recognized in the Statement of Operations.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The location and amount of realized (gains) losses on derivatives are recognized in the Statements of Operations when the hedged item impacts earnings and are as follows for the years ended December 31, 2020, 2019 and 2018:

The realized (gains) losses on derivatives are recognized in the Statements of Operations when the hedged item impacts earnings and are as follows for the years ended December 31, 2021, 2020 and 2019:

Amount of (Gain)/Loss

8 unchanged sentences

(Dollars in thousands)

Foreign currency derivatives Cost of sales, Other expense/(income) $ ( 2,671 ) $ ( 506 ) $ ( 522 )

Foreign currency derivatives Cost of sales, Other (income) expense, net $ 3,895 $ ( 2,671 ) $ ( 506 )

Commodity derivative contracts Cost of sales ( 1,399 ) ( 530 ) ( 223 )

Interest rate swap contracts Interest expense 866 — —

In addition, the loss deferred to "Accumulated other comprehensive loss" in the first quarter of 2021 as a result of the portion of the interest rate swaps qualifying as a debt host is amortized to interest expense over the term of the swaps.

The amount of the amortization is as follows for 2021:

Amount of (Gain)/Loss

Location of Realized (Gain)/Loss Recognized in the Consolidated Statement of Operations 2021 2020 2019

Derivatives not designated as hedges:

(Dollars in thousands)

Interest rate swap contracts Interest expense 2,807 — —

The balance of the deferred pre-tax loss is $ 7.0 million as of December 31, 2021, reported in "Accumulated other comprehensive loss", of which $ 2.6 million will be released to earnings within the next 12 months.

GRAFTECH INTERNATIONAL LTD.

6 unchanged sentences

(Dollars in thousands)

Inventories *:

Raw materials and supplies $ 132,113 $ 101,098

21 unchanged sentences

Other long-term obligations:

Postretirement benefits $ 15,669 $ 16,528

Post-employment benefits $ 14,597 $ 15,669

Pension and related benefits 31,139 37,847

1 unchanged sentence

$ 68,657 $ 81,478

*During the fourth quarter of 2020, we elected to change the presentation of needle coke within our Seadrift manufacturing facility to present such inventory as a raw material.

Prior to this change, such needle coke was presented, as either work in process or finished goods.

We applied this change in accounting policy retrospectively for all periods presented, thereby increasing raw materials by $ 25.1 million, decreasing work in process by $ 5.8 million, and decreasing finished goods by $ 19.3 million as of December 31, 2019.

The change had no impact on total inventories or any other financial statement disclosures.

We believe that the new presentation enhances comparability and consistency of inventory disclosure as it accounts for needle coke inventory as raw material across all of our facilities and whether sourced internally from Seadrift or from third-party suppliers.

We currently use all Seadrift produced needle coke internally.

*Included in "Value-added tax and other indirect taxes receivable" is the recognition of the Brazil value-added tax credit of $ 11.5 million (see Note 16, "Other (Income) Expense, net").

GRAFTECH INTERNATIONAL LTD.

4 unchanged sentences

Balance at beginning of year $ 8,243 $ 5,474 $ 1,129

ASC 326 adoption impact 2,026 — —

Additions 1,458 4,636 122

Charge to retained earnings - ASC 326 adoption impact — 2,026 —

(Credit) charge to income ( 1,266 ) 1,458 4,636

Deductions ( 142 ) ( 715 ) ( 291 )

1 unchanged sentence

We lease certain transportation and mobile manufacturing equipment such as railcars and forklifts, as well as real estate.

The Company adopted ASC 842 on January 1, 2019, which requires that all leases, financing and operating, be included on the balance sheet.

The Company adopted ASC 842 using the modified retrospective approach under which prior periods’ financial statements are not restated and a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption is recorded, if applicable.

The Company elected to adopt the transition package of practical expedients for lease identification, classification, initial direct costs and hindsight.

At the adoption of ASC 842 on January 1, 2019, the Company recognized right-of-use ("RoU") assets and corresponding operating lease liabilities of $ 7.5 million with no cumulative-effect adjustment to retained earnings.

We determine if an arrangement is a lease at lease inception.

When an arrangement contains a lease, we then determine if it meets any of the criteria for a financing lease.

Leases with a term of 12 months or less are not recorded on the balance sheet.

RoU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

RoU assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term.

Our lease term includes the option to extend the lease when it is reasonably certain that we will exercise that option.

The Company has elected to account for the lease and non-lease components as a single lease component, except for leases of warehouse space where they will be accounted for separately.

Leases may include variable lease and variable non-lease components costs which are accounted for as variable lease expense in the income statement.

