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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______ to ______
Commission file number: 1-13888
graftecimagea16.jpg
GRAFTECH INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Delaware27-2496053
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
982 Keynote Circle44131
Brooklyn Heights,OH(Zip code)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (216676-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value per shareEAFNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerEmerging Growth Company
Non-Accelerated FilerSmaller Reporting Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No 
As of July 19, 2024, 257,167,127 shares of common stock were outstanding.    


TABLE OF CONTENTS
 

Presentation of Financial, Market and Industry Data
We present our financial information on a consolidated basis. Unless otherwise noted, when we refer to dollars, we mean U.S. dollars.
Certain market and industry data included in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (the “Report”) has been obtained or derived from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications, government publications and third-party forecasts in conjunction with our assumptions about our markets. We cannot guarantee the accuracy or completeness of this market and market share data and have not independently verified it. None of the sources consented to the disclosure or use of data in this Report. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings “Cautionary Note Regarding Forward-Looking Statements” in this Report and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 ("Annual Report on Form 10-K") filed on February 14, 2024.
Cautionary Note Regarding Forward-Looking Statements
This Report may contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views with respect to, among other things, financial projections, plans and objectives of management for future operations, and future economic performance. Examples of forward-looking statements include, among others, statements we make regarding future estimated volume, pricing and revenue, anticipated levels of capital expenditures and cost of goods sold, anticipated reduction in our costs resulting from our cost rationalization initiatives and one-time costs of implementation and guidance relating to adjusted EBITDA and free cash flow. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “foresee,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to,” “are confident,” or the negative versions of those words or other comparable words. Any forward-looking statements contained in this Report are based upon our historical performance and on our current plans, estimates and expectations considering information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates, or expectations contemplated by us will be achieved. Our expectations and targets are not predictions of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. These forward-looking statements are subject to various risks
2

and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:
our dependence on the global steel industry generally and the electric arc furnace (“EAF”) steel industry in particular;
the cyclical nature of our business and the selling prices of our products, which may continue to decline in the future, and may lead to prolonged periods of reduced profitability and net losses or adversely impact liquidity;
the sensitivity of our business and operating results to economic conditions, including any recession, and the possibility others may not be able to fulfill their obligations to us in a timely fashion or at all;
the possibility that we may be unable to implement our business strategies in an effective manner;
the possibility that global graphite electrode overcapacity may adversely affect graphite electrode prices;
the competitiveness of the graphite electrode industry;
our dependence on the supply of raw materials, including decant oil and petroleum needle coke, and disruptions in supply chains for these materials;
our primary reliance on one facility in Monterrey, Mexico for the manufacturing of connecting pins;
the cost of electric power and natural gas, particularly in Europe;
our manufacturing operations are subject to hazards;
the legal, compliance, economic, social and political risks associated with our substantial operations in multiple countries;
the possibility that fluctuation of foreign currency exchange rates could materially harm our financial results;
the possibility that our results of operations could further deteriorate if our manufacturing operations were substantially disrupted for an extended period, including as a result of equipment failure, climate change, regulatory issues, natural disasters, public health crises, such as a global pandemic, political crises or other catastrophic events;
the risks and uncertainties associated with litigation, arbitration, and like disputes, including disputes related to contractual commitments;
our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services;
the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security;
the possibility that we are unable to recruit or retain key management and plant operating personnel or successfully negotiate with the representatives of our employees, including labor unions;
the sensitivity of long-lived assets on our balance sheet to changes in the market;
our dependence on protecting our intellectual property and the possibility that third parties may claim that our products or processes infringe their intellectual property rights;
the impact of inflation and our ability to mitigate the effect on our costs;
the impact of macroeconomic and geopolitical events on our business, results of operations, financial condition and cash flows, and the disruptions and inefficiencies in our supply chain that may occur as a result of such events;
the possibility that our indebtedness could limit our financial and operating activities or that our cash flows may not be sufficient to service our indebtedness;
recent increases in benchmark interest rates and the fact that any future borrowings may subject us to interest rate risk;
risks and uncertainties associated with our ability to access the capital and credit markets could adversely affect our results of operations, cash flows and financial condition;
3

the possibility that disruptions in the capital and credit markets could adversely affect our customers and suppliers;
the possibility that restrictive covenants in our financing agreements could restrict or limit our operations;
changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities;
the possibility that the cash dividends on our common stock, which are currently suspended, will remain suspended and we may not pay cash dividends on our common stock in the future; and
our ability to continue to meet NYSE continued listing standards.
These factors should not be construed as exhaustive and should be read in conjunction with the Risk Factors and other cautionary statements that are included in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements made in this Report relate only to events as of the date on which the statements are made. Except as required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this Report that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
4

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
June 30, 2024December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$120,726 $176,878 
Accounts and notes receivable, net of allowance for doubtful accounts of
$7,942 as of June 30, 2024 and $7,708 as of December 31, 2023
95,043 101,387 
Inventories304,786 330,146 
Prepaid expenses and other current assets62,448 66,382 
Total current assets583,003 674,793 
Property, plant and equipment913,710 920,444 
Less: accumulated depreciation418,157 398,330 
Net property, plant and equipment495,553 522,114 
Deferred income taxes30,793 31,542 
Other assets53,648 60,440 
Total assets$1,162,997 $1,288,889 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$61,011 $83,268 
Long-term debt, current maturities132 134 
Accrued income and other taxes9,791 10,022 
Other accrued liabilities65,245 91,702 
Tax Receivable Agreement1,949 5,417 
Total current liabilities138,128 190,543 
Long-term debt928,046 925,511 
Other long-term obligations52,723 55,645 
Deferred income taxes24,073 33,206 
Tax Receivable Agreement long-term3,788 5,737 
Commitments and contingencies - Note 7
Stockholders’ equity:
Preferred stock, par value $0.01, 300,000,000 shares authorized, none issued
  
Common stock, par value $0.01, 3,000,000,000 shares authorized, 257,167,127 and 256,831,870 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
2,572 2,568 
Additional paid-in capital751,958 749,527 
Accumulated other comprehensive loss(30,371)(11,458)
Accumulated deficit(707,920)(662,390)
Total stockholders’ equity16,239 78,247 
Total liabilities and stockholders’ equity$1,162,997 $1,288,889 
See accompanying Notes to the Condensed Consolidated Financial Statements
5


GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
 June 30,
Six Months Ended
 June 30,
 2024202320242023
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales$137,327 $185,561 $273,911 $324,363 
Cost of goods sold131,970 157,216 267,174 269,861 
Lower of cost or market inventory valuation adjustment1,381  4,073  
Gross profit 3,976 28,345 2,664 54,502 
Research and development1,447 1,196 3,074 2,388 
Selling and administrative expenses5,098 18,551 20,375 40,702 
Rationalization expenses110  3,255  
Operating (loss) income (2,679)8,598 (24,040)11,412 
Other (income) expense, net(1,091)455 (1,484)1,108 
Interest expense15,609 13,907 31,235 26,713 
Interest income(1,853)(242)(3,377)(614)
Loss before (benefit) provision for income taxes(15,344)(5,522)(50,414)(15,795)
(Benefit) provision for income taxes(592)2,329 (4,793)(575)
Net loss$(14,752)$(7,851)$(45,621)$(15,220)
Basic loss per common share:
Net loss per share$(0.06)$(0.03)$(0.18)$(0.06)
Weighted average common shares outstanding257,772,069 257,003,691 257,587,613 256,935,763 
Diluted loss per common share:
Net loss per share$(0.06)$(0.03)$(0.18)$(0.06)
Weighted average common shares outstanding257,772,069 257,003,691 257,587,613 256,935,763 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss$(14,752)$(7,851)$(45,621)$(15,220)
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax of $0, $0, $45 and $0, respectively
(6,240)2,949 (12,712)7,572 
Commodities, interest rate and foreign currency derivatives, net of tax benefit of $573, $952, $1,725 and $1,905, respectively
(1,948)(3,596)(6,201)(6,173)
Other comprehensive (loss) income, net of tax(8,188)(647)(18,913)1,399 
Comprehensive loss$(22,940)$(8,498)$(64,534)$(13,821)


