Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 20192020
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
gti-20200930_g1.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, OHOH(Zip code)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (216) 676-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filero
Accelerated Filero
Emerging Growth Companyo
Non-Accelerated FilerSmaller Reporting Company
Non-Accelerated Filer x
Smaller Reporting Company  o
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 Exchange Act Rule 12b-2).    Yes  ¨    No  ý
As of October 31, 2019, 289,532,9272020, 267,188,547 shares of common stock, par value $0.01 per share, were outstanding.



Table of Contents
TABLE OF CONTENTS
 


Presentation of Financial, Market and Legal Data
We present our financial information on a consolidated basis. Unless otherwise noted, when we refer to dollars, we mean U.S. dollars.
Unless otherwise specifically noted, market and market share data in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 20192020 (the "Report") are our own estimates or derived from sources described in our Annual Report on Form 10-K for the year ended December 31, 20182019 ("Annual Report on Form 10-K") filed on February 22, 2019.21, 2020. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Forward Looking“Forward-Looking Statements” and “Risk Factors” in this Report and in our Annual Report on Form 10-K. We cannot guarantee the accuracy or completeness of this market and market share data and have not independently verified it. None of the sources has consented to the disclosure or use of data in this Report.
Forward LookingForward-Looking Statements
Some of the statements under "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "will,“will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” "foresee," "may," "plan," "estimate," "project," "believe," "anticipate," "expect," "intend," "should," "would," "could," "target," "goal," "continue“intend,” “should,” “would,” “could,” “target,” “goal,” “continue to," "positioned to"” “positioned to” or the negative versionversions 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 in light of 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 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:

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the ultimate impact that the COVID-19 pandemic has on our business, results of operations, financial condition and cash flows;
the cyclical nature of our business and the selling prices of our products may lead to periods of reduced profitability and net losses in the future;
the possibility that we may be unable to implement our business strategies, including our initiativeability to secure and maintain longer-term customer contracts, in an effective manner;
the risks and uncertainties associated with litigation, arbitration, and like disputes, including the recently filed stockholder litigation and disputes related to contractual commitments;
the possibility that tax legislation couldglobal graphite electrode overcapacity may adversely affect us or our stockholders;graphite electrode prices;
pricing for graphite electrodes has historically been cyclical and the price of graphite electrodes may continue to decline in the future;
the sensitivity of our business and operating results to economic conditions and the possibility others may not be able to fulfill their obligations to us in a timely fashion or at all;
our dependence on the global steel industry generally and the electric arc furnace ("EAF") steel industry in particular;
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 petroleum needle coke;
our dependence on supplies of raw materials (in addition to petroleum needle coke) and energy;
the possibility that our manufacturing operations are subject to hazards;
changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities;
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 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 the COVID-19 pandemic, political crises or other catastrophic events;
our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services;
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 possibility that we may divest or acquire businesses, which could require significant management attention or disrupt our business;
the sensitivity of goodwill on our balance sheet to changes in the market;
the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security;
our dependence on protecting our intellectual property;
the possibility that third parties may claim that our products or processes infringe their intellectual property rights;
the possibility that significant changes in our jurisdictional earnings mix or in the tax laws of those jurisdictions could adversely affect our business;
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;
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the possibility that restrictive covenants in our financing agreements could restrict or limit our operations;
the fact that borrowings under certain of our existing financing agreements subjectssubject us to interest rate risk;
the possibility of a lowering or withdrawal of the ratings assigned to our debt;

the possibility that disruptions in the capital and credit markets could adversely affect our results of operations, cash flows and financial condition, or those of our customers and suppliers;
the possibility that highly concentrated ownership of our common stock may prevent minority stockholders from influencing significant corporate decisions;
the possibility that we may not pay cash dividends on our common stock in the future;
the fact that certain of our stockholders have the right to engage or invest in the same or similar businesses as us;
the possibility that the market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets, including by Brookfield;Brookfield (as defined below);
the fact that certain provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated By-Laws could hinder, delay or prevent a change of control;
the fact that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders; and
our status as a "controlled company" within the meaning of the New York Stock Exchange ("NYSE") corporate governance standards, which allows us to qualify for exemptions from certain corporate governance requirements.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements, including the Risk Factors section,sections, that are included in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020 and June 30, 2020, and other filings with the Securities and Exchange Commission ("SEC"). The forward‑lookingforward-looking statements made in this Report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward‑lookingforward-looking statement except as required by law, 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‑lookingforward-looking statements. We caution that you should not place undue reliance on any of our forward‑lookingforward-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. All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors.
For a more complete discussion
4