Components of lease expense are as follows:

For the Year Ended December 31,

2021 2020 2019

(Dollars in thousands)

3 unchanged sentences

Total lease cost $ 6,260 $ 6,726 $ 5,057

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash-flow and other information related to leases is as follows:

For the Year Ended December 31,

2021 2020 2019

(Dollars in thousands)

RoU assets obtained in exchange for new operating lease liabilities (non-cash) 5,584 5,262 4,995

Operating (use of cash) from operating leases ( 6,177 ) ( 4,724 )

Cash payments for operating leases ( 5,466 ) ( 6,177 ) ( 4,724 )

Supplemental balance sheet information related to leases is as follows:

1 unchanged sentence

(Dollars in thousands)

Operating RoU Assets Other assets $ 7,164 $ 7,994

Operating RoU lease assets Other assets $ 7,646 $ 7,164

Current operating lease liabilities Other accrued liabilities 4,109 4,102

2 unchanged sentences

Weighted average remaining lease term (in years) 2.3 2.7

Weighted average discount rate - operating leases 5.82 % 5.61 %

Weighted average discount rate 4.31 % 5.82 %

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, lease commitments under non-cancelable operating leases extending for one year or more will require the following future payments:

(Dollars in thousands)

2025 and thereafter 449

2026 and after 152

Total lease payments $ 8,010

2 unchanged sentences

As of December 31, 2021, we have not entered into any additional operating lease commitments that have yet to commence.

(11) Retirement Plans and Postretirement Benefits

(11) Retirement Plans and Post-Employment Benefits

Retirement Plans

6 unchanged sentences

The Union Carbide plan is responsible for paying retirement and death benefits earned as of February 26, 1991.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Effective January 1, 2002, we established a defined contribution plan for U.S.

15 unchanged sentences

Expected return on assets ( 4,213 ) ( 545 ) ( 4,730 ) ( 401 ) ( 5,026 ) ( 424 )

Mark- to- market loss 613 2,596 205 3,302 2,473 503

Pension costs $ 1,154 $ 3,552 $ 1,546 $ 3,777 $ 2,818 $ 1,100

The mark-to-market loss in 2020 was the result of the unfavorable change in the discount rate, new employee obligations and unfavorable foreign currency translation, partially offset by better than expected return on plan assets, particularly for the U.S.

The mark-to-market loss in 2019 was the result of the unfavorable change in the discount rate, partially offset by better than expected return on plan assets, particularly for the U.S.

The mark-to-market loss in 2018 was the result of less than expected return on plan assets, partially offset by a favorable change to the discount rate.

Mark-to-market (gain) loss ( 2,428 ) ( 1,327 ) 613 2,596 205 3,302

Pension (benefits) costs $ ( 2,351 ) $ ( 412 ) $ 1,154 $ 3,552 $ 1,546 $ 3,777

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The mark-to-market gain in 2021 was the result of a favorable change in the discount rate and favorable foreign currency translation, as well as a better than expected return on plan assets, particularly for the U.S.

The mark-to-market loss in 2019 was the result of the unfavorable change in the discount rate, partially offset by better than expected return on plan assets, particularly for the U.S.

The reconciliation of the beginning and ending balances of our pension plans’ benefit obligations, fair value of assets, and funded status at December 31, 2021 and 2020 are:

32 unchanged sentences

The following describes the methods and significant assumptions used to estimate the fair value of the investments:

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cash and cash equivalents – Valued at cost.

3 unchanged sentences

Fixed insurance contract – Valued at the present value of the guaranteed payment streams.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Investment contracts – Valued at the total cost of annuity contracts purchased, adjusted for market differences from the date of purchase to year-end.

23 unchanged sentences

Total $ 1,850 $ 995 $ 24,087 $ 140,650

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes for those financial instruments classified within Level 3 of the valuation hierarchy for international plan pension assets for the years ended December 31, 2020 and 2021 (dollars in thousands):

7 unchanged sentences

Balance at December 31, 2021

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We annually re-evaluate assumptions and estimates used in projecting pension assets, liabilities and expenses.

18 unchanged sentences

The rate of compensation increase assumption is generally based on salary increases.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents our retirement plan weighted average asset allocations at December 31, 2021, by asset category :

14 unchanged sentences

Fair value of plan assets 109,961 26,003 115,568 24,118

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Information for our pension plans with a projected benefit obligation in excess of plan assets at December 31, 2021 and 2020 follows:

14 unchanged sentences

2027-2031 40,997 12,312

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Post-Employment Benefit Plans

We have legacy post-retirement medical coverage and life insurance benefits for eligible retired employees in the US and in certain foreign jurisdictions.

Effective December 31, 2005, all US post-retirement medical coverage plans were frozen.

We have legacy post-employment medical coverage and life insurance benefits for eligible retired employees in the U.S.

and in certain foreign jurisdictions.

Effective December 31, 2005, all U.S.

post-employment medical coverage plans were frozen.

The post-employment benefit plans are un-funded and our periodic contributions correspond to the amount of benefits paid in the period.

Our funding contributions were $ 1.4 million and $ 1.3 million in 2021 and 2020, respectively.

The estimated liability for post-employment benefit plans was $ 17.2 million and $ 18.1 million as of December 31, 2020 and December 31, 2019, respectively.

The expense recognized in the Consolidated Statement of Operations for post-employment benefits was $ 0.7 million, $ 1.6 million and none for 2020, 2019 and 2018, respectively.

The estimated liability for post-employment benefit plans was $ 16.0 million and $ 17.2 million as of December 31, 2021 and 2020, respectively.

The expense recognized in the Consolidated Statement of Operations for post-employment benefits was $ 0.5 million, $ 0.7 million and $ 1.6 million for 2021, 2020 and 2019, respectively.

Included in post-employment benefit expense are mark-to-market gains of $ 0.1 million and less than $ 0.1 million for 2021 and 2020, respectively, and a mark-to-market loss of $ 0.6 million in 2019.