See accompanying Notes to the Condensed Consolidated Financial Statements
6

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
 June 30,
 20242023
Cash flow from operating activities:
Net loss$(45,621)$(15,220)
Adjustments to reconcile net loss to cash (used in) provided by operations:
Depreciation and amortization28,202 26,099 
Deferred income tax benefit(6,118)(6,424)
Non-cash stock-based compensation expense2,608 2,181 
Non-cash interest expense(2,970)11,684 
Lower of cost or market inventory valuation adjustment4,073  
Other adjustments2,239 (6,416)
Net change in working capital*(13,345)6,400 
Change in Tax Receivable Agreement(5,417)(4,631)
Change in long-term assets and liabilities(1,036)2,101 
Net cash (used in) provided by operating activities(37,385)15,774 
Cash flow from investing activities:
Capital expenditures(17,490)(39,789)
Proceeds from the sale of fixed assets80 214 
Net cash used in investing activities(17,410)(39,575)
Cash flow from financing activities:
Interest rate swap settlements 27,453 
Debt issuance and modification costs (6,324)
Proceeds from the issuance of long-term debt, net of original issuance discount 438,552 
Principal payments on long-term debt (433,708)
Payments for taxes related to net share settlement of equity awards(82)(129)
Dividends paid  (5,134)
Principal payments under finance lease obligations(35)(10)
Net cash (used in) provided by financing activities(117)20,700 
Net change in cash and cash equivalents(54,912)(3,101)
Effect of exchange rate changes on cash and cash equivalents(1,240)620 
Cash and cash equivalents at beginning of period176,878 134,641 
Cash and cash equivalents at end of period$120,726 $132,160 
* Net change in working capital due to changes in the following components:
Accounts and notes receivable, net$4,442 $34,720 
Inventories20,786 18,732 
Prepaid expenses and other current assets717 4,133 
Income taxes payable(2,864)(22,396)
Accounts payable and accruals(36,412)(29,141)
Interest payable(14)352 
Net change in working capital$(13,345)$6,400 
Net cash paid during the periods for:
Interest$34,219 $1,176 
Income taxes $3,132 $30,534 
Non-cash investing activities:
Change in capital expenditures in accounts payable$(10,133)$(15,129)

See accompanying Notes to the Condensed Consolidated Financial Statements
7



GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Balance as of December 31, 2023256,831,870 $2,568 $749,527 $(11,458)$(662,390)$78,247 
Net loss— — — — (30,869)(30,869)
Other comprehensive loss:
Commodity, interest rate and foreign currency derivatives income, net of tax of $17
— — — (121)— (121)
Commodity, interest rate and foreign currency derivatives reclassification adjustments, net of tax of $1,135
— — — (4,132)— (4,132)
Foreign currency translation adjustments, net of tax of $45
— — — (6,472)— (6,472)
   Total other comprehensive loss— — — (10,725)— (10,725)
Stock-based compensation390,490 4 1,043 — — 1,047 
Payments for taxes related to net share settlement of equity awards(61,185) (173)— 91 (82)
Balance as of March 31, 2024257,161,175 $2,572 $750,397 $(22,183)$(693,168)$37,618 
Net loss— — — — (14,752)(14,752)
Other comprehensive loss:
Interest rate and foreign currency derivatives loss, net of tax of $21
— — — (151)— (151)
Interest rate and foreign currency derivatives reclassification adjustments, net of tax of $552
— — — (1,797)— (1,797)
Foreign currency translation adjustments, net of tax of $0
— — — (6,240)— (6,240)
   Total other comprehensive loss— — — (8,188)— (8,188)
Stock-based compensation5,952  1,561 — — 1,561 
Balance as of June 30, 2024257,167,127 $2,572 $751,958 $(30,371)$(707,920)$16,239 
8


GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
Balance as of December 31, 2022256,597,342 $2,566 $745,164 $(8,070)$(401,945)$337,715 
Net loss— — — — (7,369)(7,369)
Other comprehensive (loss) income:
Commodity, interest rate and foreign currency derivatives income, net of tax of $67
— — — (241)— (241)
Commodity, interest rate and foreign currency derivatives reclassification adjustments, net of tax of $886
— — — (2,336)— (2,336)
Foreign currency translation adjustments, net of tax of $0
— — — 4,623 — 4,623 
   Total other comprehensive income— — — 2,046 — 2,046 
Stock-based compensation104,533 1 795 — — 796 
Payments for taxes related to net share settlement of equity awards(23,577)— (68)— (61)(129)
Dividends paid ($0.01 per share)
— — — — (2,566)(2,566)
Balance as of March 31, 2023256,678,298 $2,567 $745,891 $(6,024)$(411,941)$330,493 
Net loss— — — — (7,851)(7,851)
Other comprehensive income (loss):
Commodity, interest rate and foreign currency derivatives income, net of tax of $(146)
— — — 2,513 — 2,513 
Commodity, interest rate and foreign currency derivatives reclassification adjustments, net of tax of $1,098
— — — (6,109)— (6,109)
Foreign currency translation adjustments, net of tax of $0
— — — 2,949 — 2,949 
   Total other comprehensive loss— — — (647)— (647)
Stock-based compensation117,170 1 1,384 — — 1,385 
Payments for taxes related to net share settlement of equity awards(48)  —   
Dividends paid ($0.01 per share)
— — — — (2,568)(2,568)
Balance as of June 30, 2023256,795,420 $2,568 $747,275 $(6,671)$(422,360)$320,812 


See accompanying Notes to the Condensed Consolidated Financial Statements
9

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)Organization and Summary of Significant Accounting Policies
A. Organization
GrafTech International Ltd. (the “Company” or “GrafTech”) 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. The Company’s common stock is listed on the New York Stock Exchange under the symbol “EAF.”
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 EAF operators.
B. Basis of Presentation
The interim condensed consolidated financial statements are unaudited; however, in the opinion of management, they have been prepared in accordance with Rule 10-01 of Regulation S-X and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The December 31, 2023 Consolidated Balance Sheet data included herein was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 14, 2024, but does not include all disclosures required by GAAP in audited financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the accompanying notes, contained in the Company's Annual Report on Form 10-K.
The unaudited condensed consolidated financial statements reflect all adjustments (all of which are of a normal, recurring nature) which management considers necessary for a fair presentation of our financial statements for the interim periods presented. The results for the interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.
C. New Accounting Standards
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. Although the ASU only modifies the Company’s required income tax disclosures, the Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and related disclosures.

