What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-14 compared with 2022-02-22 · 458 added, 482 removed, 1010 unchanged (48% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive Income

Consolidated Statements of Cash Flows

6 unchanged sentences

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

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”).

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income, stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

24 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Related Party Tax Receivable Agreement - Refer to Notes 1 and 12 to the financial statements

Goodwill - Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

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.

The Company’s goodwill balance was $171.1 million as of December 31, 2022, which relates to one reporting unit.

The Company assesses goodwill for impairment testing annually or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit might be impaired.

In evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company performed a qualitative assessment of relevant events and circumstances that could impact the fair value of such reporting unit.

If, after assessing the totality of events and circumstances, it is deemed more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company estimates the fair value of the reporting unit by performing a quantitative goodwill impairment assessment.

As a result of the analysis performed as of December 31, 2022, the Company determined that the goodwill was not more likely than not impaired, and no quantitative assessment was necessary.

Qualitative factors included macroeconomic conditions, industry and market considerations, current discount rates, cost factors, historical and forecasted financial results and events specific to the reporting unit, which required a higher degree of auditor judgment to evaluate.

We identified the evaluation of qualitative goodwill impairment indicators, or qualitative factors, as a critical audit matter as the assessment of the potential impact that these qualitative factors have on the reporting unit's fair value required the application of subjective auditor judgment.

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 Tax Receivable Agreement 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 Tax Receivable Agreement liability.

• 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 and income

◦ Schedule of future revenues resulting from contracts with certain customers

◦ Internal communications to management and the Board of Directors

◦ Industry reports for the Company and the steel industry

• We evaluated whether the estimates of future revenues and taxable income were consistent with evidence obtained in other areas of the audit.

Our audit procedures related to the relevant qualitative factors in the Company’s December 31, 2022 qualitative assessment included the following, among others:

• Tested the effectiveness of controls related to the evaluation of the assumptions and inputs used as part of management’s review of the qualitative assessment.

• We evaluated the qualitative factors used by management for reasonableness, which included an assessment of the impact of those factors when applied to the Company’s last quantitative assessment performed.

• We compared the actual results of the reporting unit to the Company’s historical forecasted performance to evaluate the accuracy of management’s estimates.

• We evaluated whether the underlying assumptions of future performance for the reporting unit were consistent with information from analyst reports and macroeconomic industry and market considerations and whether there were other significant adverse considerations that would impact the underlying assumptions.

• With the assistance of our fair value specialists, we evaluated the impact of changes in discount rates by developing a range of independent estimates based upon industry peers, including testing the underlying information and the mathematical accuracy of the calculations.

/s/ DELOITTE & TOUCHE LLP

6 unchanged sentences

(Dollars in thousands, except share data)

As of December 31,

Current assets:

12 unchanged sentences

Total assets $ 1,604,178 $ 1,412,318

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable $ 103,156 $ 117,112

Short-term debt 127 131

Long-term debt, current maturities 124 127

Accrued income and other taxes 40,592 57,097

7 unchanged sentences

Commitments and contingencies – Note 12

Stockholders’ equity (deficit):

Stockholders’ equity:

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

3 unchanged sentences

Accumulated deficit ( 401,945 ) ( 733,199 )

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

Total stockholders’ equity 337,715 23,402

Total liabilities and stockholders’ equity $ 1,604,178 $ 1,412,318

2 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

7 unchanged sentences

Other (income) expense, net ( 10,064 ) ( 16,451 ) 3,330

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

Related party Tax Receivable Agreement (benefit) expense ( 83 ) 231 ( 21,090 )

Interest expense 36,568 68,760 98,074

9 unchanged sentences

Weighted average common shares outstanding 258,791,228 266,317,194 267,930,644

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF COMPREHENSIVE INCOME

Net income $ 382,962 $ 388,330 $ 434,374

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustments, net of

1 unchanged sentence

( 7,024 ) ( 19,605 ) 6,568

Commodities and interest rate derivatives, net of

Commodities, interest rate and foreign currency derivatives, net of

tax of $( 2,591 ), $( 8,632 ) and $ 5,399 , respectively

6,398 31,802 ( 18,848 )

Other comprehensive income (loss), net of tax:

Other comprehensive (loss) income, net of tax:

( 626 ) 12,197 ( 12,280 )

5 unchanged sentences

(Dollars in thousands)

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

4 unchanged sentences

Depreciation and amortization 55,496 65,716 62,963

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

Related party Tax Receivable Agreement (benefit) expense ( 83 ) 231 ( 21,090 )

Deferred income tax provision 17,022 ( 3,657 ) 20,241

Loss on extinguishment of debt — — 8,329

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

Non-cash stock-based compensation expense 2,311 16,631 2,665

Non-cash interest expense ( 2,428 ) 12,051 6,192

Other adjustments ( 8,023 ) 7,107 7,861

Net change in working capital* ( 99,575 ) ( 16,377 ) 86,438

7 unchanged sentences

Cash flow from financing activities:

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

Debt issuance and modification costs ( 2,232 ) ( 3,109 ) ( 6,278 )

1 unchanged sentence

Principal payments on long-term debt ( 110,124 ) ( 400,142 ) ( 896,360 )

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

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

Repurchase of common stock ( 60,000 ) ( 50,000 ) ( 30,099 )

Payments for taxes related to net share settlement of equity awards ( 230 ) ( 4,077 ) ( 71 )

Proceeds from exercise of stock options 225 351 —

Dividends paid to non-related party ( 7,770 ) ( 7,439 ) ( 8,603 )

Dividends paid to related party ( 2,559 ) ( 3,206 ) ( 22,272 )

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

Interest rate swap settlements 6,423 ( 4,170 ) —

Net cash used in financing activities ( 176,267 ) ( 471,792 ) ( 463,683 )

9 unchanged sentences

(Dollars in thousands)

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

19 unchanged sentences

Comprehensive

Income (Loss) Retained Earnings (Accumulated

Deficit) Total

Loss Accumulated Deficit Total

Stockholders’

2 unchanged sentences

Net income — — — — 434,374 434,374

Other comprehensive income (loss):

Commodity derivatives income, 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 )

Commodity and foreign currency derivatives reclassification adjustments, net of tax of $ 1,872

Commodity derivatives reclassification adjustments, net of tax of $ 879

— — — ( 3,254 ) — ( 3,254 )

2 unchanged sentences

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

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 )

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

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

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)

2 unchanged sentences

— — — — ( 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 )

Net income — — — — 388,330 388,330

Other comprehensive (loss) income:

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

Other comprehensive income (loss):

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

— — — 7,277 — 7,277

1 unchanged sentence

— — — ( 19,605 ) — ( 19,605 )

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

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

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

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 )

3 unchanged sentences

— — — — ( 7,439 ) ( 7,439 )

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

1 unchanged sentence

Other comprehensive income (loss):

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

Commodity, interest rate and foreign currency derivatives income, net of tax of $( 5,060 )

— — — 15,829 — 15,829

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

Commodity, interest rate and foreign currency derivatives reclassification adjustments, net of tax of $ 2,469

— — — ( 9,431 ) — ( 9,431 )

1 unchanged sentence

— — — ( 7,024 ) — ( 7,024 )

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 )

Total other comprehensive loss — — — ( 626 ) — ( 626 )

Repurchase of common stock ( 6,662,421 ) ( 67 ) ( 18,721 ) — ( 41,212 ) ( 60,000 )

Stock-based compensation 1,348 — 2,311 — — 2,311

13 unchanged sentences

Discussion of Business and Structure

GrafTech International Ltd.

(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 the Company.

and its subsidiaries.

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

(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.

GrafTech is a leading manufacturer of high-quality graphite electrode products essential to the production of EAF steel and other ferrous and non-ferrous metals.

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.