Our employee savings plan provides eligible employees the opportunity for long-term savings and investment.

1 unchanged sentence

In 2021, 2020 and 2019, the Company's matching contributions to our savings plan were $ 2.5 million, $ 2.2 million and $ 2.1 million, respectively.

(12) Contingencies

(12) Commitments and Contingencies

Legal Proceedings

1 unchanged sentence

While it is not possible to determine the ultimate disposition of each of these matters, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

Additionally, we are involved in the following legal proceedings described below.

We are involved in various arbitrations, sometimes as claimants and other times as respondents/counterclaimants, pending before the International Chamber of Commerce with several customers who, among other things, have failed to perform under their LTAs and in certain instances are seeking to modify or frustrate their contractual commitments to us.

In particular, Aperam South America LTDA, Aperam Sourcing S.C.A., ArcelorMittal Sourcing S.C.A., and ArcelorMittal Brasil S.A.

(collectively, the “Claimants”) initiated a single arbitration proceeding against two of the Company’s subsidiaries in the International Chamber of Commerce in June 2020.

In June 2021, the Claimants filed their statement of claim, seeking approximately $ 61 million plus interest in monetary relief and/or reimbursement in respect of several fixed price LTAs that were executed between such subsidiaries and the Claimants in 2017 and 2018.

The Claimants argue, among other things, that they should no longer be required to comply with the terms of the LTAs that they signed due to an alleged drop in market prices for graphite electrodes in January 2020.

Alternatively, the Claimants argue that they should not be required to comply with the LTAs that they signed due to alleged market circumstances at the time of execution.

We believe we have valid defenses to these claims.

We intend to vigorously defend them and enforce our rights under the LTAs.

Pending litigation in Brazil has been brought by employees seeking to recover additional amounts and interest thereon under certain wage increase provisions applicable in 1989 and 1990 under collective bargaining agreements to which employers in the Bahia region of Brazil were a party (including our subsidiary in Brazil).

7 unchanged sentences

The employees have further appealed and, on December 16, 2020, the court upheld the decision in favor of GrafTech Brazil.

On February 22, 2021, the employees filed a further appeal , and we intend to vigorously defend our position.

On February 22, 2021, the employees filed a further appeal and, on April 28, 2021, the court rejected the employees' appeal in

favor of GrafTech Brazil.

The employees filed a further appeal and we intend to vigorously defend our position.

As of December 31, 2021, we are unable to assess the potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.

13 unchanged sentences

Related Party Tax Receivable Agreement

On April 23, 2018, the Company entered into the TRA that provides Brookfield, as the sole pre-IPO stockholder, the right to receive future payments from us for 85 % of the amount of cash savings, if any, in U.S.

On April 23, 2018, the Company entered into the Tax Receivable Agreement that provides Brookfield, as the sole Pre-IPO stockholder, the right to receive future payments from us for 85 % of the amount of cash savings, if any, in U.S.

federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of the pre-IPO Tax Assets.

The term of the TRA commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.

There was no liability recognized on the date we entered into the TRA as there was a full valuation allowance recorded against our deferred tax assets.

During the second quarter of 2018, it was determined that the conditions were appropriate for the Company to release a valuation allowance of certain tax assets as we exited our three year cumulative loss position.

This release resulted in the recording of a $ 86.5 million liability related to the TRA on the Consolidated Statements of Operations as "Related Party Tax Receivable Agreement Expense."

As of December 31, 2019, the total TRA liability was $ 89.9 million, of which $ 27.9 million was classified as a current liability in "Related party payable-tax receivable agreement" on the balance sheet, and $ 62.0 million of the liability remained as a long-term liability in "Related party payable-tax receivable agreement" on the balance sheet.

The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.

As of December 31, 2020, total Tax Receivable Agreement liability was $ 40.9 million, of which $ 21.8 million was classified as current liability "Related party payable - Tax Receivable Agreement" on the Consolidated Balance Sheets, as we expected this portion to be settled within 12 months, and $ 19.1 million of the liability remained as a long-term liability in "Related party payable - Tax Receivable Agreement long-term" on the Consolidated Balance Sheets.

The 2020 current liability was settled in the first quarter of 2021.

In 2020, the TRA liability was reduced by $ 21.1 million as a result of revised U.S.

In 2021, the Tax Receivable Agreement liability increased $ 0.2 million as a result of revised U.S.

income estimates affecting the future usage of our U.S.

tax attributes.

The reduction was recorded as a "Related Party Tax Receivable Agreement Benefit" on the Consolidated Statement of Operations.

As of December 31, 2020, total TRA liability is $ 40.9 million, of which $ 21.8

million is classified as current liability "Related party payable - tax receivable agreement" on the balance sheet, as we expect this portion to be settled within twelve months, and $ 19.1 million of the liability remains as a long-term liability in "Related party payable - tax receivable agreement" on the balance sheet.

tax attributes and related interest.

The increase was recorded in "Related Party Tax Receivable Agreement Expense (Benefit)" on the Consolidated Statement of Operations.

As of December 31, 2021, the total Tax Receivable Agreement liability is $ 19.3 million, of which $ 3.8 million is classified as a current liability "Related party payable - Tax Receivable Agreement" on the Consolidated Balance Sheets, as we expect this portion to be settled within 12 months, and $ 15.5 million of the liability remains as a long-term liability in "Related party payable - Tax Receivable Agreement long-term" on the Consolidated Balance Sheets.