10

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(2)Revenue from Contracts with Customers
Disaggregation of Revenue
The following table provides information about disaggregated revenue by type of product and contract, including our take or pay contracts with initial terms of three to five years (“LTA”) and short-term agreements and spot sales (“non-LTA”):
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2024202320242023
(Dollars in thousands)
Graphite Electrodes - LTAs$26,595 $76,369 $62,689 $146,235 
Graphite Electrodes - Non-LTAs98,212 101,137 186,105 158,097 
By-products and other12,520 8,055 25,117 20,031 
Total Revenues$137,327 $185,561 $273,911 $324,363 
Contract Balances
Substantially all of the Company’s receivables relate to contracts with customers. Accounts receivables 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. 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.
We did not have any contract asset balances as of June 30, 2024 or December 31, 2023.
Current deferred revenue is included in “Other accrued liabilities” on the Condensed Consolidated Balance Sheets. The following table provides our contract liability balances as of June 30, 2024 and December 31, 2023:
June 30,
2024
December 31, 2023
(Dollars in thousands)
Current deferred revenue$18,109 $31,583 
The amount of revenue recognized in the first six months of 2024 that was included in the December 31, 2023 current deferred revenue balance was $19.1 million. The decrease in the current deferred revenue balance since December 31, 2023 is due to revenue recognized in the current year, partially offset by customer prepayments.
Transaction Price Allocated to the Remaining Performance Obligations
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 for the full year of 2024:
2024
(Dollars in millions)
Estimated LTA revenue
$110-$120(1)
(1) Estimated LTA revenue includes payments from customers that failed to meet certain obligations under their LTAs.
11

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We recorded $62.7 million of LTA revenue in the six months ended June 30, 2024, and we expect to record approximately $47.3 million to $57.3 million of LTA revenue for the remainder of 2024.
The remaining LTAs are defined as pre-determined fixed annual volume contracts. The actual revenue realized from these contracted volumes may vary in timing and total due to contract non-performance, force majeure notices, arbitrations and credit risk associated with certain customers facing financial challenges.
(3)Intangible Assets
The following table summarizes intangible assets with determinable useful lives by major category, which are included in “Other assets” on our Condensed Consolidated Balance Sheets:
 June 30, 2024December 31, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
(Dollars in thousands)
Trade names$22,500 $(17,815)$4,685 $22,500 $(17,379)$5,121 
Technology and know-how55,300 (47,275)8,025 55,300 (45,746)9,554 
Customer-related intangibles64,500 (38,937)25,563 64,500 (36,802)27,698 
Total finite-lived intangible assets$142,300 $(104,027)$38,273 $142,300 $(99,927)$42,373 
Amortization expense for intangible assets was $2.1 million and $2.5 million in the three months ended June 30, 2024 and 2023, respectively, and $4.1 million and $4.9 million in the six months ended June 30, 2024 and 2023, respectively. Amortization expense is expected to be approximately $3.9 million for the remainder of 2024, $7.3 million in 2025, $6.7 million in 2026, $6.1 million in 2027, $5.5 million in 2028 and $4.9 million in 2029.
(4)Debt and Liquidity
The following table presents our long-term debt: 
June 30, 2024
December 31, 2023
 (Dollars in thousands)
2020 Senior Secured Notes500,000 500,000 
2023 Senior Secured Notes450,000 450,000 
Other debt135 139 
Unamortized debt discount and issuance costs(21,957)(24,494)
Total debt928,178 925,645 
Less: Long-term debt, current portion(132)(134)
Long-term debt$928,046 $925,511 

The fair value of our debt was approximately $646.1 million and $676.6 million as of June 30, 2024 and December 31, 2023, respectively. The fair values were determined using Level 2 quoted market prices for the same or similar debt instruments.
12

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2018 Term Loan and 2018 Revolving Credit Facility
In February 2018, the Company entered into a credit agreement (as amended, the “2018 Credit Agreement”), which provided 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”). GrafTech Finance Inc. (“GrafTech Finance”) was the sole borrower under the 2018 Term Loan Facility while GrafTech Finance, GrafTech Switzerland SA (“Swissco”) and GrafTech Luxembourg II S.à r.l. (“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co-Borrowers”) are co-borrowers under the 2018 Revolving Credit Facility. The 2018 Revolving Credit Facility matures on May 31, 2027. The net proceeds from the 2023 Senior Secured Notes (as defined below) were used to repay outstanding borrowings under our 2018 Term Loan Facility. As of June 30, 2024 and December 31, 2023, the availability under our 2018 Revolving Credit Facility was $111.1 million and $112.4 million, respectively. As any borrowings under the 2018 Revolving Credit Facility remain subject to compliance with the financial covenant thereunder, our operating performance as of June 30, 2024 and December 31, 2023 resulted in a reduction of the availability under the facility. As of June 30, 2024 and December 31, 2023, there were no borrowings outstanding on the 2018 Revolving Credit Facility and there was $4.4 million and $3.1 million of letters of credit drawn against the 2018 Revolving Credit Facility as of each date, respectively.
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.
The 2018 Revolving Credit Facility is guaranteed by each of our domestic subsidiaries, subject to certain customary exceptions, and by GrafTech Luxembourg I S.à r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech, Luxembourg HoldCo, and Swissco (collectively, the “Guarantors”) with respect to all obligations under the 2018 Revolving Credit Facility of each of our foreign subsidiaries that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)).
Any obligations under the 2018 Revolving Credit Facility are secured, subject to certain exceptions, by: (i) a pledge of all of the equity securities of each domestic Guarantor and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65% of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Revolving Credit Facility. 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 no more than 65% of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Revolving Credit Facility.
The 2018 Revolving Credit Facility 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 Revolving Credit Facility 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 Revolving Credit Facility also contains customary events of default. We were in compliance with all of our debt covenants as of June 30, 2024 and December 31, 2023.
13

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

2020 Senior Secured Notes
In December 2020, GrafTech Finance issued $500 million aggregate principal amount of 4.625% senior secured notes due 2028 (the “2020 Senior Secured Notes”) in a private offering. The 2020 Senior Secured Notes and related guarantees are secured on a pari passu basis by the collateral securing the 2018 Revolving Credit Facility and the 2023 Senior Secured Notes (as defined below). All of the net proceeds from the 2020 Senior Secured Notes were used to partially repay borrowings under our 2018 Term Loan Facility.
The 2020 Senior Secured Notes pay interest in arrears on June 15 and December 15 of each year, with the principal due in full on December 15, 2028. The 2020 Senior Secured Notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
The indenture governing the 2020 Senior Secured Notes (the “Indenture”) contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain asset sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets. Pursuant to the Indenture, if our pro forma consolidated first lien net leverage ratio is no greater than 2.00 to 1.00, we can make restricted payments so long as no default or event of default has occurred and is continuing. If our pro forma consolidated first lien net leverage ratio is greater than 2.00 to 1.00, we can make restricted payments pursuant to certain baskets.
The Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or GrafTech Finance, all outstanding 2020 Senior Secured Notes will become due and payable immediately without further action or notice. If any other type of event of default occurs and is continuing, then the trustee or the holders of at least 30% in principal amount of the then outstanding 2020 Senior Secured Notes may declare all of the 2020 Senior Secured Notes to be due and payable immediately. We were in compliance with all of our debt covenants as of June 30, 2024 and December 31, 2023.
2023 Senior Secured Notes
In June 2023, GrafTech Global Enterprises Inc. issued $450 million aggregate principal amount of 9.875% senior secured notes due 2028 (the “2023 Senior Secured Notes”), including $11.4 million of original issue discount. The 2023 Senior Secured Notes were issued at an issue price of 97.456% of the principal amount thereof in a private offering. The 2023 Senior Secured Notes and related guarantees are secured on a pari passu basis by the collateral securing the 2018 Revolving Credit Facility and the 2020 Senior Secured Notes. The net proceeds from the 2023 Senior Secured Notes were used to repay borrowings under our 2018 Term Loan Facility.
The 2023 Senior Secured Notes pay interest in arrears on June 15 and December 15 of each year, with the principal due in full on December 15, 2028. Prior to December 15, 2025, up to 40% of the 2023 Senior Secured Notes may be redeemed with the net cash proceeds of certain equity offerings at a price equal to 109.875% of the principal amount thereof, together with accrued and unpaid interest, if any. The 2023 Senior Secured Notes may be redeemed, in whole or in part, at any time prior to December 15, 2025 at a price equal to 100% of the principal amount of the notes redeemed plus a premium together with accrued and unpaid interest, if any, to, but not including, the redemption date. Thereafter, the 2023 Senior Secured Notes may be redeemed, in whole or in part, at various prices depending on the date redeemed.
The indenture governing the 2023 Senior Secured Notes (the “2023 Indenture”) contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain asset sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets. Pursuant to the 2023 Indenture, if our pro forma consolidated first lien net leverage ratio is no greater than 2.00 to 1.00, we can make restricted payments so long as no default or event of default has occurred and is continuing. If our pro forma consolidated first lien net leverage ratio is greater than 2.00 to 1.00, we can make restricted payments pursuant to certain baskets.
The 2023 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 Global Enterprises Inc., all outstanding 2023 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
14