In April 2018, we completed our IPO of 38,097,525 shares of our common stock held by Brookfield at a price of $ 15.00 per share.

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.

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.

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 reduction of Brookfield's ownership of outstanding shares of GrafTech common stock to 24.9 % as of December 31, 2022 and 24.3 % as of December 31, 2021.

See Note 14, "Stockholders' Equity," for more information.

The increase in Brookfield's share ownership from December 31, 2021 to December 31, 2022 reflects a reduction of the Company's total outstanding shares due to the repurchase and retirement of 6.7 million shares of its common stock in 2022.

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

graphite electrodes and petroleum needle coke products.

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

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

Summary of Significant Accounting Policies

2 unchanged sentences

Cash Equivalents

We consider all highly liquid financial instruments with original maturities of three months or less to be cash equivalents.

Cash equivalents consist of short-term, highly liquid investments with an original maturity of three months or less.

Cash equivalents consist of certificates of deposit, money market funds and commercial paper.

7 unchanged sentences

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) we satisfy a performance obligation.

and (v) recognize revenue when (or as) a performance obligation is satisfied.

The Company sells the majority of its products directly to steel manufacturers located in various jurisdictions.

The Company’s contracts consist of longer-term take-or-pay sales contracts of graphite electrodes with terms of up to five years and short-term purchase orders (deliveries within one year ).

The Company’s contracts consist of longer-term take-or-pay sales contracts of graphite electrodes with initial terms of up to five years and short-term purchase orders (deliveries within one year ).

Collectability is assessed based on the customer’s ability and intention to pay, reviewing a variety of factors including the customer’s historical payment experience and published credit and financial information.

Additionally, for multi-year contracts, we may require the customer to post a bank guarantee, guarantee of a parent, a letter of credit or a significant pre-payment.

The promises of delivery of graphite electrodes represent the distinct performance obligations of our contracts.

A small portion of our sales consist of deliveries of by-products of the manufacturing processes, such as graphite powders, naphta and gasoil.

Additionally, for multi-year contracts, we may require the customer to post a bank guarantee, guarantee of a parent, a letter of credit or a significant prepayment.

The promises of delivery of graphite electrodes represent the distinct performance obligations of the Company's contracts.

A small portion of the Company's sales consist of deliveries of by-products of the manufacturing processes, such as graphite powders, naphta and gasoil.

Given their nature, the Company’s performance obligations are satisfied at a point in time when control of the products has been transferred to the customer.

In most cases, control transfer is deemed to happen at the delivery point of the products defined under the incoterms, usually at time of loading the truck or the vessel.

The Company has elected to treat the transportation activity as a fulfilment activity instead of as a distinct performance obligation, and outbound freight cost is accrued when the product delivery promises are satisfied.

The Company has elected to treat the

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

transportation activity as a fulfillment activity instead of as a distinct performance obligation, and outbound freight cost is accrued when the product delivery promises are satisfied.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods to the customer.

3 unchanged sentences

Historically, these reversals have been insignificant.

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.

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.

Contracts that contain multiple distinct performance obligations require an allocation of the transaction price to each performance obligation based on a relative stand-alone selling price basis.

5 unchanged sentences

Inventories are stated at the lower of cost or market.

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

Cost is principally determined using the first-in, first-out ("FIFO") or 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.

We recognize abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) as current period charges.

The Company allocates fixed production overheads to the costs of conversion based on normal capacity utilization of the production facilities.

The Company recognizes abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) as current period charges.

Property, Plant and Equipment

2 unchanged sentences

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 (income) expense, net.

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

Gains and losses from the sale of property, plant and equipment are included in cost of sales or other (income) expense, net on the Consolidated Statements of Operations.

The Company depreciates its assets using the straight-line method over the estimated useful lives of the assets.

The ranges of estimated useful lives are as follows:

13 unchanged sentences

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.

When an arrangement contains a lease, the Company then determines 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.

Right of Use ("RoU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's 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.

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

The Company's lease terms include the option to extend the lease when it is reasonably certain that option will be exercised.

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.

Leases may include variable lease and variable non-lease components costs, which are accounted for as variable lease expense in the Consolidated Statements of Operations.

Accounts Receivable

1 unchanged sentence

Allowance for Doubtful Accounts

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.

Deferred Debt Issuance Costs

We defer debt issuance costs upon the incurrence of debt and record them as a direct reduction against our debt.

We had deferred debt issuance costs of $ 11.8 million and $ 18.1 million as of December 31, 2021 and 2020, respectively.

We amortize such amounts over the life of the respective debt instrument using the effective interest method.

The estimated life may be adjusted upon the occurrence of a triggering event.

Amortization of debt issuance costs amounted to $ 8.6 million, $ 9.2 million and $ 4.1 million in 2021, 2020 and 2019, respectively.

Debt issuance costs amortization is included in interest expense.

The Company recognizes credit losses at the time the financial assets originate or are acquired using a lifetime of expected credit losses measurement.

The Company's expected losses are adjusted each period for changes in expected lifetime credit losses.

Debt Issuance Costs

Deferred financing costs are amortized over the terms of the related debt using the effective interest method.

If the terms of renewed or modified debt instruments are deemed to be substantially different, all unamortized financing costs associated with the modified debt are charged to earnings in the current period.

If the terms are not substantially different, the costs associated with the renewal are capitalized and amortized over the remaining term of the debt instrument.

For modifications affecting a line of credit, fees paid to a creditor and any third party costs will be capitalized and amortized over the remaining term of the new arrangement.

Any unamortized deferred financing costs associated with the old arrangement are either deferred and amortized over the life of the new arrangement or written off, depending upon the nature of the modification and cost.

The balance of any unamortized financing costs on extinguished debt is expensed upon extinguishment.

Derivative Financial Instruments

3 unchanged sentences

For a fair value hedge, both the effective and ineffective portions of the change in the fair value of the derivative are recorded in earnings and reflected in the Consolidated Statement of Operations on the same line as the gain or loss on the hedged item attributable to the hedged risk.

For a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in accumulated other comprehensive loss in the Consolidated Balance Sheet.

When the underlying hedged transaction is realized, the gain or loss included in accumulated other comprehensive loss is recorded in earnings and reflected in the Consolidated Statement of Operations on the same line as the gain or loss on the hedged item attributable to the hedged risk.

For a net investment hedge, the effective portion of the change in the fair value of the derivative is recorded in cumulative translation adjustment, which is a component of accumulated other comprehensive loss in the Consolidated Balance Sheet and is de-recognized upon liquidation or sale of the entity.

We formally document our hedge relationships, including the identification of the hedging instruments and the related hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction.

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

For a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded in accumulated other comprehensive loss ("AOCL") in the Consolidated Balance Sheet.

When the underlying hedged transaction is realized, the gain or loss included in AOCL is recorded in earnings and reflected in the Consolidated Statement of Operations on the same line as the gain or loss on the hedged item attributable to the hedged risk.

For a net investment hedge, the effective portion of the change in the fair value of the derivative is recorded in cumulative translation adjustment, which is a component of AOCL in the Consolidated Balance Sheet and is de-recognized upon liquidation or sale of the entity.

For contracts not designated as hedging instruments, changes in fair value are adjusted through the statement of operations.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

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.

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.

10 unchanged sentences

Commodity Contracts

We have entered into derivative contracts for refined oil products.

We enter into derivative contracts for refined oil products from time to time.

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.

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 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.

Changes in their fair values are included in AOCL in the Consolidated Balance Sheets until settlement.

Realized gains and losses resulting from settlement are first recognized in AOCL 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 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").

The Company’s risk management objective is to fix its cash flows associated with the risk in variability in the one-month USD LIBOR for a portion of its 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 included in accumulated other comprehensive loss on the Consolidated Balance Sheets until settlement.

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

Changes in their fair value are included in AOCL 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.