Long-term Incentive Plan

The long-term incentive plan ("LTIP") was adopted by the Company effective as of August 17, 2015, as amended and restated as of March 15, 2018.

The purpose of the plan is to retain senior management personnel of the Company, to incentivize them to make decisions with a long-term view and to influence behavior in a way that is consistent with maximizing value for the pre-IPO stockholder of the Company in a prudent manner.

Each participant is allocated a number of profit units, with a maximum of 30,000 profit units ("Profit Units") available under the plan.

Awards of Profit Units generally vest in equal increments over a five-year period beginning on the first anniversary of the grant date and subject to continued employment with the Company through each vesting date.

Any unvested Profit Units that have not been previously forfeited will accelerate and become fully vested upon a ‘‘Change in Control’’ (as defined below).

Profit Units will generally be settled in a lump sum payment within 30 days following a Change in Control based on the ‘‘Sales Proceeds’’ (as defined below) received by Brookfield Capital Partners IV, L.P.

(or, together with its affiliates, Brookfield Capital IV) in connection with the Change in Control.

The LTIP defines ‘‘Change in Control’’ as any transaction or series of transactions (including, without limitation, the consummation of a combination, share purchases, recapitalization, redemption, issuance of capital stock, consolidation, reorganization or otherwise) pursuant to which (a) a person not affiliated with Brookfield Capital IV acquires securities representing more than seventy percent ( 70 %) of the combined voting power of the outstanding voting securities of the Company or the entity surviving or resulting from such transaction, (b) following a public offering of the Company’s stock, Brookfield Capital IV has ceased to have a beneficial ownership interest in at least 30 % of the Company’s outstanding voting securities (effective on the first of such date), or (c) the Company sells all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis.

It is intended that the occurrence of a Change in Control in which Sales Proceeds exceed the Threshold Value would constitute a ‘‘substantial risk of forfeiture’’ within the meaning of Section 409A of the Code.

The LTIP defines ‘‘Threshold Value’’ as, as of any date of determination, an amount equal to $ 855,000,000 (which represents the amount of the total invested capital of Brookfield Capital IV as of August 17, 2015), plus the dollar value of any cash or other consideration contributed to or invested in the Company by Brookfield Capital IV after August 17, 2015.

The Threshold Value shall be determined by the Board of Directors in its sole discretion.

The LTIP defines ‘‘Sales Proceeds’’ as, as of any date of determination, the sum of all proceeds actually received by the Brookfield Capital IV, net of all Sales Costs (as defined below), (i) as consideration (whether cash or equity) upon the Change in Control and (ii) as distributions, dividends, repurchases, redemptions or otherwise as a holder of such equity interests in the Company.

Proceeds that are not paid upon or prior to or in connection with the Change in Control, including earn-outs, escrows and other contingent or deferred consideration shall become ‘‘Sale Proceeds’’ only as and when such proceeds are received by Brookfield Capital IV.

‘‘Sales Costs’’ means any costs or expenses (including legal or other advisor costs), fees (including investment banking fees), commissions or discounts payable directly by Brookfield Capital IV in connection with, arising out of or relating to a Change in Control, as determined by the Board of Directors in its sole discretion.

Given the successful completion of the IPO in the second quarter of 2018, it is reasonably possible that a Change in Control, as defined above, may ultimately happen and that the awarded Profit Units will be subsequently paid out to the participants.

Depending on Brookfield’s sales proceeds, the potential liability triggered by a Change in Control is estimated to be in the range of $ 55 million to $ 70 million.

As of December 31, 2020, the awards are 100 % vested.

The long-term incentive plan ("LTIP") was adopted by the Company in August 2015 and amended and restated in March 2018.

The purpose of the plan was to retain senior management of the Company, to incentivize them to make decisions with a long-term view and to influence behavior in a way that is consistent with maximizing value for the pre-IPO stockholder of the Company in a prudent manner.

Each participant was allocated a number of profit units, with a maximum of 30,000 profit units ("Profit Units") available under the plan.

Awards of Profit Units generally vested in equal increments over a five-year period beginning on the first anniversary of the grant date of the Profit Units, subject to continued employment with the Company through each vesting date.

If a participant ceased to provide services prior to any applicable vesting date for any reason, other than a termination for cause, then the participant forfeited all unvested Profit Units and any vested Profit Units remained outstanding.

If a participant had been terminated for cause, both vested and unvested Profit Units would have been forfeited.

Upon a Change in Control (as defined in the LTIP), the Profit Units entitled the participant to a payment based on a

percentage of the sum of (i) all net "Sale Proceeds" (as defined in the LTIP) received by Brookfield Capital IV L.P.

and its affiliates ("Brookfield Capital IV") less (ii) the "Threshold Value" (as defined in the LTIP), with such payment amount being determined by the Company's Board of Directors in its sole discretion.

In the event that, in connection with a Change in Control, Brookfield Capital IV disposes of less than 100 % of its ownership interest in the Company, the amount of the Sale Proceeds in excess of the Threshold Value shall be determined on a pro-rata basis by reference to the percentage of ownership interest disposed, as determined by the Board of Directors of the Company.