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

continuing, then the trustee or the holders of at least 30% in principal amount of the then outstanding 2023 Senior Secured Notes may declare all of the 2023 Senior Secured Notes to be due and payable immediately. We were in compliance with all of our debt covenants as of June 30, 2024 and December 31, 2023.
(5)Inventories
Inventories are comprised of the following: 
June 30, 2024December 31, 2023
 (Dollars in thousands)
Inventories:
Raw materials and supplies$98,079 $109,084 
Work in process165,488 186,473 
Finished goods41,219 34,589 
         Total$304,786 $330,146 
In the first six months of 2024 and for the full year of 2023, we recorded lower of cost or market (“LCM”) inventory valuation adjustments of $4.1 million and $12.4 million, respectively, in order to state our inventories at market. As of June 30, 2024 and December 31, 2023, the carrying value of our inventory reflected total write-downs of $5.1 million and $12.4 million, respectively, due to the impact of the LCM adjustments.
(6)Interest Expense
The following table presents the components of interest expense: 
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2024202320242023
 (Dollars in thousands)
Interest incurred on debt$17,110 $11,325 $34,205 $21,947 
Accretion of original issue discount521 1,308 1,041 1,476 
Amortization of debt issuance costs749 2,488 1,497 3,143 
Amortization of interest rate swap deferred gains(2,771)(45)(5,508)(45)
Realized gain on termination of de-designated interest rate swap (6,918) (6,918)
Unrealized loss on de-designated interest rate swap 5,749  7,110 
Total interest expense$15,609 $13,907 $31,235 $26,713 

The 2023 Senior Secured Notes and the 2020 Senior Secured Notes carry fixed interest rates of 9.875% and 4.625%, respectively.
In June 2023, the net proceeds from the issuance of the 2023 Senior Secured Notes were used to repay the $433.7 million of principal outstanding on the 2018 Term Loan Facility. The repayment of the 2018 Term Loan Facility was accounted for as a debt extinguishment and triggered $1.2 million of accelerated accretion of the original issue discount and $1.9 million of accelerated amortization of debt issuance costs. The 2023 Senior Secured Notes were accounted for as new debt and the related discount and debt issuance costs were deferred.
In connection with the repayment of the 2018 Term Loan Facility in June 2023, we terminated the outstanding interest rate swap contracts that were in place to fix the 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. As a result of the swaps termination, we recorded realized gains of $6.9 million in interest expense relative to our de-designated swap and we deferred realized gains of $13.5 million into accumulated other comprehensive loss (“AOCL”) in connection with our designated swap. The gains
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PART I (CONT'D)
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

deferred into AOCL for the designated swap are being amortized into interest expense until August 2024, consistent with the term of the discontinued cash-flow hedging relationship.
See Note 4, “Debt and Liquidity” for details of our debt and Note 9, “Fair Value Measurements and Derivative Instruments” for additional details on our interest rate swaps and embedded derivative.

(7) Commitments and Contingencies
Legal Proceedings
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.
Since 2020, we have been involved in a number of arbitrations before the International Chamber of Commerce with a few customers who failed to perform under their LTAs or sought relief in respect of the LTAs. In particular, Aperam South America LTDA, Aperam Sourcing S.C.A., ArcelorMittal Sourcing S.C.A., and ArcelorMittal Brasil S.A. (collectively, the “Claimants”) initiated a single arbitration proceeding against two of the Company’s subsidiaries in the International Chamber of Commerce in June 2020. The Claimants argued, among other things, that they should not 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 argued that they should not be required to comply with the LTAs that they signed due to alleged market circumstances at the time of execution. 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 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 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. On April 16, 2024, we were formally notified that on March 14, 2024 the sole arbitrator appointed by the International Chamber of Commerce issued the final award in the arbitration in which he entirely dismissed all of the Claimants’ claims against the two Company subsidiaries, and ordered Claimants to pay an aggregate of approximately $9.2 million to the Company in legal fees and other related expenses, and ordered the Company to pay approximately $60,000 to the Claimants in legal fees and expenses. The Claimants paid the Company approximately $9.2 million during the second quarter of 2024, which is recorded in selling and administrative expenses on the Condensed Consolidated Statements of Operations.
Pending litigation in Brazil has been brought by employees seeking to recover additional amounts and interest thereon under certain wage increase provisions applicable in 1989 and 1990 under collective bargaining agreements to which employers in the Bahia region of Brazil were a party (including our subsidiary in Brazil). Companies in Brazil have settled claims arising out of these provisions and, in May 2015, the litigation was remanded by the Brazilian Supreme Court in favor of the employees union. After denying an interim appeal by the Bahia region employers on June 26, 2019, the Brazilian Supreme Court finally ruled in favor of the employees union on September 26, 2019. The employers union has determined not to seek annulment of such decision. Separately, on October 1, 2015, a related action was filed by current and former employees against our subsidiary in Brazil to recover amounts under such provisions, plus interest thereon, which amounts together with interest could be material to us. If the Brazilian Supreme Court proceeding above had been determined in favor of the employers union, it would also have resolved this proceeding in our favor. In the first quarter of 2017, the state court initially ruled in favor of the employees. We appealed this state court ruling, and the appellate court issued a decision in our favor on May 19, 2020. 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 on September 12, 2022, we filed our response in opposition. We intend to vigorously defend our position. As of June 30, 2024, we are unable to assess the potential loss associated with
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PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
Product Warranties
We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated. We also accrue for estimated warranty claims incurred based on a historical claims charge analysis. Claims accrued but not yet paid and the related activity within the accrual for the six months ended June 30, 2024, are presented below: 
(Dollars in thousands)
Balance as of December 31, 2023$77 
Product warranty charges/adjustments313 
Payments and settlements(39)
Balance as of June 30, 2024$351 
Tax Receivable Agreement
On April 23, 2018, the Company entered into the tax receivable agreement (“Tax Receivable Agreement”) that provides Brookfield Corporation and its affiliates (together, “Brookfield”) as the sole stockholder prior to the Company’s initial public offering in April 2018 (the “IPO”), the right to receive future payments from us for 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of the pre-IPO tax assets. In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date. On April 10, 2023, the Tax Receivable Agreement was amended and restated to change the applicable interest rate from LIBOR plus 1.00% per year to the one-month period secured overnight financing rate administered by the Federal Reserve Bank of New York plus 1.10%. 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 June 30, 2024, the total Tax Receivable Agreement liability was $5.7 million, of which $1.9 million was classified as current liability Tax Receivable Agreement on the Condensed Consolidated Balance Sheets and $3.8 million was classified as a long-term liability in Tax Receivable Agreement long-term on the Condensed Consolidated Balance Sheets. As of December 31, 2023, the total Tax Receivable Agreement liability was $11.1 million, of which $5.4 million was classified as a current liability and $5.7 million was classified as a long-term liability.
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. de R.L. de C.V. (“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 affiliate. As of June 30, 2024, the tax assessment for the four month period under audit amounted to approximately $28.0 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. On March 15, 2024, GrafTech Commercial Mexico filed the Tax Adhesive Appeal for Review before the Collegiate Court in Administrative Matters who has authority to hear the MTA’s appeal. The MTA’s appeal and the Adhesive appeal are still pending to be resolved.
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
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