Changes in fair value of the de-designated portion of interest rate swaps are recorded in the statement of operations.

We file a consolidated U.S.

8 unchanged sentences

The guidance on accounting for uncertainty in income taxes also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods.

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.

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

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Recent Law Changes

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which includes a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases after December 31, 2022, and several tax incentives to promote clean energy.

The Company does not believe this legislation will have a material impact on its consolidated financial statements and will continue to assess the implications.

Related Party Tax Receivable Agreement

18 unchanged sentences

The Company accounts for forfeitures as they occur.

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

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

Environmental, Health and Safety Matters

2 unchanged sentences

We have been in the past, and may become in the future, the subject of formal or informal enforcement actions or proceedings regarding noncompliance with these laws or the remediation of company-related substances released into the environment.

Historically, such matters have been resolved by negotiation with regulatory authorities resulting in commitments to compliance, abatement or remediation programs and in some cases payment of penalties.

Historically, such matters have been resolved by negotiation with regulatory authorities resulting in commitments

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

to compliance, abatement or remediation programs and in some cases payment of penalties.

Historically, neither the commitments undertaken nor the penalties imposed on us have been material.

3 unchanged sentences

When payments are fixed or determinable, the liability is discounted using a rate at which the payments could be effectively settled.

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

The accrued liability relating to environmental remediation was $ 4.4 million and $ 4.9 million as of December 31, 2022 and 2021, respectively.

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

3 unchanged sentences

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.

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

subsidiaries are sold or substantially or completely liquidated.

For our Mexican, Swiss, United Kingdom and Russian subsidiaries, whose functional currency is the U.S.

For our Russian, Swiss, Luxembourg, United Kingdom and Mexican subsidiaries, whose functional currency is the U.S.

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

3 unchanged sentences

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

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.

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 AOCL on 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.

6 unchanged sentences

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.

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.

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

The estimated useful lives for each major category of amortizable intangible assets are:

Trade name 5 - 20

Trade names 5 - 20

Technology and know-how 5 - 14

Customer related intangible 5 - 15

Customer-related intangibles 5 - 15

Additional information about goodwill and other intangibles is set forth in Note 6, “Goodwill and Other Intangible Assets.”

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Major Maintenance and Repair Costs

4 unchanged sentences

We defer these costs when incurred and use the straight-line method to amortize them over the period of time estimated to lapse until the next scheduled overhaul of the applicable storage or processing unit.

Under this policy, $ 0.7 million was deferred in 2021 and $ 10.2 million of costs were deferred in 2020.

Under this policy, $ 17.2 million was deferred in 2022 and $ 0.7 million was deferred in 2021.

Amortization of deferred maintenance costs totaled $ 4.7 million, $ 4.6 million and $ 6.0 million in 2022, 2021 and 2020, respectively.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

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.

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

See Note 15, “Earnings per Share.”

5 unchanged sentences

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

6 unchanged sentences

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.

2016-13, Financial Instruments-Credit Losses (Topic 326), which introduces the Current Expected Credit Losses ("CECL") accounting model.

CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

CECL utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired.

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

2016-13 was effective for the Company on January 1, 2020.

The adoption of ASU No.

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 Guidance Issued But Not Adopted

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations , which requires disclosures intended to enhance the transparency of supplier finance programs.

The amendments in this ASU require buyers in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted.

The amendments should be applied retrospectively to each period in which a balance sheet is presented, except for disclosure of rollforward information, which should be applied prospectively.

The Company is currently evaluating the impact of adopting this guidance on its disclosures.

GRAFTECH INTERNATIONAL LTD.

4 unchanged sentences

The following table provides information about disaggregated revenue by type of product and contract:

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

5 unchanged sentences

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

Substantially all the Company's receivables relate to contracts with customers.

Accounts receivables are recorded when the right to consideration becomes unconditional.

Accounts receivable are recorded when the right to consideration becomes unconditional.

Payment terms on invoices range from 30 to 120 days depending on the customary business practices of the jurisdictions in which we do business.

Certain short-term and longer-term sales contracts require up-front payments prior to the Company’s fulfillment of any performance obligation.

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.

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

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.

The Company did not have any contract asset balances as of December 31, 2022.

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.

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.

The following table provides our contract liability balances as of December 31, 2022 and 2021.

December 31, 2022 December 31, 2021

(Dollars in thousands)

Current deferred revenue $ 27,878 $ 9,840

Long-term deferred revenue — 4,303

The amount of revenue recognized in 2022 that was included in the December 31, 2021 deferred revenue current and long-term balances was $ 2.5 million and $ 0.1 million, respectively.

The increase in the December 31, 2022 current deferred revenue balance versus the prior year was primarily driven by shipments relative to some contractual prepayments being postponed to the following year.

Additionally, the balance includes cashed bank guarantees relative to outstanding arbitration proceedings whose outcome will determine timing of revenue recognition.

The amount of revenue recognized in 2021 that was included in the December 31, 2020 deferred revenue current balance was $ 5.5 million.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

(Dollars in thousands)

Balance as of December 31, 2019 $ 11,776 $ 3,858

Increases due to cash received 10,110 —

Revenue recognized ( 6,270 ) —

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

Foreign currency impact ( 756 ) —

Balance as of December 31, 2020 13,056 5,662

Increases due to cash received 32,466 —

Revenue recognized ( 37,030 ) —

Reclassification between long-term and current 1,359 ( 1,359 )

Foreign currency impact ( 11 ) —

Balance as of December 31, 2021 $ 9,840 $ 4,303

Transaction Price Allocated to the Remaining Performance Obligations

The following table presents estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of reporting period.

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

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

2022 2023 through 2024

The following table presents estimated revenues expected to be recognized in the corresponding period below related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of reporting period.

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

(Dollars in millions)

Estimated LTA revenue $ 235 -$ 275

2 unchanged sentences

The majority of the LTAs are defined as pre-determined fixed annual volume contracts while a small portion are defined with a specified volume range.

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 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.

For the years 2023 and 2024, 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 contract non-performance, force majeure notices, arbitrations, credit risk associated with certain customers facing financial challenges and customer demand related to contracted volume ranges.

As it relates to the conflict between Ukraine and Russia, we have provided force majeure notices with respect to certain impacted LTAs.

In the event of a force majeure, the LTAs provide our counterparties with the right to terminate the LTA if the force majeure event continues for more than six months after the delivery of the force majeure notice, with no continuing obligations of either party.

Certain of our LTA counterparties have challenged the force majeure notices, but we will continue to enforce our contractual rights, while other LTAs have been terminated as a result of the force majeure period elapsing.

The estimates of LTA revenue as set forth above in the immediately preceding table includes (i) our current view of the validity of such force majeure notices and (ii) our current expectations of termination fees from our customers who have failed to meet certain obligations under their LTAs.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(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 ("RSUs") and deferred share units ("DSUs")).

(3) Stock-Based Compensation

The Company's 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, 2022, the aggregate number of shares authorized under the plan since its initial adoption was 15.0 million.

4 unchanged sentences

A majority of the expense, $ 2.1 million in 2022, $ 14.6 million in 2021 and $ 2.3 million in 2020, was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales.

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.

Stock-based compensation expense for 2021 included $ 14.7 million, recorded in the second quarter of 2021, due to the Change in Control accelerated vesting provisions of certain of the Company's 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 constituted 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.

The Company recognized tax benefits of less than $ 0.1 million, $ 1.8 million and $ 0.5 million in 2022, 2021 and 2020, respectively, relating to the issuance of common stock for the exercise/vesting of equity awards.

Stock Options.

17 unchanged sentences

Expected Volatility .

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.

We estimate 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 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.

3 unchanged sentences

The expected life of awards granted represents the time period that the awards are expected to be outstanding.

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.

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

GRAFTECH INTERNATIONAL LTD.