The May 2021 secondary offering of our common stock by Brookfield Capital IV constituted a Change in Control under the LTIP.

A Change in Control under the LTIP is defined as, among other things, a transaction or series of transactions (including, without limitation, the consummation of a combination, share purchases, recapitalization, redemption, issuance of capital stock, consolidation, reorganization or otherwise) pursuant to which following a public offering of the Company’s stock, Brookfield Capital IV ceases to have a beneficial ownership interest in at least 30 % of the Company’s outstanding voting securities (effective on the first of such date).

Upon completion of the May 2021 secondary offering, Brookfield beneficially owned approximately 24 % of the Company's outstanding voting securities.

Accordingly, the Company settled the vested Profit Units in lump sum payments within 30 days following the Change in Control.

In the second quarter 2021, the settlement of the Profit Units resulted in the recording of a pre-tax charge of $ 73.4 million, of which $ 30.7 million was recorded in cost of sales and $ 42.7 million was recorded in selling and administrative expense.

As of December 31, 2021, $ 71.4 million of the charges have been settled in cash by the Company while the remainder of the liability, related to payroll taxes, is expected to be paid in subsequent quarters, which will satisfy all obligations under the LTIP.

(13) Income Taxes

The following table summarizes the U.S.

components of income (loss) from continuing operations before Provision (benefit) for income taxes:

components of income before provision for income taxes:

For the Year Ended December 31,

3 unchanged sentences

525,493 458,373 757,462

$ 510,045 $ 842,827 $ 902,808

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense (benefit) consists of the following:

Income before provision for income taxes $ 456,406 $ 510,045 $ 842,827

Provision for income taxes consists of the following:

For the Year Ended December 31,

8 unchanged sentences

65,299 55,509 75,946

Total income tax expense (benefit) $ 75,671 $ 98,225 $ 48,920

Income tax expense in 2020 was $ 75.7 million on income before taxes of $ 510.0 million.

In 2019, income tax expense

was $ 98.2 million on income before taxes of $ 842.8 million, and in 2018, income tax expense was $ 48.9 million on income before taxes of $ 902.8 million.

The change in tax expense from year to year is primarily due to changes in earnings and the shift

in the jurisdictional mix of earnings and losses from year to year.

The years 2018 and 2019 also included partial release of a valuation allowance recorded against the deferred tax asset related to certain foreign, US federal and state tax attributes.

Income tax expense (benefit) differed from the amount computed by applying the U.S.

federal income tax rate of 21 % for years ended December 31, 2020, 2019 and 2018 to income before (benefit) expense for taxes as set forth in the following table:

Provision for income taxes $ 68,076 $ 75,671 $ 98,225

Provision for income taxes in 2021 was $ 68.1 million on income before taxes of $ 456.4 million.

In 2020, provision for income taxes was $ 75.7 million on income before taxes of $ 510.0 million, and in 2019, provision for income taxes was $ 98.2 million on income before taxes of $ 842.8 million.

The change in tax expense from year to year is primarily due to the reduction in pre-tax income, the mix of worldwide earnings from various countries taxed at different rates and the U.S.

taxation of GILTI.

The years 2019 and 2021 also included the partial release of a valuation allowance recorded against the deferred tax asset related to certain foreign, U.S.

federal and state tax attributes.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Provision for income taxes differed from the amount computed by applying the U.S.

federal income tax rate of 21 % for the years ended December 31, 2021, 2020 and 2019 to income before the provision for income taxes as set forth in the following table:

For the Year Ended December 31,

4 unchanged sentences

Impact of U.S.

Tax Act - GILTI 45,539 65,531 93,739

Tax Cuts and Jobs Act of 2017 - GILTI 51,016 45,539 65,531

Impact of Tax Receivable Agreement 49 ( 4,429 ) 713

5 unchanged sentences

Foreign tax credits ( 43,821 ) ( 37,280 ) ( 56,171 )

Change-in-Control-related compensation 10,626 — —

Other ( 6,804 ) ( 1,450 ) ( 2,491 )

Provision (benefit) for income taxes $ 75,671 $ 98,225 $ 48,920

Provision for income taxes $ 68,076 $ 75,671 $ 98,225

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2020 and December 31, 2019 are set forth in the following table:

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 are set forth in the following table:

As of December 31,

1 unchanged sentence

Deferred tax assets:

Postretirement and other employee benefits $ 18,202 $ 18,256

Post-employment and other employee benefits $ 17,375 $ 18,202

Foreign tax credit and other carryforwards 32,452 37,101

5 unchanged sentences

Mark-to-market hedges — 3,552

Previously taxed income 5,229 2,163

Other 2,175 1,483

6 unchanged sentences

Goodwill and acquired intangibles 9,502 7,552

Mark-to-market hedges 2,824 —

Other 3,079 3,254

Total deferred tax liabilities 75,834 73,864

Net deferred tax ( liability) asset $ ( 10,620 ) $ 5,445

Net non-current deferred tax assets are separately stated as deferred income taxes in the amount of $ 84.3 million as of December 31, 2019 and $ 63.2 million as of December 31, 2020.

Net non-current deferred tax liabilities are separately stated as deferred income taxes in the amount of $ 78.9 million at December 31, 2019 and $ 73.9 million at December 31, 2020.