approximately $51.0 million, including penalties, inflation and interest. Interest would continue to accrue up to five years from the date the corresponding VAT returns were filed and inflation would continue to accrue with the passage of time. 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 Commercial Mexico submitted before PRODECON the favorable ruling it obtained on January 8, 2024 in connection with the 2019 proceeding 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. On March 20, 2024, a meeting was held at PRODECON where the parties confirmed their final positions. No agreement between the parties was reached, the conclusive agreement procedure came to an end, and the tax audit process resumed. On July 10, 2024, the MTA concluded the tax audit and determined that there is no tax deficiency to be assessed for the period January 1, 2018 to December 31, 2018.
As evidenced by the favorable court decision issued on January 8, 2024 with respect to the 2019 proceeding and the MTA’s conclusion of the tax audit for the 2018 proceeding, 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 the 2019 proceeding under the MTA’s audit. The Company intends to vigorously defend its position in the 2019 proceeding.
(8) Income Taxes
We compute and apply to ordinary income an estimated annual effective tax rate on a quarterly basis based on current and forecasted business levels and activities, including the mix of domestic and foreign results and enacted tax laws. The estimated annual effective tax rate is updated quarterly based on actual results and updated operating forecasts. Ordinary income refers to income before the provision for income taxes excluding significant, unusual or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs as a discrete item of tax.

The following table summarizes the (benefit) provision for income taxes:
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2024202320242023
(Dollars in thousands)
(Benefit) provision for income taxes$(592)$2,329 $(4,793)$(575)
Pre-tax loss(15,344)(5,522)(50,414)(15,795)
Effective tax rate3.9 %(42.2)%9.5 %3.6 %
The effective tax rate for the second quarter and first six months of 2024 and 2023 was different than the U.S. statutory tax rate of 21% primarily due to the mix of U.S. and foreign earnings, tax incentives and provisions of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”).
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2020 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. Other jurisdictions are generally closed for years prior to 2018.
We continue to assess the realization of our 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. In circumstances where the significant positive evidence does not outweigh the negative evidence in regards to whether or not a
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PART I (CONT'D)
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

valuation allowance is required, we have established and maintained valuation allowances on those net deferred tax assets. There were no material changes to our valuation allowances in the first six months of 2024.
(9) Fair Value Measurements and Derivative Instruments
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. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not anticipate nonperformance by any of the counterparties to our instruments.
Foreign currency derivatives
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, 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 goods sold and they are largely offset by the financial impact of translating foreign currency-denominated payables and receivables.
In the second, third and fourth quarters of 2023 and in the second quarter of 2024, 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 the U.S. 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 goods sold in the Condensed Consolidated Statements of Operations when the hedged exposures affect earnings.
Commodity derivative contracts
From time to time, we enter 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. The unrealized gains or losses related to commodity derivative contracts designated as cash flow hedges are recorded in AOCL and subsequently, when realized, are reclassified to the Condensed 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 we have not entered into any new contracts as of June 30, 2024.
Interest rate swap contracts
We have utilized interest rate swaps in the past to limit exposure to market fluctuations on our variable-rate debt. For each derivative agreement that is designated as a cash-flow hedge, the unrealized gain or loss is recorded in AOCL and, when realized, is recorded to interest expense. Upon discontinuance of a designated cash-flow hedging relationship, when interest payments are still probable of occurring, the fair value at the date of discontinuance is deferred into AOCL and amortized into interest expense based upon the term of the cash-flow hedging relationship.
We entered into interest rate swap contracts that were "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 contained an other-than-insignificant financing element. As such, they were 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 embedded derivative is treated as a cash-flow hedge.
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PART I (CONT'D)
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In the first quarter of 2022, in connection with the partial repayment of principal on our 2018 Term Loan Facility 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 AOCL and is being amortized into interest expense over the remaining life of the swap.
In the third quarter of 2022, we redeemed $67.0 million of our $250.0 million notional amount de-designated interest rate swap. The change in fair value of the de-designated embedded derivative in the second quarter and first six months of 2023 resulted in losses of $5.7 million and $7.1 million, respectively, and were recorded in interest expense in the Condensed Consolidated Statements of Operations.
In the second quarter of 2023, in connection with the repayment of the $433.7 million outstanding balance on our 2018 Term Loan Facility, we terminated our $183.0 million notional de-designated interest rate swap and our $250.0 million notional designated interest rate swap and received net cash of $20.4 million. The net cash received included a $23.1 million gain on the embedded derivatives, partially offset by a $2.8 million loss on the settlement of our debt host liability as of the termination date. As of June 30, 2024, the balance of the loss related to the settlement of the debt host liability recorded in AOCL was $0.5 million and will be amortized into interest expense using the effective interest method through August 2024.
Out of the $23.1 million gain on the embedded derivatives, $6.9 million for the de-designated swap was recorded in interest expense and $16.2 million for the designated swap was recorded in AOCL and will be amortized into interest expense using the effective interest method through August 2024. As of June 30, 2024, the balance related to the settlement of the embedded derivative recorded in AOCL was $2.3 million.
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. The fair value of all of our derivatives was determined using Level 2 inputs.
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PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The notional amounts of our outstanding derivative instruments as of June 30, 2024 and December 31, 2023 were as follows:
June 30, 2024December 31, 2023
 Notional AmountNotional Amount
(Dollars in thousands)
Derivative instruments designated as hedges:
Foreign currency derivatives$19,535 $10,684 
Derivative instruments not designated as hedges:
Foreign currency derivatives$9,725 $41,863 
The following table summarizes the fair value of our outstanding derivatives designated as hedges (on a gross basis) and balance sheet classification as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
    Fair Value   Fair Value
(Dollars in thousands)
Prepaid and other current assets
Foreign currency derivatives$ $386 
Total$ $386 
Other accrued liabilities
Foreign currency derivatives$(164)$ 
Net (liability) asset $(164)$386 
As a result of the settlement of interest rate swaps, as of June 30, 2024, net realized pre-tax gains of $2.3 million were reported in AOCL and will be released to earnings within the next 12 months. As of June 30, 2024, net realized pre-tax gains of $0.2 million related to our foreign currency derivatives were reported in AOCL and will be released to earnings within the next 12 months. No ineffectiveness expense was recorded in the second quarter or first six months of 2024 or 2023. See the table below for amounts recognized on the effective portion of our commodity derivative contracts in the Condensed Consolidated Statement of Operations.
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PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The pre-tax realized (gains) losses on designated cash flow hedges are recognized in the Statements of Operations when the hedged item impacts earnings and were as follows for the periods ended June 30, 2024 and 2023:
  Amount of Loss/(Gain)
Recognized
Location of Realized Loss/(Gain) Recognized in the Condensed Consolidated Statement of OperationsThree Months Ended June 30,
20242023
Derivatives designated as cash flow hedges:(Dollars in thousands)
Foreign currency derivativesCost of goods sold$423 $ 
Commodity derivative contractsCost of goods sold (4,470)
Interest rate swap contractsInterest expense(2,771)(2,737)
Amount of Loss/(Gain)
Recognized
Location of Realized Loss/(Gain) Recognized in the Condensed Consolidated Statement of OperationsSix Months Ended
 June 30,
20242023
Derivatives designated as cash flow hedges:(Dollars in thousands)
Foreign currency derivativesCost of goods sold$355 $2,040 
Commodity derivative contractsCost of goods sold(2,462)(7,287)
Interest rate swap contractsInterest expense(5,508)(5,182)