27 unchanged sentences

As of December 31, 2022, there was $ 1.8 million of total unrecognized compensation cost related to unvested stock options, which is expected to be amortized over a weighted average period of 4.0 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.

The total fair value of options vested was $ 0.3 million in 2022, $ 6.6 million in 2021 and $ 1.1 million in 2020.

There were 25,000 and 39,700 options exercised during 2022 and 2021, respectively.

No options were exercised during 2020.

Cash received from option exercises during 2022 and 2021 was $ 0.2 million and $ 0.4 million, respectively.

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

11 unchanged sentences

During 2022, 2021 and 2020, we recognized stock-based compensation expense of $ 0.7 million, $ 10.0 million and $ 1.0 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

The total fair value of RSU awards vested during 2022 was less than $ 0.1 million.

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

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

$ 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.

respectively.

As of December 31, 2022, $ 3.9 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 4.2 years.

DSUs are primarily 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.

1 unchanged sentence

During 2022, 2021 and 2020, we recognized stock-based compensation expense of $ 1.0 million, $ 0.7 million and $ 0.6 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.

The total fair value of DSU awards vested was $ 1.0 million in both 2022 and 2021 and $ 0.5 million in 2020.

(4) Segment Reporting

1 unchanged sentence

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

We utilize substantially all the needle coke that we produce internally to manufacture our graphite electrodes and as a result approximately 96 % of our revenues from external customers are derived from the sale of graphite electrodes.

In 2021, no customer accounted for more than 10% of our net sales.

The following tables summarize information as to our operations in different geographic areas:

We utilize the majority of the needle coke that we produce internally to manufacture our graphite electrodes and as a result approximately 95 % of our revenues from external customers are derived from the sale of graphite electrodes.

No single customer accounted for 10% or more of the Company's net sales in 2022, 2021 or 2020.

The following tables summarize information as to the Company's operations in different geographic areas:

Year Ended December 31,

2022 2021 2020

5 unchanged sentences

Total $ 1,281,250 $ 1,345,788 $ 1,224,361

At December 31,

(Dollars in thousands)

13 unchanged sentences

The following table presents our long-term debt:

December 31, 2021 As of

December 31, 2022

December 31, 2021

(Dollars in thousands)

4 unchanged sentences

Total debt 921,927 1,029,688

Short-term Debt ( 127 ) ( 131 )

Long-term debt, current portion ( 124 ) ( 127 )

Long-term debt $ 921,803 $ 1,029,561

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”).

In February 2018, the Company entered into a credit agreement (as amended, 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 $ 330 million senior secured revolving credit facility after giving effect to the May 2022 amendment that increased the revolving commitments under the 2018 Credit Agreement by $ 80 million from $ 250 million (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, the “Senior Secured Credit Facilities”).

GrafTech Finance Inc.

1 unchanged sentence

(“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.

The 2018 Term Loan Facility and the 2018 Revolving Credit Facility mature on February 12, 2025 and May 31, 2027, respectively.

As of December 31, 2022 and 2021, there was no debt outstanding on the 2018 Revolving Credit Facility and there was $ 3.0 million and $ 3.3 million of letters of credit drawn against the 2018 Revolving Credit Facility, respectively.

1 unchanged sentence

The Second Amendment also decreased the interest rate floor from 1.00 % 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.

The 2018 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) the Adjusted Term SOFR Rate, and Adjusted EURIBOR Rate (each, as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 3.00 % per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.00 % 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.

2 unchanged sentences

(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.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

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 Loan Facility amortizes at a rate of $ 112.5 million per 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.

1 unchanged sentence

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.

As of December 31, 2022, we had satisfied all required amortization installments through such 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.

The 2018 Credit Agreement contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00 :1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $ 35 million), taken together, exceed 35 % of the total amount of commitments under the 2018 Revolving Credit Facility.

The 2018 Credit Agreement contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00 to 1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $ 35.0 million), taken together, exceed 35 % of the total amount of commitments under the 2018 Revolving Credit Facility.

The 2018 Credit Agreement also contains customary events of default.

The Company was in compliance with all of its debt covenants as of December 31, 2022 and 2021.

2020 Senior Secured Notes

10 unchanged sentences

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.

If any other type of event of default occurs and is continuing, then the

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

(6) Goodwill and Other Intangible Assets

We are required to review goodwill and indefinite-lived intangible assets annually for impairment.

Goodwill impairment is tested at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

For the years ended December 31, 2021 and 2020, an assessment for potential impairment was performed and an impairment adjustment was not required.

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

Goodwill and indefinite-lived intangible assets are required to be reviewed annually for impairment.

Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The Company's annual impairment tests performed in 2022, 2021 and 2020 did not result in the fair value of its reporting unit being less than its carrying value.

We performed the step 0 qualitative assessment in 2022 and 2021.

The goodwill balance, which relates to one reporting unit, was $ 171.1 million as of each of December 31, 2022 and 2021.

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, 2021

As of December 31, 2020

December 31, 2022

December 31, 2021

Amount Accumulated

3 unchanged sentences

(Dollars in thousands)

Trade name $ 22,500 $ ( 13,935 ) $ 8,565 $ 22,500 $ ( 11,932 ) $ 10,568

Trade names $ 22,500 $ ( 15,869 ) $ 6,631 $ 22,500 $ ( 13,935 ) $ 8,565

Technology and know-how 55,300 ( 42,371 ) 12,929 55,300 ( 38,486 ) 16,814

Customer related intangible 64,500 ( 28,195 ) 36,305 64,500 ( 23,848 ) 40,652

Customer-related intangibles 64,500 ( 32,513 ) 31,987 64,500 ( 28,195 ) 36,305

Total finite-lived intangible assets $ 142,300 $ ( 90,753 ) $ 51,547 $ 142,300 $ ( 80,616 ) $ 61,684

3 unchanged sentences

The following table presents an analysis of interest expense:

For the Year Ended December 31

Year Ended December 31,

2022 2021 2020

3 unchanged sentences

Amortization of debt issuance and modification costs 3,475 8,642 9,179

Unrealized mark-to-market gain on de-designated interest rate swap ( 7,111 ) — —

Gain upon partial termination of embedded derivative ( 4,605 ) — —

Total interest expense $ 36,568 $ 68,760 $ 98,074

2 unchanged sentences

The 2018 Term Loan Facility had an interest rate of 7.38 % as of December 31, 2022, 3.50 % as of December 31, 2021 and 4.50 % as of December 31, 2020.

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.

The Company has several interest rate swap contracts to fix its cash flows associated with the risk in variability in the one-month USD London Interbank Offered Rate ("USD LIBOR") for the 2018 Term Loan Facility.

The interest rate swaps fixed the cash flows associated with the payments on our Term Loan Facility to an effective fixed interest rate of 4.2 % throughout 2022.

See Note 5, "Debt and Liquidity" for details of our debt and Note 8, "Fair Value Measurements and Derivative Instruments" for additional details on our interest rate swaps and embedded derivative.

In 2022, the Company made voluntary prepayments of $ 110.0 million under its 2018 Term Loan Facility.

In connection with this, the Company recorded $ 0.5 million of accelerated accretion of the original issue discount and $ 0.8 million of accelerated amortization of the debt issuance cost.

In 2021, the Company made voluntary prepayments of $ 400.0 million under its 2018 Term Loan Facility.

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

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

In December 2020, the proceeds from the issuance of the $ 500.0 million 2020 Senior Secured Notes were used to repay $ 500.0 million of principal on the 2018 Term Loan Facility.

1 unchanged sentence

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

1 unchanged sentence

Depending on the inputs, we classify each fair value measurement as follows:

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

• 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

• Level 3 – based upon one or more significant unobservable inputs.

The following section describes key inputs and assumptions used in valuation methodologies of our assets and liabilities measured at fair value on a recurring basis:

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

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

• Level 1 – Quoted market prices in active markets for identical assets or liabilities.

• Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable.

• Level 3 – Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the classification of our assets and liabilities measured at fair value on a recurring basis:

December 31, 2022 Total Level 1 Level 2 Level 3

(Dollars in thousands)

Foreign currency derivatives $ 92 $ — $ 92 $ —

Interest rate swap contracts 27,384 — 27,384 —

Total assets at fair value $ 27,476 $ — $ 27,476 $ —

Foreign currency derivatives $ 282 $ — $ 282 $ —

Total liabilities at fair value $ 282 $ — $ 282 $ —

December 31, 2021 Total Level 1 Level 2 Level 3

(Dollars in thousands)

Foreign currency derivatives $ 388 $ — $ 388 $ —

Commodity derivative contracts 8,469 — 8,469 —

Interest rate swap contracts 6,060 — 6,060 —

Total assets at fair value $ 14,917 $ — $ 14,917 $ —

Foreign currency derivatives $ 2 $ — $ 2 $ —

Interest rate swap contracts 140 — 140 —

Total liabilities at fair value $ 142 $ — $ 142 $ —

The carrying amounts and fair values of financial instruments, other than cash and cash equivalents, short-term notes and accounts receivable, accounts payable and other current payables, are shown in the table above.

The carrying value of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term nature of these instruments.

The fair value of our debt as of December 31, 2022 and 2021 was $ 843.2 million and $ 1,051.6 million, respectively.

The fair values were determined using Level 2 quoted market prices for the same or similar debt instruments.

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

Derivative Instruments

We use derivative instruments as part of our overall foreign currency and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows and to minimize commodity price volatility.

Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the U.S.

In the normal course of business, we are exposed to certain risks related to fluctuations in currency exchange rates, commodity prices and interest rates.

We use various derivative financial instruments, primarily foreign currency derivatives, commodity derivative contracts and interest rate swaps as part of our overall strategy to manage risks from these market fluctuations.

Certain of our derivative contracts contain provisions that require us to provide collateral.

3 unchanged sentences

We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates.

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.

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

Foreign currency forward and swap contracts are used to mitigate the foreign exchange risk of balance sheet items.

These derivatives are fair value hedges.

Gains and losses from these derivatives are recorded in cost of sales and they are largely offset by the financial impact of translating foreign currency-denominated payables and receivables.

In the first quarter of 2022, we entered into foreign currency derivatives with maturities of one month to 12 months in order to protect against the risk that cash flows associated with certain sales and purchases denominated in a currency other than

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

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, 2021 had maturity dates from January 2022 to April 2022, and were not designated as hedging instruments.

dollar will be adversely affected by future changes in foreign exchange rates.

These derivatives are designated as cash flow hedges.

The resulting unrealized gains or losses from these derivatives are recorded in AOCL and subsequently, when realized, are reclassified to net sales or cost of sales in the Consolidated Statements of Operations when the hedged exposures affect earnings.

Commodity derivative contracts

We have entered into commodity derivative contracts for refined oil products.

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.

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 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 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.

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

In the fourth quarter of 2017, we began to enter into LTAs with many of our customers and began to hedge the cash flows related to these contracts.

The unrealized gains or losses related to commodity derivative contracts designated as cash flow hedges are recorded in accumulated other comprehensive income ("AOCI") and subsequently, when realized, are reclassified to the Consolidated Statement of Operations when the hedged item impacts earnings, which is when the finished product is sold.

The last of our commodity derivative contracts matured as of June 30, 2022 and no new contracts were entered during 2022.

Interest rate swap contracts

During the third quarter of 2019, the Company entered into interest rate swap contracts.

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 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.

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.

We utilize interest rate swaps to limit exposure to market fluctuations on our variable-rate debt.

Each derivative agreement's unrealized gain or loss is recorded in AOCL and, when realized, is recorded to interest expense.

In the third quarter of 2019, we entered into interest rate swap contracts that are "pay fixed, receive variable." Our risk management objective was to fix our cash flows associated with the risk of variability in the one-month USD LIBOR for a portion of our outstanding debt.

It was expected that the swaps would fix the cash flows associated with the forecasted interest payments on our debt to an effective fixed interest rate of 4.2 %, which could be lowered to 3.95 % depending on credit ratings.

Since their modification concurrent with the 2018 Term Loan Facility modification in the first quarter of 2021, the swaps contain an other-than-insignificant financing element.

As such, 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 $ 3.8 million as of December 31, 2022, with $ 2.3 million included in "Other accrued liabilities" and $ 1.5 million in "Other long-term obligations" on the Consolidated Balance Sheets.

As of December 31, 2021, the debt host portion amounted to a liability of $ 7.0 million, with $ 2.6 million included in "Other accrued liabilities" and $ 4.4 million included in "Other long-term obligations" on the Consolidated Balance Sheets.

The corresponding loss is accounted for in AOCL and is being amortized over the remaining life of the swaps.

The associated embedded derivative is treated as a cash flow hedge.

In the first quarter of 2022, in connection with the repayment of principal on our 2018 Term Loan Facility discussed in Note 4, "Debt and Liquidity," and our probability assessment of the variable-rate debt remaining outstanding through the term of the swaps, we de-designated one interest rate swap contract with a $ 250.0 million notional amount, maturing in the third quarter of 2024.

The fair value of the embedded derivative at the de-designation date was a gain of $ 6.6 million and was recorded in AOCI and will be amortized into interest expense over the remaining life of the swap.

The change in fair value of the de-designated embedded derivative in 2022 resulted in a gain of $ 7.1 million and was recorded in interest expense in the Consolidated Statements of Operations.

In the third quarter of 2022, we redeemed $ 67.0 million of our $ 250.0 million notional amount de-designated interest rate swap and recorded in interest expense in the Consolidated Statements of Operations a gain of $ 4.6 million on the reduction of the embedded derivative.

The partial redemption of the interest rate swap also triggered a $ 0.7 million accelerated settlement of the associated debt host.

All derivatives are recorded on the balance sheet at fair value.

If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in AOCL until the hedged item is recognized in earnings.

The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately.

If a derivative is not a hedge, changes in the fair value are adjusted through earnings.

The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position).

The fair values will also be classified as short-term or long-term depending upon their maturity dates.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Consolidated Balance Sheets.

At December 31, 2021 and 2020, the fair value of our derivatives and their respective balance sheet locations are presented in the following table:

Asset Derivatives Liability Derivatives

Location Fair Value Location Fair Value

As of December 31, 2021

The notional amounts of our outstanding derivative instruments as of December 31, 2022 and 2021 were as follows:

December 31, 2022 December 31, 2021

Notional Amount Notional Amount

(Dollars in thousands)

Derivatives designated as cash flow hedges:

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

Other assets — Other long-term obligations —

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

Other assets 6,060 Other long-term obligations —

Total fair value $ 14,529 $ 140

As of December 31, 2020

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

Other assets 63 Other long-term obligations 1,898

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

Other assets — Other long-term obligations 6,903

Total fair value $ 581 $ 13,769

Asset Derivatives Liability Derivatives

Location Fair Value Location Fair Value

As of December 31, 2021

Derivative instruments designated as hedges:

Commodity derivative contracts $ — $ 19,474

Interest rate swap contracts 250,000 500,000

Derivative instruments not designated as hedges:

Foreign currency derivatives $ 70,420 $ 99,260

Interest rate swap contracts 183,000 —

The following table summarizes the fair value of our outstanding derivatives designated as hedges (on a gross basis) and balance sheet classification as of December 31, 2022 and 2021:

December 31, 2022 December 31, 2021

Fair Value Fair Value

(Dollars in thousands)

Derivatives not designated as hedges:

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

Total fair value $ 388 $ 2

As of December 31, 2020

Derivatives not designated as hedges:

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

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

Total fair value $ 6 $ 1,063

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.