Net deferred tax (liability) $ ( 14,487 ) $ ( 10,620 )

Net deferred tax assets are separately stated as deferred income taxes in the amount of $ 61.3 million as of December 31, 2021 and $ 63.2 million as of December 31, 2020.

Net deferred tax liabilities are separately stated as deferred income taxes in the amount of $ 75.8 million at December 31, 2021 and $ 73.9 million at December 31, 2020.

At each reporting period, we assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income.

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Balance as of December 31, 2020

During 2018, we determined that sufficient positive evidence existed that allowed us to conclude that a full valuation allowance was no longer required to be recorded against the deferred tax assets related to the U.S.

Credited to income ( 2,208 )

Translation adjustment ( 15 )

Balance as of December 31, 2021

tax attributes.

This positive evidence was primarily supplied by the company exiting a cumulative loss period in the U.S.

as well as sufficient U.S.

This positive evidence was primarily supplied by the Company exiting a cumulative loss period in the United States as well as sufficient U.S.

current and forecasted taxable income that would utilize the U.S.

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In 2020, the reduction in the valuation allowance resulted primarily from expirations of NOLs upon which a valuation allowance was previously recorded.

In 2021, the decrease in valuation allowance was mainly attributable to changes in expected future utilization, state law changes and expiration of U.S.

state NOL carryforward during the year.

As of December 31, 2021, we have a total foreign tax credit carryforward of $ 13.1 million.

As indicated above, a valuation allowance is no longer recorded against this foreign tax credit carryforward.

These tax credit carryforwards begin to expire in 2027.

In addition, we have state net operating losses carryforwards of $ 255.7 million (net of federal benefit), which can be carried forward from 5 to 20 years.

These state net operating losses carryforwards result in a deferred tax asset of $ 15.0 million as of December 31, 2020.

In addition, we have state net operating loss carryforwards of $ 239.6 million (net of federal benefit), which can be carried forward from five to 20 years.

These state net operating loss carryforwards result in a deferred tax asset of $ 14.3 million as of December 31, 2021.

We also have U.S.

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As of December 31, 2021, we had unrecognized tax benefits of $ 0.1 million, which, if recognized, would have a favorable impact on our effective tax rate.

We have elected to report interest and penalties related to uncertain tax positions as income tax expense.

Accrued interest and penalties were $ 0.9 million as of December 31, 2018 and no accrued interest and penalties as of December 31, 2019 (a decrease of $ 0.9 million).

No material amounts of accrued interest or penalties have been recorded as of December 31, 2021 or 2020.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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Settlements ( 75 )

Reductions for tax positions of prior years ( 421 )

Foreign currency impact 16

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federal tax years prior to 2018 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities.

Other jurisdictions are still open to examination beginning after 2014.

Other jurisdictions are generally closed for years prior to 2016.

GRAFTECH INTERNATIONAL LTD.

2 unchanged sentences

As of December 31, 2021, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $ 1.2 billion.

Because $ 1.0 billion of such earnings have previously been subject to taxation by way of the transition tax on foreign earnings required by the Tax Act, as well as the current and previous years’ GILTI inclusion, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign withholding and state taxes.

Because $ 1.1 billion of such earnings have previously been subject to taxation by way of the transition tax on foreign earnings required by the Tax Cuts and Jobs Act of 2017, as well as the current and previous years’ GILTI inclusion, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign withholding and state taxes.

We intend, however, to indefinitely reinvest these earnings and expect future U.S.

cash generation to be sufficient to meet future U.S.

(14) Stockholders' Equity

The following information should be read in conjunction with the Consolidated Statement of Stockholders' Equity.

On April 12, 2018, the Company effected a 3,022,259.23 to one stock split of the Company's then outstanding common stock.

We have retroactively applied this split to all share presentations, as well as "Net income per share" and "Income from continuing operations per share" calculations for the periods presented.

Conditional Dividend to Pre-IPO Stockholder

On April 19, 2018, we declared a $ 160 million cash dividend payable to Brookfield, the sole pre-IPO stockholder.

Payment of this dividend was conditional upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the payment of the dividend and (iii) the payment occurring within 60 days from the dividend record date.

The conditions of this dividend were met upon filing of our first quarter report on Form 10-Q and the dividend was paid on May 8, 2018.

Brookfield Promissory Note

On April 19, 2018, we declared a dividend in the form of the Brookfield Promissory Note to the sole pre-IPO stockholder.

This note was repaid on June 15, 2018 with proceeds from our Incremental Term Loans.

See Note 5 "Debt and Liquidity".

Initial Public Offering

On April 23, 2018, we completed the IPO of 35,000,000 shares of our common stock at a price of $ 15 per share.

This offering represented a sale of 11.6 % of our sole pre-IPO stockholder's ownership in the Company.

On April 26, 2018, we closed the sale of an additional 3,097,525 shares of common stock at a price to the public of $ 15 per share from the pre-IPO stockholder, as a result of the partial exercise by the underwriters in our IPO of their overallotment option.

After giving effect to the partial exercise of the overallotment option, the total number of shares of common stock sold by the pre-IPO stockholder was 38,097,525 .

The Company did not receive any proceeds related to the offering.

We incurred $ 5.1 million of legal, accounting, printing and other fees associated with this offering through December 31, 2019, which was recorded in "Selling and administrative" expenses in the Consolidated Statements of Operations.