Table of these and other factors, see “Risk Factors” in Part II of this Report and the "Risk Factors" section included in our Annual Report on Form 10-K and other SEC filings.Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Unaudited
(Unaudited)
As of
September 30,
2019
 As of
December 31, 2018
As of
September 30,
2020
As of
December 31, 2019
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$381,164
 $49,880
Cash and cash equivalents$158,841 $80,935 
Accounts and notes receivable, net of allowance for doubtful accounts of
$4,163 as of September 30, 2019 and $1,129 as of December 31, 2018
264,157
 248,286
Accounts and notes receivable, net of allowance for doubtful accounts of
$8,973 as of September 30, 2020 and $5,474 as of December 31, 2019
Accounts and notes receivable, net of allowance for doubtful accounts of
$8,973 as of September 30, 2020 and $5,474 as of December 31, 2019
164,195 247,051 
Inventories314,955
 293,717
Inventories299,236 313,648 
Prepaid expenses and other current assets40,481
 46,168
Prepaid expenses and other current assets35,299 40,946 
Total current assets1,000,757
 638,051
Total current assets657,571 682,580 
Property, plant and equipment708,267
 688,842
Property, plant and equipment765,822 733,417 
Less: accumulated depreciation207,444
 175,137
Less: accumulated depreciation264,304 220,397 
Net property, plant and equipment500,823
 513,705
Net property, plant and equipment501,518 513,020 
Deferred income taxes48,237
 71,707
Deferred income taxes40,767 55,217 
Goodwill171,117
 171,117
Goodwill171,117 171,117 
Other assets104,735
 110,911
Other assets96,616 104,230 
Total assets$1,825,669
 $1,505,491
Total assets$1,467,589 $1,526,164 
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Accounts payable$73,856
 $88,097
Accounts payable$49,056 $78,697 
Short-term debt70,861
 106,323
Short-term debt147 141 
Accrued income and other taxes58,916
 82,255
Accrued income and other taxes81,756 65,176 
Other accrued liabilities48,707
 50,452
Other accrued liabilities65,058 48,335 
Related party payable - tax receivable agreement23,852
 
Related party payable - tax receivable agreement16,115 27,857 
Total current liabilities276,192
 327,127
Total current liabilities212,132 220,206 
Long-term debt1,965,501
 2,050,311
Long-term debt1,564,431 1,812,682 
Other long-term obligations77,759
 72,519
Other long-term obligations76,403 72,562 
Deferred income taxes50,484
 45,825
Deferred income taxes44,251 49,773 
Related party payable - tax receivable agreement62,625
 86,478
Contingencies – Note 9   
Related party payable - tax receivable agreement long-termRelated party payable - tax receivable agreement long-term42,479 62,014 
Contingencies - Note 8Contingencies - Note 8
Stockholders’ equity:   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, 289,658,478
shares issued and outstanding as of September 30, 2019 and 290,537,612
as of December 31, 2018
2,897
 2,905
Preferred stock, par value $0.01, 300,000,000 shares authorized, NaN issuedPreferred stock, par value $0.01, 300,000,000 shares authorized, NaN issued
Common stock, par value $0.01, 3,000,000,000 shares authorized, 267,188,547
shares issued and outstanding as of September 30, 2020 and 270,485,308
as of December 31, 2019
Common stock, par value $0.01, 3,000,000,000 shares authorized, 267,188,547
shares issued and outstanding as of September 30, 2020 and 270,485,308
as of December 31, 2019
2,672 2,705 
Additional paid-in capital818,720
 819,622
Additional paid-in capital757,576 765,419 
Accumulated other comprehensive loss(23,677) (5,800)Accumulated other comprehensive loss(39,161)(7,361)
Accumulated deficit(1,404,832) (1,893,496)Accumulated deficit(1,193,194)(1,451,836)
Total stockholders’ deficit(606,892) (1,076,769)Total stockholders’ deficit(472,107)(691,073)
   
Total liabilities and stockholders’ equity$1,825,669
 $1,505,491
Total liabilities and stockholders’ equity$1,467,589 $1,526,164 
See accompanying Notes to Condensed Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands)thousands, except share data)
(Unaudited)
For the Three Months Ended September 30, For the Nine Months
Ended September 30,
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
2019 2018 2019 2018 2020201920202019
CONSOLIDATED STATEMENTS OF OPERATIONS       CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales$420,797
 $454,890
 $1,376,181
 $1,363,121
Net sales$286,987 $420,797 $886,351 $1,376,181 
Cost of sales178,497
 180,280
 571,068
 491,339
Cost of sales131,862 178,497 401,379 571,068 
Gross profit242,300
 274,610
 805,113
 871,782
Gross profit155,125 242,300 484,972 805,113 
Research and development611
 518
 1,961
 1,528
Research and development650 611 2,072 1,961 
Selling and administrative expenses15,708
 14,234
 46,328
 46,349
Selling and administrative expenses19,062 15,708 49,995 46,328 
Operating profit225,981
 259,858
 756,824
 823,905
Operating profit135,413 225,981 432,905 756,824 
       
