What changed in this filing

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Item 3. Legal Proceedings

2024-02-14 compared with 2023-02-14 · 59 added, 34 removed, 70 unchanged (57% of the section changed)

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

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

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

On December 16, 2022, the Claimants revised their calculation of alleged damages to approximately $178.9 million including interest, with damages 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.

In March 2023, an International Chamber of Commerce hearing was held before the party-appointed sole arbitrator with the Claimants, the Company, and witnesses in attendance.

On March 31, 2023, the Claimants further revised their calculation of alleged damages to approximately $171.7 million, including interest, for the period covering the first quarter of 2020 through 2022.

In June of 2023, the Claimants again revised their calculation of alleged damages to approximately $188.2 million, including interest, for the period covering the first quarter of 2020 through the first quarter of 2023.

We believe we have valid defenses to these claims.

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

Monterrey, Mexico Operations Shutdown

On September 15, 2022, inspectors from the State Attorney’s Office for the Secretary of Environment of the State of Nuevo León, Mexico visited GrafTech México graphite electrode manufacturing facility located in Monterrey, Mexico to inspect GrafTech Mexico’s facility and certain of the facility’s environmental and operating permits.

Monterrey, Mexico Suspension of Operations

On September 15, 2022, inspectors from the State Attorney’s Office for the Secretary of Environment of the State of Nuevo León, Mexico visited GrafTech Mexico S.A.

De C.V.’s (“GrafTech Mexico”) graphite electrode manufacturing facility located in Monterrey, Mexico to inspect GrafTech Mexico’s facility and certain of the facility’s environmental and operating permits.

At the conclusion of the inspection, the inspectors issued a Record of Inspection providing for the results of the inspection, their observations, and the imposition of a temporary suspension of GrafTech Mexico’s facilities within seven days.

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On November 17, 2022, the State Attorney’s Office for the Secretary of Environment lifted the suspension notice, subject to the completion of certain agreed-upon activities, including the submission of an environmental impact study with respect to the facility’s operations, allowing the Monterrey facility to resume operations.

Notwithstanding that the suspension notice has been conditionally lifted and that the Monterrey facility has resumed operations, GrafTech Mexico believes it is prudent to continue to pursue the related legal proceedings set forth below, particularly the amparo proceeding and the nullity proceeding.

Amparo Proceeding

On September 20, 2022, GrafTech Mexico filed an amparo proceeding before the First District Court for Administrative Matters of the State of Nuevo León arguing that the measure imposed by the Ministry of the Environment of the State of Nuevo León ordering a complete temporary suspension of operations violated GrafTech Mexico’s constitutional rights and requested a provisional injunction and a definitive injunction that would last through the decision on the merits.

The provisional injunction was denied by the court on September 26, 2022.

On October 3, 2022, GrafTech Mexico appealed this decision before the Third Collegiate Court in Administrative Matters of the Fourth Circuit (Nuevo León), which appeal was also denied on October 24, 2022.

On November 8, 2022, the judge denied the definitive injunction, and on November 23, 2022 GrafTech Mexico appealed this decision.

With respect to the decision on the merits, on December 20, 2022, the judge reviewed all filings submitted during the proceeding.

We expect a decision on the merits no later than March 2023, which will be subject to appeal by the parties.

Nullity Proceeding

Separately, on September 28, 2022, GrafTech Mexico filed a nullity proceeding with the Court of Administrative Justice of the State of Nuevo León requesting the court to set aside the determination of the Ministry of the Environment of the State of Nuevo León that the previously requested modification to the operating license was denied because GrafTech Mexico no longer had a valid operating license.

On October 13, 2022, the court admitted the nullity proceeding and granted GrafTech Mexico’s request for a preliminary injunction effectively deeming GrafTech Mexico’s operating license valid pending the conclusion of the nullity proceeding.

On October 27, 2022, the Ministry of the Environment of the State of Nuevo León challenged the court's decision granting GrafTech Mexico a preliminary injunction.