GrafTech has considered the tax impact of COVID-19 legislation, including the American Rescue Plan Act, and has concluded that there is no material tax impact.

The Company continues to monitor the tax effects of any legislative changes.

(14) Stockholders' Equity (Deficit)

The following information should be read in conjunction with the Consolidated Statement of Stockholders' Equity (Deficit).

Follow-on Offerings and Common Stock Repurchases

On August 13, 2018, Brookfield completed an underwritten public secondary offering (the "Offering") of 23,000,000 shares of our common stock at a price to the public of $ 20.00 per share.

The Company did not receive any proceeds related to the Offering.

Pursuant to a share repurchase agreement with Brookfield, we concurrently repurchased 11,688,311 shares directly from Brookfield.

The price per share paid by us in the repurchase was equal to the price at which the underwriters purchased the shares from Brookfield in the Offering net of underwriting commissions and discounts.

We funded the share repurchase from cash on hand.

The terms and conditions of the share repurchase were reviewed and approved by the audit committee of our board of directors, which is comprised solely of independent directors.

All repurchased shares were retired.

On July 30, 2019, our Board of Directors authorized a program to repurchase up to $ 100 million of our outstanding common stock.

We may purchase shares from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans.

The amount and timing of repurchases are subject to a variety of factors including liquidity, stock price,

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

applicable legal requirements, other business objectives and market conditions.

As of December 31, 2020, we had repurchased 4,333,259 shares of common stock totaling $ 41.0 million under this program.

On December 5, 2019, GrafTech announced two separate transactions.

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As a result, GrafTech repurchased 19,047,619 shares of common stock, reducing total shares outstanding at the time by approximately 7 %.

Brookfield undertook several transactions during 2020 reducing their ownership to 55.3 % as of December 31, 2020.

The Board of Directors declared and paid a dividend of $ 0.0645 per share for the first quarter of 2018 totaling $ 19.5 million, which was paid on June 29, 2018 and represented a prorated quarterly dividend of $ 0.085 (or $ 0.34 per annum) per share of our common stock prorated from the date of our IPO, April 23, 2018 to June 30, 2018.

Additionally, we paid a special dividend to stockholders of $ 0.70 per share on December 31, 2018.

Since that time, the Company paid regular quarterly dividends of $ 0.085 through the first quarter of 2020.

Effective the second quarter of 2020, the regular quarterly dividend was reduced to $ 0.01 per share.

Accumulated other comprehensive income (loss)

The balance in our Accumulated other comprehensive (loss) income is set forth in the following table:

Brookfield has since distributed a portion of its GrafTech common stock to the owners in the Brookfield consortium and sold shares of GrafTech common stock in public and private transactions, resulting in Brookfield's ownership of outstanding shares of GrafTech common stock decreasing to 55.3 % as of December 31, 2020 and 24.3 % as of December 31, 2021.

We announced on July 31, 2019, that our Board of Directors authorized a program to repurchase up to $ 100 million of our outstanding common stock.

We may purchase shares from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans.

The amount and timing of repurchases are subject to a variety of factors including liquidity, stock price, applicable legal requirements, other business objectives and market conditions.

On November 4, 2021, we announced that our Board of Directors approved an additional $ 150 million open market stock repurchase authorization.

The stock repurchase program does not have an expiration date.

We repurchased 1,004,685 shares for $ 10.9 million in 2019, 3,328,574 shares for $ 30.1 million in 2020 and 4,658,544 shares for $ 50.0 million in 2021, under the stock repurchase program.

As of December 31, 2021 , we are authorized to repurchase up to $ 159 million in shares of our common stock under the stock repurchase program, inclusive of the amount remaining under the previous authorization.

The Company paid regular quarterly dividends of $ 0.085 through the first quarter of 2020.

Effective in the second quarter of 2020, the regular quarterly dividend was reduced to $ 0.01 per share.

Accumulated other comprehensive loss

The balance in our Accumulated other comprehensive loss is set forth in the following table:

December 31, 2021 As of

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Foreign currency translation adjustments, net of tax $ ( 22,330 ) $ ( 2,725 )

Commodities, foreign currency and interest rate derivatives, net of tax ( 16,916 ) 1,932

Total accumulated comprehensive (loss) income $ ( 19,641 ) $ ( 7,361 )

Commodities and interest rate derivatives, net of tax 14,886 ( 16,916 )

Total accumulated other comprehensive loss $ ( 7,444 ) $ ( 19,641 )

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(15) Earnings per Share

The following table shows the information used in the calculation of our basic and diluted earnings per share calculation as of December 31, 2021, 2020 and 2019.

See Note 14 "Stockholders' Equity" for details on our April 12, 2018 stock split and our common stock repurchases in 2020 and 2019.

See Note 14, "Stockholders' Equity (Deficit)" for details of our common stock repurchases in 2021, 2020 and 2019.

For the Year Ended December 31,

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Weighted average common shares outstanding for diluted calculation 266,317,194 267,930,644 289,074,601

Basic earnings per common share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding, which includes 73,320 , 32,981 and 5,592 shares of participating securities in 2020, 2019 and 2018, respectively.

Diluted earnings per share are calculated by dividing net income (loss) by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.

Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding, which includes 130,624 , 73,320 and 32,981 shares of participating securities in 2021, 2020 and 2019, respectively.

Diluted earnings per share are calculated by dividing net income by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.

The weighted average common shares outstanding for the diluted earnings per share calculation excludes consideration of 1,499,128 , 1,667,325 and 1,082,113 equivalent shares in 2021, 2020 and 2019, respectively, as these shares are anti-dilutive.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(16) Summary of quarterly financial data (Unaudited)

The following summarizes certain consolidated operating results by quarter for 2020 and 2019.

March 31 June 30 September 30 December 31 March 31 June 30 September 30 December 31

(Dollars in thousands, except per share amounts)

Net Sales $ 318,646 $ 280,718 $ 286,987 $ 338,010 $ 474,994 $ 480,390 $ 420,797 $ 414,612

Gross profit 179,729 150,118 155,125 175,525 279,470 283,343 242,300 235,290

Research and development 712 710 650 1,903 637 713 611 723

Selling and administrative expenses 14,932 16,001 19,062 17,918 15,226 15,394 15,708 17,346

Other expense (income), net ( 3,314 ) 311 694 5,639 467 863 ( 688 ) 4,561

Related party Tax Receivable

Agreement (benefit) expense ( 3,346 ) — — ( 17,744 ) — — — 3,393

Interest Expense 25,672 20,880 22,474 29,048 33,700 32,969 31,803 28,859

Interest Income ( 1,141 ) ( 348 ) ( 93 ) ( 168 ) ( 414 ) ( 731 ) ( 1,765 ) ( 1,799 )

Net income 122,268 92,776 94,234 125,096 197,436 196,368 175,876 174,922

Net income per share $ 0.45 $ 0.35 $ 0.35 $ 0.47 $ 0.68 $ 0.68 $ 0.61 $ 0.61

(16) Other (Income) Expense, net

The following table presents the details of other (income) expense:

For the Year Ended December 31

2021 2020 2019

(Dollars in thousands)

Brazil value-added tax credit $ ( 11,511 ) $ — $ —

Pension and post-employment non-service cost ( 5,298 ) 3,584 4,382

Bank charges 1,098 962 1,173

Other ( 740 ) ( 1,216 ) ( 352 )

Total other (income) expense, net $ ( 16,451 ) $ 3,330 $ 5,203

In May 2021, the Brazilian Supreme Court ruled definitely to exclude the ICMS (state value-added tax) from the basis of calculation of certain federal value-added taxes, specifically the tax relative to the program of social integration ("PIS") and to the contribution for the financing of social security ("COFINS"), and confirmed the methodology for calculating the PIS-COFINS tax credit to which taxpayers are entitled.

The Company's Brazilian subsidiary had previously filed a legal claim on this matter and is entitled to receive tax credits and interests dating back to five years preceding the date of the claim.

The overpayments, plus interests, of PIS-COFINS related to the period from June 2005 to August 2021 represent $ 11.5 million, net of legal fees.

In the fourth quarter of 2021, the Company's subsidiary obtained the approval by the Brazilian Tax Authorities to start offsetting the PIS-COFINS credit against the current federal value-added tax payable and recorded the one-time credit as a realizable gain.

As of December 31, 2021, the Company had offset $ 1.2 million of the credit.

The balance of the PIS-COFINS credit is expected to be utilized within the next 12 months and is reported within "Prepaid expenses and other current assets" on the Consolidated Balance Sheet.

Pension and post-employment non-service costs include the components of pension and post-employment costs other than service cost.

The income in 2021 was due to a $ 3.8 million mark-to-market gain, compared to mark-to-market losses of $ 3.2 million and $ 3.5 million recorded in 2020 and 2019, respectively.

See Note 11, "Retirement Plans and Post-Employment Benefits" for further discussion.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(17) Subsequent Events

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On February 2, 2022, the Board of Directors declared a dividend of $ 0.01 per share of common stock to stockholders of record as of the close of business on February 28, 2022, to be paid on March 31, 2022.

Brookfield Offering and Ownership

On January 20, 2021, Brookfield completed the sale of 20,000,000 shares of our common stock, in an underwritten public offering at a price of $ 10.90 per share.

Brookfield's ownership percentage stood at approximately 47.8 % of our outstanding common stock following the transaction.

Term Loan Repricing

On February 17, 2021 (the “Effective Date”), the Company entered into a second amendment (the “Second Amendment”) to its 2018 Credit Agreement to, among other things, (a) decrease the Applicable Rate (as defined in the Credit Agreement) with respect to any Initial Term Loan (as defined in the Credit Agreement) by 0.50 % for each pricing level, (b) decrease the interest rate floor for all Initial Term Loans to 0.50 %, (c) add certain technical provisions with respect to the impact of European Union bail-in banking legislation on liabilities of certain non-U.S.

financial institutions, and (d) add certain technical provisions in connection with future replacement of the LIBO Rate (as defined in the Credit Agreement).

As a result of the Second Amendment and the combined effect of the reduction in the interest rate margin and the reduction in the interest rate floor, the interest rate on the Initial Term Loan has been reduced by 1.0% per year.

In connection with the Second Amendment, on February 12, 2021, GrafTech Finance repaid approximately $ 150 million aggregate principal amount of its Initial Term Loans with cash on hand.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data