Prepaid and other current assets

Commodity derivative contracts $ — $ 8,469

Interest rate swap contracts 10,246 —

Total $ 10,246 $ 8,469

Interest rate swap contracts $ 5,575 $ 6,060

Total $ 5,575 $ 6,060

Other accrued liabilities

Interest rate swap contracts $ — $ ( 140 )

Total $ — $ ( 140 )

Net asset $ 15,821 $ 14,389

As a result of the settlement of commodity derivative contracts and foreign currency derivatives, as of December 31, 2022, net realized pre-tax gains of $ 17.6 million and net realized pre-tax losses of $ 5.5 million were reported in AOCL and will be released to earnings within the following 12 months.

In addition, we recorded $ 0.8 million of ineffectiveness income to cost of sales in the Consolidated Statements of Operations in 2022 related to the settlement of commodity derivative contracts.

No ineffectiveness expense was recorded in 2021 or 2020.

See the table below for amounts recognized on the effective portion of our commodity derivative contracts in the Statement of Operations.

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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:

The realized (gains) losses on cash flow hedges are recognized in the Statements of Operations when the hedged item impacts earnings and are as follows for the years ended December 31, 2022, 2021 and 2020:

Amount of (Gain)/Loss

2 unchanged sentences

(Dollars in thousands)

Foreign currency derivatives Cost of sales $ 1,975 $ — $ —

Commodity derivative contracts Cost of sales ( 11,452 ) 6,440 ( 4,134 )

Interest rate swaps Interest expense (income) 1,846 4,390 ( 1,050 )

Interest rate swaps Interest expense ( 2,423 ) 1,846 4,390

Pre-tax gains and losses on non-designated derivatives recognized in earnings are as follows:

Amount of (Gain)/Loss

4 unchanged sentences

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

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:

Interest rate swaps Interest expense ( 11,716 ) 866 —

The following table summarizes the fair value of our outstanding derivatives not designated as hedges (on a gross basis) and balance sheet classification as of December 31, 2022 and 2021:

December 31, 2022 December 31, 2021

Fair Value Fair Value

(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.

Prepaid and other current assets

Interest rate swap contracts $ 7,492 $ —

Foreign currency derivatives 92 388

Interest rate swap contracts 4,071 —

Other accrued liabilities

Foreign currency derivatives ( 282 ) ( 2 )

Net asset $ 11,373 $ 386

GRAFTECH INTERNATIONAL LTD.

3 unchanged sentences

The following tables present supplementary balance sheet details:

December 31, 2021 As of

December 31, 2022

December 31, 2021

(Dollars in thousands)

26 unchanged sentences

$ 50,822 $ 68,657

*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.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents an analysis of the allowance for doubtful accounts:

The following table presents an analysis of the allowance for doubtful accounts for the years ended December 31:

2022 2021 2020

(Dollars in thousands)

Balance at beginning of year $ 6,835 $ 8,243 $ 5,474

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

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

Charge (credit) to income 1,585 ( 1,266 ) 1,458

Deductions ( 401 ) ( 142 ) ( 715 )

Balance at end of year $ 8,019 $ 6,835 $ 8,243

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

Components of lease expense are as follows:

For the Year Ended December 31,

The Company leases certain transportation and mobile manufacturing equipment such as railcars and forklifts, as well as real estate.

The components of lease expense are as follows:

Year Ended December 31,

2022 2021 2020

5 unchanged sentences

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

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

3 unchanged sentences

Supplemental balance sheet information related to leases is as follows:

As of December 31,

(Dollars in thousands)

8 unchanged sentences

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:

As of December 31, 2022, future minimum lease payments under noncancellable operating leases were as follows:

(Dollars in thousands)

2026 and after 152

2028 and thereafter —

Total lease payments $ 6,202

1 unchanged sentence

Present value of lease payments $ 5,879

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

As of December 31, 2022, the Company has not entered into any additional operating lease commitments that have yet to commence.

(11) Retirement Plans and Post-Employment Benefits

18 unchanged sentences

The components of our consolidated net pension costs are set forth in the following table:

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

4 unchanged sentences

Mark-to-market (gain) loss ( 181 ) ( 7,801 ) ( 2,428 ) ( 1,327 ) 613 2,596

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

Net periodic benefit (credit) cost $ 491 $ ( 6,994 ) $ ( 2,351 ) $ ( 412 ) $ 1,154 $ 3,552

GRAFTECH INTERNATIONAL LTD.

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The mark-to-market gain in 2022 was primarily the result of a favorable change in the discount rate, partially offset by a worse than expected return on plan assets.

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 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 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:

December 31, 2021 As of

The mark-to-market loss in 2020 was the result of an unfavorable change in the discount rate, new employee obligations and unfavorable foreign currency translation, partially offset by a 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, 2022 and 2021 are shown below.

December 31, 2022

December 31, 2021

(Dollars in thousands)

5 unchanged sentences

Foreign currency exchange changes — ( 660 ) — ( 1,318 )

Actuarial (gain) loss ( 4,316 ) ( 1,104 ) 9,583 2,683

Actuarial gain ( 24,202 ) ( 7,293 ) ( 4,316 ) ( 1,104 )

Benefits paid ( 10,343 ) ( 1,557 ) ( 10,322 ) 237

12 unchanged sentences

of financial position:

Non-current assets $ — $ — $ — $ 13

Current liabilities ( 420 ) ( 44 ) ( 423 ) ( 50 )

Non-current liabilities ( 19,525 ) ( 11,614 ) ( 24,263 ) ( 13,597 )

Other accrued liabilities $ ( 409 ) $ ( 167 ) $ ( 420 ) $ ( 44 )

Other long-term obligations ( 19,578 ) ( 3,190 ) ( 19,525 ) ( 11,614 )

Net amount recognized $ ( 19,987 ) $ ( 3,357 ) $ ( 19,945 ) $ ( 11,658 )

• For certain international jurisdictions, the amount reported under "Benefits paid" include obligations and assets that have been transferred into our plans in connection with personnel hired during the year.

The accumulated benefit obligation for all defined benefit pension plans was $ 129.5 million and $ 166.1 million as of December 31, 2022 and 2021, respectively.

2 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.

1 unchanged sentence

Foreign government bonds – Valued by the trustees using various pricing services of financial institutions.

Equity securities – Valued at the closing price reported on the active market on which the security is traded.

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

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

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Collective trusts – Valued at the net asset value provided by the administrator of the fund (the practical expedient).

4 unchanged sentences

The fair value of other plan assets by category is summarized below (dollars in thousands):

As of December 31, 2021

December 31, 2022

Level 1 Level 2 Level 3 Total

3 unchanged sentences

Fixed insurance contracts — — 26,685 26,685

Total assets in the fair value hierarchy $ — $ 910 $ 26,003 $ 26,913

Total international plan assets $ — $ 1,023 $ 26,685 $ 27,708

Plan - Investments measured at net asset value $ 79,300

Total $ 706 $ 1,023 $ 26,685 $ 107,714

As of December 31, 2020

December 31, 2021

Level 1 Level 2 Level 3 Total

3 unchanged sentences

Fixed insurance contracts — — 26,003 26,003

Total assets in the fair value hierarchy $ — $ 995 $ 24,087 $ 25,082

Total international plan assets $ — $ 910 $ 26,003 $ 26,913

Plan - Investments measured at net asset value $ 109,246

Total $ 715 $ 910 $ 26,003 $ 136,874

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, 2022 and 2021 (dollars in thousands):

7 unchanged sentences

Balance at December 31, 2022

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.