Pretax gains and losses on non-designated derivatives recognized in earnings were as follows:
  Amount of (Gain)/Loss
Recognized
Location of (Gain)/Loss Recognized in the Condensed Consolidated Statement of OperationsThree Months Ended June,
20242023
Derivatives not designated as hedges:(Dollars in thousands)
Foreign currency derivativesCost of goods sold, other (income) expense, net$(170)$(116)
Interest rate swap contractsInterest expense (4,318)
Amount of (Gain)/Loss
Recognized
Location of (Gain)/Loss Recognized in the Condensed Consolidated Statement of OperationsSix Months Ended
 June 30,
20242023
Derivatives not designated as hedges:(Dollars in thousands)
Foreign currency derivativesCost of goods sold, other (income) expense, net$(43)$320 
Interest rate swap contractsInterest expense (2,957)
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PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
    Fair Value   Fair Value
(Dollars in thousands)
Prepaid and other current assets
Foreign currency derivatives389 244 
Other accrued liabilities
Foreign currency derivatives (519)
Net asset (liability)$389 $(275)

(10) Accumulated Other Comprehensive Loss
The balance in our Accumulated other comprehensive loss is set forth in the following table:
 June 30, 2024
December 31, 2023
 (Dollars in thousands)
Foreign currency translation adjustments, net of tax$(31,900)$(19,188)
Commodity, interest rate, and foreign currency derivatives, net of tax1,529 7,730 
Total accumulated other comprehensive loss$(30,371)$(11,458)
(11) Loss per Share
We did not repurchase any shares of our common stock during the second quarter or first six months of 2024 or 2023.
The following table presents a reconciliation of the numerator and denominator of basic and diluted loss per share for the three and six months ended June 30, 2024 and 2023:
Three Months Ended
 June 30,
Six Months Ended
 June 30,
2024202320242023
(Dollars in thousands, except per share amounts)
Numerator for basic and diluted loss per share:
Net loss$(14,752)$(7,851)$(45,621)$(15,220)
Denominator:
Weighted average common shares outstanding for basic calculation257,772,069 257,003,691 257,587,613 256,935,763 
Add: Effect of equity awards    
Weighted average common shares outstanding for diluted calculation257,772,069 257,003,691 257,587,613 256,935,763 
Basic loss per share$(0.06)$(0.03)$(0.18)$(0.06)
Diluted loss per share$(0.06)$(0.03)$(0.18)$(0.06)
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding, which included 605,204 and 535,921 shares of participating securities in the three and six months ended June 30, 2024, respectively, and 256,682 and 245,277 shares of participating securities in the three and six months ended June 30, 2023,
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PART I (CONT'D)
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

respectively. Diluted loss per share is calculated by dividing net loss by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.
The weighted average common shares outstanding for the diluted loss per share calculation for the three and six months ended June 30, 2024 excludes the dilutive effect of approximately 2,543 and 1,490 shares, respectively, and 15,461 and 11,211 shares for the three and six months ended June 30, 2023, respectively, primarily related to restricted stock units (“RSUs”), as their inclusion would have been anti-dilutive due to the Company’s net loss.
Additionally, the weighted average common shares outstanding for the diluted loss per share calculation excludes consideration of 5,671,092 and 4,574,726 equivalent shares for the three and six months ended June 30, 2024, respectively, and 3,905,182 and 3,423,368 equivalent shares for the three and six months ended June 30, 2023, respectively, as their effect would have been anti-dilutive.
(12) Stock-Based Compensation
The Human Resources and Compensation Committee of our Board of Directors granted 3,114,328 RSUs and 1,353,661 performance-based restricted stock units (“PSUs”) to our employees during the first six months of 2024 under our Omnibus Equity Incentive Plan. Our electing non-employee directors received 151,884 deferred share units (“DSUs”), 112,994 RSUs and 282,486 deferred RSUs (“DRSUs”) during the six months ended June 30, 2024 under our Omnibus Equity Incentive Plan.
We measure the fair value of grants of RSUs, DRSUs and DSUs based on the closing market price of a share of our common stock on the date of the grant. The weighted average fair value per share was $1.87 for RSUs granted to employees, $1.72 for RSUs and DRSUs granted to non-employee directors and $1.15 for DSUs granted to non-employee directors during the six months ended June 30, 2024.
We measure the fair value of grants of PSUs using a Monte Carlo valuation. The weighted average fair value of the PSUs granted in the first six months of 2024 was $1.15 per share and will be expensed over a vesting period of three years. The final payout to holders of PSUs will be based upon the Company’s total shareholder return relative to a peer group’s performance measured at the end of each performance period. The final payout for PSUs granted in 2024 is subject to a 3.5x value cap.
In the three months ended June 30, 2024 and 2023, we recognized $1.6 million and $1.4 million, respectively, of stock-based compensation expense. The majority of the expense, $1.4 million and $1.3 million, respectively, was recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations, with the remaining expense recorded in cost of goods sold.
In the six months ended June 30, 2024 and 2023, we recognized $2.6 million and $2.2 million, respectively, of stock-based compensation expense. The majority of the expense, $2.2 million and $2.0 million, respectively, was recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations, with the remaining expense recorded in cost of goods sold.
As of June 30, 2024, the unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately $13.1 million and is expected to be recognized over the remaining vesting period of the respective grants.
(13) Supplementary Balance Sheet Detail
Supplier Finance Program (“SFP”) Obligations
GrafTech Mexico S.A. De C.V. (“GrafTech Mexico”) participates in an electronic vendor voucher payment program supported by the Mexican Government through one of its national banks, whereby suppliers can factor their invoices through a financial intermediary. This program gives GrafTech Mexico’s suppliers the option to settle trade receivables by obtaining payment from the financial intermediary prior to the invoice due date for a discounted amount. GrafTech Mexico’s responsibility is limited to making payment on the terms originally negotiated with its supplier, regardless of whether the supplier elects to receive early payment. The range of payment terms GrafTech Mexico negotiates with its suppliers is consistent, irrespective of whether a supplier participates in the program.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

As of June 30, 2024 and December 31, 2023, $5.6 million and $4.6 million, respectively, of SFP obligations were included in accounts payable on the Condensed Consolidated Balance Sheets and upon settlement, are reflected as cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows.