Other (income) expense, net(688) 1,502
 642
 2,533
Related party Tax Receivable Agreement expense
 
 
 61,801
Other expense (income), netOther expense (income), net694 (688)(2,309)642 
Related party Tax Receivable Agreement benefitRelated party Tax Receivable Agreement benefit(3,346)
Interest expense31,803
 33,855
 98,472
 100,387
Interest expense22,474 31,803 69,026 98,472 
Interest income(1,765) (562) (2,910) (1,068)Interest income(93)(1,765)(1,582)(2,910)
Income from continuing operations before
provision for income taxes
196,631
 225,063
 660,620
 660,252
Income before provision for income taxesIncome before provision for income taxes112,338 196,631 371,116 660,620 
Provision for income taxesProvision for income taxes18,104 20,755 61,838 90,940 
       
Provision for income taxes20,755
 24,871
 90,940
 36,250
Net income from continuing operations175,876
 200,192
 569,680
 624,002
       
(Loss) income from discontinued operations, net of tax
 (726) 
 585
       
Net income$175,876
 $199,466
 $569,680
 $624,587
Net income$94,234 $175,876 $309,278 $569,680 
       
Basic income per common share*:       Basic income per common share*:
Net income per share$0.61
 $0.67
 $1.96
 $2.08
Net income per share$0.35 $0.61 $1.15 $1.96 
Net income from continuing operations per share$0.61
 $0.68
 $1.96
 $2.08
Weighted average common shares outstanding290,112,233
 296,136,564
 290,410,859
 300,173,831
Weighted average common shares outstanding267,265,705 290,112,233 267,908,427 290,410,859 
Diluted income per common share*:       Diluted income per common share*:
Income per share$0.61
 $0.67
 $1.96
 $2.08
Income per share$0.35 $0.61 $1.15 $1.96 
Diluted income from continuing operations per share$0.61
 $0.68
 $1.96
 $2.08
Weighted average common shares outstanding290,127,296
 296,145,453
 290,422,351
 300,178,704
Weighted average common shares outstanding267,279,555 290,127,296 267,920,890 290,422,351 
       
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)STATEMENTS OF COMPREHENSIVE INCOME (LOSS)      STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income$175,876
 $199,466
 $569,680
 $624,587
Net income$94,234 $175,876 $309,278 $569,680 
Other comprehensive income:       Other comprehensive income:
Foreign currency translation adjustments, net of tax of
($92), $0, ($128), and $0, respectively
(13,597) (3,601) (13,519) (17,379)
Commodity and interest rate derivatives, net of tax of $6,972, $0, $1,065 and $0, respectively(25,934) 5,890
 (4,358) 31,629
Other comprehensive (loss) income, net of tax:(39,531) 2,289
 (17,877) 14,250
Foreign currency translation adjustments, net of tax of
$0, $(92), $(162) and $(128), respectively
Foreign currency translation adjustments, net of tax of
$0, $(92), $(162) and $(128), respectively
7,455 (13,597)(6,083)(13,519)
Commodity and interest rate derivatives, net of tax of $(740), $6,972, $7,224 and $1,065, respectivelyCommodity and interest rate derivatives, net of tax of $(740), $6,972, $7,224 and $1,065, respectively2,826 (25,934)(25,717)(4,358)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:10,281 (39,531)(31,800)(17,877)
Comprehensive income$136,345
 $201,755
 $551,803
 $638,837
Comprehensive income$104,515 $136,345 $277,478 $551,803 
*See Notes 1 and 1312
See accompanying Notes to Condensed Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, unaudited)thousands)
(Unaudited)
For the Nine Months
Ended September 30,
For the Nine Months
Ended September 30,
2019 2018 20202019
Cash flow from operating activities:   Cash flow from operating activities:
Net income$569,680
 $624,587
Net income$309,278 $569,680 
Adjustments to reconcile net income to cash provided by operations:   Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization46,387
 47,746
Depreciation and amortization45,074 46,387 
Related party Tax Receivable Agreement expense
 61,801
Deferred income tax provision (benefit)28,696
 (18,184)
Loss on extinguishment of debt
 23,827
Related party Tax Receivable Agreement benefitRelated party Tax Receivable Agreement benefit(3,346)
Deferred income tax provisionDeferred income tax provision16,237 28,696 
Interest expense4,764
 3,747
Interest expense4,768 4,764 
Other charges, net17,689
 9,652
Other charges, net2,335 17,689 
Net change in working capital*(80,311) (143,695)Net change in working capital*85,098 (80,311)
Change in related party Tax Receivable AgreementChange in related party Tax Receivable Agreement(27,857)
Change in long-term assets and liabilities(2,133) 2,763
Change in long-term assets and liabilities(14,922)(2,133)
Net cash provided by operating activities584,772
 612,244
Net cash provided by operating activities416,665 584,772 
Cash flow from investing activities:   Cash flow from investing activities:
Capital expenditures(44,053) (47,632)Capital expenditures(30,688)(44,053)
Proceeds from the sale of assets98
 866
Proceeds from the sale of assets78 98 
Net cash used in investing activities(43,955) (46,766)Net cash used in investing activities(30,610)(43,955)
Cash flow from financing activities:   Cash flow from financing activities:
Short-term debt, net
 (12,607)
Revolving Facility reductions
 (45,692)
Debt issuance costs
 (27,326)
Proceeds from the issuance of long-term debt, net of
original issuance discount