1 unchanged sentence

Assumptions used to determine net pension costs and projected benefit obligations are:

Pension Benefit Obligations Key Assumptions As of December 31,

Pension Benefit Obligations Key Assumptions December 31,

Weighted average assumptions to determine benefit obligations:

13 unchanged sentences

The expected return on assets assumption is a long-term assumption that is expected to remain the same from one year to the next unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market conditions.

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

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The rate of compensation increase is based on the long-term inflation rate projection of the jurisdictions where we have active plans and on any incremental change due to merit or productivity.

The following table presents our retirement plan weighted average asset allocations at December 31, 2022, by asset category :

Percentage of Plan Assets

as of December 31, 2021

December 31, 2022

Equity securities and return seeking assets 20 % — %

7 unchanged sentences

For each plan, the investment policy is set within both asset return and local statutory requirements.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Information for our pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2022 and 2021 follows:

17 unchanged sentences

2027 8,608 1,842

2027-2031 40,997 12,312

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Next five years 38,940 12,201

Post-Employment Benefit Plans

6 unchanged sentences

The estimated liability for post-employment benefit plans was $ 13.5 million and $ 16.0 million as of December 31, 2022 and 2021, 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.

The Company recognized income of $ 0.9 million in the Consolidated Statement of Operations for post-employment benefits in 2022 and expense of $ 0.5 million and $ 0.7 million for 2021 and 2020, respectively.

Included in post-employment benefit expense are mark-to-market gains of $ 1.6 million and $ 0.1 million in 2022 and 2021, respectively, and a mark-to-market gain of less than $ 0.1 million for 2020.

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

The plan allows employees to contribute up to 5 % of pay as a basic contribution and an additional 45 % of pay as supplemental contribution.

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.

In 2022, 2021 and 2020, the Company's contributions to our savings plan were $ 3.0 million, $ 2.5 million and $ 2.2 million, respectively.

(12) Commitments and Contingencies

Legal Proceedings

We are involved in various investigations, lawsuits, claims, demands, environmental compliance programs and other legal proceedings arising out of or incidental to the conduct of our business.

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.

We are involved in various investigations, lawsuits, claims, demands, labor disputes and other legal proceedings, including with respect to environmental and human exposure or other personal injury matters, arising out of or incidental to the conduct of our business.

While it is not possible to determine the ultimate disposition of each of these matters and proceedings, 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.

We are involved in certain arbitrations as respondents/counterclaimants, pending before the International Chamber of Commerce with a few 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.

1 unchanged sentence

In June 2021, the Claimants filed their statement of claim, seeking approximately $ 61.0 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.

On December 16, 2022, the Claimants revised their calculation of damages to approximately $ 178.9 million including interest, covering the period from the first quarter of 2020 through the end of the third quarter of 2022 and interest covering the period from June 2020 through December 16, 2022.

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.

11 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, 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.

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 on September 12, 2022 we filed our response in opposition.

We intend to vigorously defend our position.

As of December 31, 2022, 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.

17 unchanged sentences

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 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 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.

As of December 31, 2022, total Tax Receivable Agreement liability was $ 15.5 million, of which $ 4.6 million was classified as a current liability "Related party payable - Tax Receivable Agreement" on the Consolidated Balance Sheets and $ 10.9 million was classified as a long-term liability in "Related party payable - Tax Receivable Agreement long-term" on the Consolidated Balance Sheets.

As of December 31, 2021, the total Tax Receivable Agreement liability was $ 19.3 million, of which $ 3.8 million was classified as a current liability "Related party payable - Tax Receivable Agreement" on the Consolidated Balance Sheets and $ 15.5 million was classified as a long-term liability in "Related party payable - Tax Receivable Agreement long-term" on the Consolidated Balance Sheets.

Long-term Incentive Plan

5 unchanged sentences

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.

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.

5 unchanged sentences

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.

To date, $ 71.8 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.

Mexico Value-Added Tax ("VAT")

In July 2019, the Mexican Tax Authority ("MTA") opened an audit of the VAT filings of one of the Company's subsidiaries in Mexico for the period of January 1 to April 30, 2019.

In September 2021, the MTA issued a tax assessment, claiming improper use of a certain VAT exemption rule for purchases from a foreign affiliate.

The Company filed an administrative appeal against the tax assessment with the MTA's appeals office.

In November 2022, the MTA appeal's office concluded its review and confirmed the tax assessment.

The Company believes that the purchases from a foreign affiliate are exempt from VAT back-up withholding and in December 2022, the Company filed a Claim for Nullity with the Chamber Specialized in exclusive resolution of substance of the Federal Court of Administrative Justice.

At the time of filing, the tax assessment for the four month period under audit amounted to approximately $ 23.5 million, including penalties, inflation and interest.

After the filing of the Claim for Nullity, in January 2023, the MTA notified the same subsidiary in Mexico of its intent to assess $ 51.0 million, including penalties, inflation and interest for the period January 1 to December 31, 2018, asserting the same improper use of certain VAT exemption rules on purchases from a foreign affiliate.In Mexico, each tax assessment requires a separate claim.

The Company intends to pursue administrative appeal procedures with the MTA to try and resolve this matter.

The Company believes that its application of the VAT exemption rules is appropriate and, accordingly, does not believe that it is probable that it will incur a loss related to this matter for either of the two periods under the MTA's audit.

The Company intends to vigorously defend its position.

(13) Income Taxes

The following table summarizes the U.S.

components of income before provision for income taxes:

For the Year Ended December 31,

Income before the provision for income taxes was derived from the following sources:

Year Ended December 31,

2022 2021 2020

1 unchanged sentence

$ 55,107 $ ( 69,087 ) $ 51,672

525,493 458,373 757,462

Foreign 397,211 525,493 458,373

Income before provision for income taxes $ 452,318 $ 456,406 $ 510,045

Provision for income taxes consists of the following:

For the Year Ended December 31,

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes consists of the following:

Year Ended December 31,

2022 2021 2020

(Dollars in thousands)

income taxes:

2 unchanged sentences

16,892 2,777 20,162

income taxes:

Foreign income taxes:

Current 48,744 71,088 63,092

2 unchanged sentences

Provision for income taxes $ 69,356 $ 68,076 $ 75,671

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.

The increase in the provision for income taxes in 2022 versus 2021 is primarily due to the mix of worldwide earnings from various countries taxed at different rates and the U.S.

taxation of GILTI, partially offset by the reduction in pre-tax income.

The 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, 2022, 2021 and 2020 to income before the provision for income taxes as set forth in the following table:

For the Year Ended December 31,

Year Ended December 31,

2022 2021 2020

18 unchanged sentences

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 are set forth in the following table:

As of December 31,

(Dollars in thousands)

6 unchanged sentences

Long-term contract option amortization 934 982

Provision for rationalization charges 71 96

Mark-to-market hedges — 3,552

Previously taxed income 8,304 5,229

11 unchanged sentences

Net deferred tax liability $ ( 33,105 ) $ ( 14,487 )

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.

Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.

Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets.

Examples of negative evidence would include cumulative losses in recent years and history of tax attributes expiring unused.

In circumstances where the significant positive evidence does not outweigh the negative evidence in our assessment, we have established and maintained valuation allowances on those net deferred tax assets.

However, the recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At each reporting period, the Company assesses the need for valuation allowances against deferred tax assets and whether it is more likely than not that deferred tax benefits will be realized in each jurisdiction.

Consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.

Examples of positive evidence include a strong earnings history, an event or events that would increase the Company's taxable income or reduce expenses, or tax planning strategies that would create the ability to realize deferred tax assets.

Examples of negative evidence include cumulative losses in recent years or a history of tax attributes expiring unused.

In circumstances where the negative evidence outweighs the positive evidence, the Company has established or maintained valuation allowances on the jurisdiction’s net deferred tax assets.

However, the recognition of the valuation allowance does not limit the Company's ability to utilize these tax assets on a tax return in the future should taxable income be realized in sufficient amount to realize the assets.