GrafTech Mexico received notice of such challenge on October 28, 2022 and filed its response on November 17, 2022.

On December 2, 2022, the Ministry of the Environment of the State of Nuevo León responded to GrafTech's petition, arguing that the Ministry's actions were legally permissible.

GrafTech Mexico filed final pleadings on January 17, 2023.

We expect the court to issue a ruling no later than April 2023, which will be subject to appeal by the parties.

Administrative Proceeding

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Once the State Attorney’s Office for the Secretary of Environment initiates the summary argument period, GrafTech Mexico will have three business days to provide its summary arguments.

A final resolution is expected to be issued within

fifteen business days from submission of the summary arguments, but can be extended up to an additional three months and is subject to appeal.

A final resolution is expected to be issued within fifteen business days from submission of the summary arguments, but can be extended up to an additional three months and is subject to appeal.

Brazil Clause IV

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As of December 31, 2023, 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.

Mexico Value-Added Tax (“VAT”)

In July 2019, the Mexican Tax Authority (“MTA”) opened an audit of the VAT filings of GrafTech Comercial de Mexico S.

(“GrafTech Commercial 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

As of December 31, 2023, the tax assessment for the four month period under audit amounted to approximately $28.8 million, including penalties, inflation and interest.

Interest will continue to accrue up to five years from the date the corresponding VAT returns were filed and inflation will continue to accrue with the passage of time.

GrafTech Commercial Mexico filed an administrative appeal against the tax assessment with the MTA’s appeals office.

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

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

On February 17, 2023, the MTA filed the response to the nullity petition.

On May 31, 2023, the court held a hearing to determine the scope of the issues to be decided in the proceedings.

At the court’s request, GrafTech Commercial Mexico submitted formal pleadings on August 1, 2023.

On January 8, 2024, the court ruled in GrafTech Commercial Mexico’s favor and annulled the tax assessment.

On January 31, 2024, the MTA filed an appeal for review.

In March 2022, the MTA opened another audit of the VAT filings of GrafTech Commercial Mexico for the period January 1 to December 31, 2018.

In the proposed assessment received in January 2023, the MTA is alleging the same improper use of certain VAT exemption rules on purchases from a foreign affiliate and has provided notice of its intent to assess approximately $51.0 million, including penalties, inflation and interest.

In Mexico, each tax assessment requires a separate claim.

In the first quarter of 2023, GrafTech Commercial Mexico requested a conclusive agreement with the Mexican ombudsman (“PRODECON”) to reach a settlement with the MTA.

The MTA responded to GrafTech Commercial Mexico’s request on May 30, 2023.

On August 2, 2023, GrafTech Commercial Mexico filed a motion exhibiting additional information and reaffirming its position.

On September 22, 2023, the MTA responded to GrafTech Commercial Mexico’s motion.

On October 2, 2023, GrafTech Commercial Mexico filed a motion requesting a formal meeting with the MTA and PRODECON, which occurred on November 14, 2023.

During the meeting, the parties agreed that GrafTech Commercial Mexico will provide additional documentation and information to be evaluated by the MTA, and, on November 29, 2023, GrafTech Commercial Mexico filed the information requested.

On January 24, 2024, the MTA filed its response.

On that same day, GrafTech Commerical Mexico submitted before PRODECON the favorable ruling it obtained on January 8, 2024 in connection with the 2019 preceding for the MTA’s consideration.

On February 1, 2024, the MTA confirmed its position, holding that GrafTech Commercial Mexico was required to withhold the VAT.

GrafTech Commercial Mexico plans to challenge the assessment.

The $51.0 million includes interest and inflation.

Interest will continue to accrue up to five years from the date the corresponding VAT returns were filed and inflation will continue to accrue with the passage of time.

As evidenced by the favorable court decision issued on January 8, 2024, GrafTech Commercial Mexico’s application of the VAT exemption rules is appropriate and, accordingly, GrafTech Commercial Mexico 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 in these proceedings.