(14) Rationalization Expenses
In the first quarter of 2024, we announced a set of initiatives designed to reduce our cost structure and optimize our manufacturing footprint. As part of these initiatives, we indefinitely suspended production activities at our St. Marys, Pennsylvania facility, with the exception of graphite electrode and pin machining. In addition, we indefinitely idled certain assets within our remaining graphite electrode manufacturing footprint. As a result, our graphite electrode production capacity has been reduced to approximately 178 thousand metric tons (“MT”) in 2024. In parallel, we adopted measures for additional overhead reductions to reduce our selling and administrative expenses. Collectively, these initiatives resulted in a reduction of our global headcount by approximately 130 employees, or 10% of our workforce. Rationalization charges of $3.3 million related to severance and contract terminations will be paid in cash and we expect the substantial majority to be paid by the end of the second quarter of 2025. Rationalization-related charges of $2.7 million represent the non-cash write-off of inventory and fixed assets. Substantially all charges relative to this plan were recorded during the first quarter of 2024 and wind-down activities were completed by the end of the second quarter of 2024.
The following table summarizes costs incurred related to these initiatives:
Three Months Ended
 June 30,
Six Months Ended
June 30,
2024202320242023
(Dollars in thousands)
Recorded in Cost of Goods Sold
Inventory write-offs$ $ $2,202 $ 
Fixed asset write-offs  453  
Total rationalization-related expenses$ $ $2,655 $ 
Recorded in Rationalization Expenses
Severance and related costs$35 $ $2,913 $ 
Contract terminations75  342  
Total rationalization expenses$110 $ $3,255 $ 
The following table presents a roll-forward of the liability incurred for employee termination benefits and contract termination costs incurred in connection with the rationalization initiatives described above.
Balance Sheet Line Item
Other Accrued LiabilitiesOther Long-Term Obligations
(Dollars in thousands)
Balance as of December 31, 2023$ $ 
Charges incurred2,543 712 
Payments and settlements(1,049) 
Adjustments(74)42 
Balance as of June 30, 2024$1,420 $754 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company
We are a leading manufacturer of high-quality graphite electrode products essential to the production of EAF steel and other ferrous and non‑ferrous metals. We believe that we have the most competitive portfolio of low cost ultra-high power graphite electrode manufacturing facilities in the industry, with some of the highest capacity facilities in the world. We are the only large scale graphite electrode producer that is substantially vertically integrated into petroleum needle coke, our key raw material for graphite electrode manufacturing.
The environmental and economic advantages of EAF steel production position both that industry and the graphite electrode industry for continued long-term growth.
We believe GrafTech's leadership position and vertical integration are sustainable competitive advantages. The services and solutions we provide will position our customers and us for a better future.
Operational and Commercial Update
Sales volume for the second quarter of 2024 was 25.5 thousand MT, consisting of 22.7 thousand MT of non-LTA volume and 2.8 thousand MT of LTA volume, and decreased 3% compared to the second quarter of 2023. Sales volume for the first half of 2023 was significantly impacted by the temporary suspension of our operations in Monterrey, Mexico in late 2022.
For the second quarter of 2024, the weighted-average realized price for our non-LTA volume was approximately $4,300 per MT, a decrease of 23% compared to the second quarter of 2023, with the decline reflecting the persistent challenges in the commercial environment. For our LTA volume, the weighted-average realized price was approximately $8,300 per MT for the second quarter of 2024.
Production volume was 26.8 thousand MT in the second quarter of 2024, an increase of 6% compared to the second quarter of 2023. We continue to proactively align our production volume with our evolving demand outlook.
Cost Rationalization and Footprint Optimization Plan Announced in February 2024
In the first quarter of 2024, we announced a set of initiatives designed to reduce our cost structure and optimize our manufacturing footprint. As part of these initiatives, we indefinitely suspended production activities at our St. Marys, Pennsylvania facility, with the exception of graphite electrode and pin machining. In addition, we indefinitely idled certain assets within our remaining graphite electrode manufacturing footprint. As a result, our graphite electrode production capacity has been reduced to approximately 178 thousand metric tons (“MT”) in 2024. In parallel, we adopted measures for additional overhead reductions to reduce our selling and administrative expenses. Collectively, these initiatives resulted in a reduction of our global headcount by approximately 130 employees, or 10% of our workforce. We continue to expect these initiatives will result in annualized cost savings of approximately $25.0 million, excluding the impact of one-time costs. Of the anticipated annualized cost savings, approximately $15.0 million are expected to be realized in cost of goods sold with the remainder in selling and administrative expenses.
Rationalization charges of $3.3 million related to severance and contract terminations will be paid in cash and we expect the substantial majority to be paid by the end of the second quarter of 2025. Rationalization-related charges of $2.7 million represent the non-cash write-off of inventory and fixed assets. Substantially all charges relative to this plan were recorded during the first quarter of 2024 and wind-down activities were completed by the end of the second quarter of 2024.
Outlook
We expect demand for graphite electrodes in the near term will remain weak, reflecting persistent challenges in the commercial environment as steel industry production remains constrained by global economic uncertainty. Given these trends, challenging pricing dynamics have persisted in most regions. As a result, we remain selective in the commercial opportunities we choose to pursue. Sales volume in the third quarter of 2024 is expected to be broadly in line with sales volume for the second quarter of 2024 and we continue to expect a modest year-over-year improvement in sales volume for the full year.
We continue to expect a mid-teen percentage point decline in our full year 2024 cash cost of goods sold per MT compared to 2023. This significant improvement in our year-over-year cost structure reflects (1) the deliberate actions we have taken to reduce our fixed manufacturing costs, (2) the benefit of additional actions we are taking to reduce our variable costs and (3) the anticipated year-over-year improvement in our sales and production volume levels. We anticipate cash cost of goods
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sold per MT to decline further in 2025. In addition, we continue to closely manage our working capital levels and capital expenditures. We continue to anticipate our full-year 2024 capital expenditures will be in the range of $35 million to $40 million.
Longer term, we remain confident that the steel industry’s accelerating efforts to decarbonize will lead to increased adoption of the electric arc furnace method of steelmaking, driving long-term demand growth for graphite electrodes. We also anticipate the demand for petroleum needle coke, the key raw material we use to produce graphite electrodes, to accelerate driven by its utilization in producing synthetic graphite for use in lithium-ion batteries for the growing electric vehicle market. We believe that the near-term actions we are taking, supported by an industry-leading position and our sustainable competitive advantages, including our substantial vertical integration into petroleum needle coke via our Seadrift facility, will optimally position GrafTech to benefit from that long-term growth.

The table of estimated shipments of graphite electrodes under existing LTAs has been updated as follows, reflecting our current expectations for the full year 2024:
2024 Outlook
Estimated LTA volume(1)
13-14
Estimated LTA revenue(2)
$110-$120(3)
(1) In thousands of MT
(2) In millions
(3) Estimated LTA revenue includes payments from customers that failed to meet certain obligations under their LTAs

We recorded 6.9 thousand MT of LTA volume and $62.7 million of LTA revenue in the first six months of 2024 and we expect to record six thousand to seven thousand MT of LTA volume and approximately $47.3 million to $57.3 million of LTA revenue for the remainder of 2024.
The remaining LTAs are defined as pre-determined fixed annual volume contracts. The actual revenue realized from these contracted volumes may vary in timing and total due to contract non-performance, force majeure notices, arbitrations and credit risk associated with certain customers facing financial challenges.
Capital Structure and Liquidity
As of June 30, 2024, we had liquidity of $231.8 million, consisting of cash and cash equivalents of $120.7 million and $111.1 million of availability under our 2018 Revolving Credit Facility. As of June 30, 2024, we had gross debt of $950.1 million.
Key metrics used by management to measure performance
In addition to measures of financial performance presented in our Condensed Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States (“GAAP”), we use certain other financial measures and operating metrics to analyze the performance of our Company. Our “non-GAAP” financial measures consist of EBITDA, adjusted EBITDA, adjusted net loss and adjusted loss per share, which help us evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance. Our key operating metrics consist of sales volume, production volume, production capacity and capacity utilization.