Valuation allowance activity for the years ended December 31, 2022, 2021 and 2020 is as follows:

2 unchanged sentences

Credited to income ( 980 )

Changes attributable to write-off of underlying assets ( 30,138 )

Translation adjustment 17

6 unchanged sentences

Balance as of December 31, 2022

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 the U.S.

tax attributes.

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.

tax attributes.

As a result, a partial release (to reflect only the economic benefit of the attributes) of the valuation allowance against federal net operating losses and state losses was recorded in 2018, while a full release of the valuation allowance against the federal foreign tax credit carryforward, other federal deferred tax assets was also recorded.

A valuation allowance of $ 35.8 million is included in the December 31, 2018 balance reflected above as there was not sufficient positive evidence that the deferred tax asset related to the U.S.

federal net operating loss would generate more than its estimated economic benefit.

This valuation allowance and the related deferred tax asset were subsequently released to the income statement in 2019.

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.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The decrease in the valuation allowance in 2022 was primarily attributable to changes in expected future utilization, state law changes and expiration of U.S.

state NOL carryforwards during the year.

The reduction in the valuation allowance in 2021 resulted primarily from expirations of NOL carryforwards upon which a valuation allowance was previously recorded.

As of December 31, 2022, the Company had a total foreign tax credit carryforward of $ 6.9 million.

These tax credit carryforwards begin to expire in 2027.

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.

In addition, the Company had state NOL carryforwards of $ 163.8 million (net of federal benefit), which can be carried forward from five to 20 years.

These state NOL carryforwards resulted in a deferred tax asset of $ 12.2 million as of December 31, 2022.

The Company also has U.S.

state tax credits of $ 0.1 million as of December 31, 2022.

Our foreign loss carryforwards on a gross basis are $ 6.8 million and may be carried forward indefinitely.

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.

The Company's foreign loss carryforwards on a gross basis were $ 6.8 million as of December 31, 2022 and may be carried forward indefinitely.

As of December 31, 2022, the Company had unrecognized tax benefits of $ 0.1 million, which, if recognized, would have a favorable impact on the effective tax rate.

No material amounts of accrued interest or penalties have been recorded as of December 31, 2022 or 2021.

2 unchanged sentences

Balance as of December 31, 2020

Settlements ( 75 )

Lapse of statute of limitations ( 45 )

Foreign currency impact ( 7 )

Balance as of December 31, 2021

Lapse of statutes of limitations ( 45 )

Lapse of statute of limitations ( 40 )

Foreign currency impact 3

Balance as of December 31, 2022

It is reasonably possible that a reduction of unrecognized tax benefits of up to $ 0.1 million may occur within 12 months due to settlements and the expiration of statutes of limitation.

We file income tax returns in the U.S.

It is reasonably possible that there will be no more unrecognized tax benefits within 12 months due to settlements and the expiration of statutes of limitation.

The Company files income tax returns in the U.S.

federal jurisdiction, and various state and foreign jurisdictions.

1 unchanged sentence

Other jurisdictions are generally closed for years prior to 2017.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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.

As of December 31, 2022, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $ 1.2 billion.

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 GrafTech's foreign investments would generally be limited to foreign withholding and state taxes.

The Company intends, however, to indefinitely reinvest these earnings and expect future U.S.

cash generation to be sufficient to meet future U.S.

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)

(14) Stockholders' Equity

The following information should be read in conjunction with the Consolidated Statement of Stockholders' Equity (Deficit).

Follow-on Offerings and Common Stock Repurchases

On December 5, 2019, GrafTech announced two separate transactions.

The first was a Rule 144 secondary block trade in which Brookfield sold 11,175,927 shares of GrafTech common stock at a price of $ 13.125 per share to a broker-dealer who placed the shares with institutional and other investors.

Separately, GrafTech entered into a share repurchase agreement with Brookfield to repurchase $ 250 million of stock from Brookfield at the arm's length price of $ 13.125 per share, set by the competitive bidding process of the secondary block trade.

As a result, GrafTech repurchased 19,047,619 shares of common stock, reducing total shares outstanding at the time by approximately 7 %.

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.

Common Stock Repurchases

On July 31, 2019, the Company announced that its Board of Directors approved the repurchase of up to $ 100.0 million of its common stock in open market purchases, including under Rule 10b5-1 and/or Rule 10b-18 plans.

On November 4, 2021, the Company announced that its Board of Directors approved the repurchase of an additional $ 150.0 million of its common stock under this program.

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.

The Company repurchased 6,662,421 shares of its common stock for $ 60.0 million in 2022, 4,658,544 shares of its common stock for $ 50.0 million in 2021 and 3,328,574 shares of its common stock for $ 30.1 million in 2020, under the stock repurchase program.

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.

GRAFTECH INTERNATIONAL LTD.

AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022 , approximately $ 99.0 million remained available for stock repurchases under this authorization.

The Company paid quarterly dividends of $ 0.085 through the first quarter of 2020.

Effective in the second quarter of 2020, the 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

The balance in our AOCL is set forth in the following table:

December 31, 2022

December 31, 2021

(Dollars in thousands)

Foreign currency translation adjustments, net of tax $ ( 29,354 ) $ ( 22,330 )

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 (Deficit)" for details of our common stock repurchases in 2021, 2020 and 2019.

For the Year Ended December 31,

Commodities, interest rate and foreign currency derivatives, net of tax 21,284 14,886

Total AOCL $ ( 8,070 ) $ ( 7,444 )

(15) Earnings per Share ("EPS")

The following table presents a reconciliation of the numerator and denominator of basic and diluted EPS:

Year Ended December 31,

2022 2021 2020

(Dollars in thousands, except per share amounts)

Numerator for basic and diluted EPS:

Net income $ 382,962 $ 388,330 $ 434,374

Weighted average common shares outstanding for basic calculation 258,781,843 266,251,097 267,916,483

1 unchanged sentence

Weighted average common shares outstanding for diluted calculation 258,791,228 266,317,194 267,930,644

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.

Basic EPS $ 1.48 $ 1.46 $ 1.62

Diluted EPS $ 1.48 $ 1.46 $ 1.62

Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding, which included 243,006 , 130,624 and 73,320 shares of participating securities in 2022, 2021 and 2020, respectively.

Diluted EPS is 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 2,240,655 , 1,499,128 and 1,667,325 equivalent shares in 2022, 2021 and 2020, respectively, as these shares are anti-dilutive.

See Note 14, "Stockholders' Equity" for details of the Company's common stock repurchases in 2022, 2021 and 2020.

GRAFTECH INTERNATIONAL LTD.

3 unchanged sentences

The following table presents the details of other (income) expense:

For the Year Ended December 31

Year Ended December 31,

2022 2021 2020

1 unchanged sentence

Brazil value-added tax credit $ — $ ( 11,511 ) $ —

Pension and post-employment non-service cost ( 5,298 ) 3,584 4,382

Non-service pension and other post-employment (income) expense ( 9,950 ) ( 5,298 ) 3,584

Bank charges 938 1,098 962

2 unchanged sentences

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.

The Company's Brazilian subsidiary had previously filed a legal claim on this matter and is entitled to receive tax credits and interest dating back to five years preceding the date of the claim.

The overpayments, plus interest, of PIS-COFINS related to the period from June 2005 to August 2021 represented $ 11.5 million, net of legal fees.

In the fourth quarter of 2021, the Company's subsidiary obtained 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, 2022, the Company had offset $ 9.7 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.

Non-service pension and other post-employment (income) expense includes the components of pension and post-employment costs other than service cost.

The Company recognized non-service pension and other post-employment income in 2022 and 2021 due to the recognition of mark-to-market gains of $ 9.6 million and $ 3.8 million, respectively.

In 2020, the Company recognized mark-to-market losses of $ 3.2 million.

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

3 unchanged sentences

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