Stockholder Class Action

On January 25, 2024, a stockholder of the Company filed a class action complaint on behalf of all purchasers of GrafTech common stock between February 8, 2019 and August 3, 2023 in the United States District Court of the Northern District of Ohio.

The complaint names the Company, certain past and present executive officers, and two entities associated with Brookfield as defendants.

The complaint alleges that certain public filings and statements made by the Company contained material misrepresentations or omissions relating to the circumstances before and after the prior temporary suspension of the Company’s graphite electrode facility located in Monterrey, Mexico, in September 2022.

The plaintiff seeks compensatory damages, which are unquantified at this time, costs and expenses, and unspecified equitable or injunctive relief.

We believe we have valid defenses to these claims and we intend to vigorously defend them.

Mine Safety Disclosures

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Name Age Position

Marcel Kessler 56 Chief Executive Officer and President

Flanagan 45 Chief Financial Officer, Vice President of Finance and Treasurer

Flanagan 46 Interim Chief Executive Officer and President

Catherine Hedoux-Delgado 59 Interim Chief Financial Officer and Treasurer

Halford 51 Executive Vice President, Chief Operating Officer

Gunning 57 Chief Legal Officer and Corporate Secretary

Iñigo Perez Ortiz 51 Senior Vice President, Commercial

Marcel Kessler became Chief Executive Officer and President and was elected to our Board of Directors in July 2022.

Prior to joining the Company, Mr.

Kessler previously served as the President and Chief Executive Officer of Pason Systems Inc.

PSI) (“Pason”), a global provider of specialized data management systems for oil and gas drilling, from 2011 to 2020, and has been a director of Pason since 2012 and is currently serving as the Chairman of the Board of Directors of Pason.

Before joining Pason in 2011, Mr.

Kessler was President, North America, of Exploration Logistics Group, an assistance, medical, safety and security solutions provider, President and Chief Executive Officer of CCR Technologies, a provider of solvent reclaiming services, and was a Partner at McKinsey & Company, a management consulting firm.

Kessler holds a master’s degree in Engineering with Distinction from the Swiss Federal Institute of Technology and a master’s degree in Finance from the London Business School.

Flanagan joined the Company as Chief Financial Officer, Vice President of Finance and Treasurer in November 2021.

Iñigo Perez Ortiz 52 Senior Vice President, Commercial and CTS

Flanagan became Interim Chief Executive Officer and President in November 2023.

Flanagan joined the Company as Chief Financial Officer, Senior Vice President of Finance and Treasurer in November 2021.

Flanagan previously served as Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc.

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in Accounting from the University of Dayton.

Catherine Hedoux-Delgado became Interim Chief Financial Officer and Treasurer in November 2023.

Hedoux-Delgado joined the Company as Vice President, Corporate Controller in April 2012 where she was responsible for the accounting and financial reporting of the Company.

Prior to joining the Company, she spent 20 years at Lexmark International Inc., a multinational printing product and services company, where she most recently served as Director of SEC Reporting and Corporate Consolidation.

Prior to that, she held numerous finance and accounting leadership roles at Lexmark, including Corporate Director of Internal Controls, Finance Director of the Consumer Printing Division for EMEA (Europe, Middle East and Africa) and Finance Director of Lexmark Canada.

Hedoux-Delgado holds a B.S.

in Management from the ESCP Business School in France.

Halford became Executive Vice President, Chief Operating Officer in October 2021.

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Gunning holds a Juris Doctor from Notre Dame Law School and a Bachelor of Arts in English from the University of Notre Dame.

Iñigo Perez Ortiz joined the Company as Senior Vice President, Commercial in February 2020.

Iñigo Perez Ortiz joined the Company as Senior Vice President, Commercial and CTS in February 2020.

Perez most recently served as Vice President, Europe and Asia, Sales and Customer Service at Alcoa, a global industry leader in bauxite, alumina, and aluminum products, a position he held since 2017.

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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 3. Legal Proceedings