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Key financial measures
Three Months Ended
 June 30,
Six Months Ended
 June 30,
(in thousands, except per share data)2024202320242023
Net sales$137,327 $185,561 $273,911 $324,363 
Net loss(14,752)(7,851)(45,621)(15,220)
Loss per share(1)
(0.06)(0.03)(0.18)(0.06)
EBITDA(2)
12,731 23,465 5,646 36,403 
Adjusted net loss(2)
(13,564)(5,768)(38,725)(11,317)
Adjusted loss per share(1)(2)
(0.05)(0.02)(0.15)(0.04)
Adjusted EBITDA(2)
14,493 26,022 14,687 41,137 
(1) Loss per share represents diluted loss per share. Adjusted loss per share represents adjusted diluted loss per share.
(2) Non-GAAP financial measure; see below for information and reconciliations of EBITDA, adjusted EBITDA and adjusted net loss to net loss and adjusted loss per share to loss per share, the most directly comparable financial measures calculated and presented in accordance with GAAP.
Key operating measures
In addition to measures of financial performance presented in accordance with GAAP, we use certain operating metrics to analyze the performance of our Company. These metrics align with management's assessment of our revenue performance and profit margin, and will help investors understand the factors that drive our profitability.
Sales volume reflects the total volume of graphite electrodes sold for which revenue has been recognized during the period. For a discussion of our revenue recognition policy, see “—Critical accounting policies—Revenue recognition” in our Annual Report on Form 10-K. Sales volume helps investors understand the factors that drive our net sales.
Production volume, production capacity and capacity utilization help us understand the efficiency of our production, evaluate cost of goods sold and consider how to approach our sales contract initiative.
Three Months Ended
 June 30,
Six Months Ended
 June 30,
(in thousands, except utilization)2024202320242023
Sales volume (MT)25.5 26.4 49.6 43.3 
Production volume (MT)(1)
26.8 25.2 52.8 41.0 
Production capacity (MT)(2)(3)
45.0 51.0 90.0 102.0 
Capacity utilization(4)
60 %49 %59 %40 %
(1) Production volume reflects graphite electrodes we produced during the period.
(2) Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage. Actual production may vary.
(3) Includes graphite electrode facilities in Calais, France; Monterrey, Mexico; and Pamplona, Spain. While maintaining the capability to produce up to 28,000 MT of graphite electrodes and pins on an annual basis at our St. Marys, Pennsylvania facility, most production activities at St. Marys have been suspended. The wind down of these production activities was completed during the second quarter of 2024. Remaining activities at St. Marys are limited to machining graphite electrodes and pins sourced from our other plants.
(4) Capacity utilization reflects production volume as a percentage of production capacity.
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Results of Operations
The Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
The table presented in our period-over-period comparisons summarizes our Condensed Consolidated Statements of Operations and illustrates key financial indicators used to assess the consolidated financial results. Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report (“MD&A”), insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
Three Months Ended
 June 30,
Increase/ Decrease% Change
20242023
(Dollars in thousands)
Net sales$137,327 $185,561 $(48,234)(26)%
Cost of goods sold131,970 157,216 (25,246)(16)%
Lower of cost or market inventory valuation adjustment1,381 — 1,381 NM
     Gross profit 3,976 28,345 (24,369)(86)%
Research and development1,447 1,196 251 21 %
Selling and administrative expenses5,098 18,551 (13,453)(73)%
Rationalization expenses110 — 110 NM
     Operating (loss) income(2,679)8,598 (11,277)(131)%
Other (income) expense, net(1,091)455 (1,546)(340)%
Interest expense15,609 13,907 1,702 12 %
Interest income(1,853)(242)(1,611)666 %
Loss before (benefit) provision for income taxes(15,344)(5,522)(9,822)178 %
(Benefit) provision for income taxes(592)2,329 (2,921)(125)%
Net loss$(14,752)$(7,851)$(6,901)88 %
NM = Not Meaningful.
Net sales decreased $48.2 million, or 26%, compared to the second quarter of 2023. The decline primarily reflected a decrease in the weighted-average realized price for volume derived from non-LTAs and a shift in the mix of our business from volume derived from LTAs to volume derived from non-LTAs.
Cost of goods sold decreased $25.2 million, or 16%, compared to the second quarter of 2023. The decrease was primarily due to reduced manufacturing costs. Additionally, due to reduced production levels, we recorded fixed manufacturing costs of $1.7 million (which includes $1.1 million of depreciation and amortization) and $12.8 million (which includes $2.5 million of depreciation and amortization) that would have otherwise been inventoried for the second quarter of 2024 and 2023, respectively. Also, the LCM inventory valuation adjustments recorded at December 31, 2023 and in the first quarter of 2024 generated a $6.0 million favorable impact to cost of goods sold in the second quarter of 2024.
LCM inventory valuation adjustment represents a write-down of inventory recorded in the second quarter of 2024. The net realizable value of certain of our inventories fell below their carrying amounts as of June 30, 2024, and as a result, we recorded a LCM inventory valuation adjustment of $1.4 million in order to state our inventories at market.
Selling and administrative expenses decreased $13.5 million, or 73%, compared to the second quarter of 2023, primarily due to the $9.2 million reimbursement of legal fees in connection with the favorable outcome of an arbitration, reduced selling expenses and a decrease in variable compensation expenses. See Note 7, “Commitments and Contingencies” in the Notes to the Condensed Consolidated Financial Statements for further discussion.
Interest expense increased $1.7 million, or 12%, compared to the second quarter of 2023 primarily due to higher interest incurred on debt associated with our 2023 Senior Secured Notes that carry a fixed interest rate of 9.875%, partially
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offset by an increase in net gains recognized related to our interest rate swaps that were terminated in the second quarter of 2023. See Note 6, “Interest Expense” in the Notes to the Condensed Consolidated Financial Statements for further discussion.
The following table summarizes the (benefit) provision for income taxes:  
Three Months Ended
 June 30,
 20242023
(Dollars in thousands)
(Benefit) provision for income taxes$(592)$2,329 
Pre-tax loss(15,344)(5,522)
Effective tax rate3.9 %(42.2)%
The effective tax rate for the second quarter of 2024 and 2023 was different than the U.S. statutory tax rate of 21% primarily due to the mix of U.S. and foreign earnings, tax incentives and provisions of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”).
The Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
The table presented in our period-over-period comparisons summarize our Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results. Throughout this MD&A, insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
Six Months Ended
 June 30,
Increase/ Decrease% Change
20242023
(Dollars in thousands)
Net sales$273,911 $324,363 $(50,452)(16)%
Cost of goods sold267,174 269,861 (2,687)(1)%
Lower of cost or market inventory valuation adjustment4,073 — 4,073 NM
     Gross profit2,664 54,502 (51,838)(95)%
Research and development3,074 2,388 686