 2,235,000
Repayment of Senior Notes
 (304,782)
Related party Promissory Note repayment
 (750,000)
Repurchase of common stock(9,484) (225,000)
Repurchase of common stock-non-related partyRepurchase of common stock-non-related party(30,099)(9,484)
Payment of tax withholdings related to net share settlement of equity awardsPayment of tax withholdings related to net share settlement of equity awards(71)
Principal repayments on long-term debt(125,000) (28,125)Principal repayments on long-term debt(249,214)(125,000)
Dividends paid to non-related-party(15,505) (7,651)Dividends paid to non-related-party(7,553)(15,505)
Dividends paid to related-party(58,507) (1,308,538)Dividends paid to related-party(20,650)(58,507)
Net cash used in financing activities(208,496) (474,721)Net cash used in financing activities(307,587)(208,496)
Net change in cash and cash equivalents332,321
 90,757
Net change in cash and cash equivalents78,468 332,321 
Effect of exchange rate changes on cash and cash equivalents(1,037) (1,615)Effect of exchange rate changes on cash and cash equivalents(562)(1,037)
Cash and cash equivalents at beginning of period49,880
 13,365
Cash and cash equivalents at beginning of period80,935 49,880 
Cash and cash equivalents at end of period$381,164
 $102,507
Cash and cash equivalents at end of period$158,841 $381,164 
   
* Net change in working capital due to changes in the following components:   * Net change in working capital due to changes in the following components:
Accounts and notes receivable, net$(20,727) $(96,045)Accounts and notes receivable, net$78,408 $(20,727)
Inventories(19,908) (93,755)Inventories10,371 (19,908)
Prepaid expenses and other current assets5,703
 7,828
Prepaid expenses and other current assets5,437 5,703 
Income taxes payable(28,152) 35,358
Income taxes payable16,032 (28,152)
Accounts payable and accruals(17,336) 4,336
Accounts payable and accruals(25,078)(17,336)
Interest payable109
 (1,417)Interest payable(72)109 
Net change in working capital$(80,311) $(143,695)Net change in working capital$85,098 $(80,311)


See accompanying Notes to Condensed Consolidated Financial Statements

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Dollars in thousands, except share data)
(Unaudited)
Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income(Loss)
Retained Earnings (Accumulated
Deficit)
Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2019270,485,308 $2,705 $765,419 $(7,361)$(1,451,836)$(691,073)
Comprehensive income (loss):
Net income— — — — 122,268 122,268 
Other comprehensive income (loss):
Commodity and interest rate derivatives income (loss), net of tax of $10,322— — — (37,577)— (37,577)
Commodity derivatives reclassification adjustments, net of tax of $605— — — (2,204)— (2,204)
Foreign currency translation adjustments, net of tax of $(163)— — — (17,168)— (17,168)
   Total other comprehensive loss— — — (56,949)— (56,949)
Stock-based compensation29,394 — 405 — — 405 
Dividends paid to related party stockholder ($0.085 per share)— — — — (16,933)(16,933)
Dividends paid to non-related party stockholders ($0.085 per share)— — — — (5,926)(5,926)
Common stock repurchased and retired (from non-related party)(3,328,574)(33)(9,700)— (20,366)(30,099)
Common stock withheld for taxes on equity award settlement(7,465)— (21)— (25)(46)
Adoption of ASC 326— — — — (2,026)(2,026)
Balance as of March 31, 2020267,178,663 $2,672 $756,103 $(64,310)$(1,374,844)$(680,379)
Comprehensive income (loss):
Net income— — — — 92,776 92,776 
Other comprehensive income (loss):
Commodity and interest rate derivatives income (loss), net of tax of $(3,199)— — — 12,132 — 12,132 
Commodity derivatives reclassification adjustments, net of tax of $236— — — (894)— (894)
Foreign currency translation adjustments, net of tax of $1— — — 3,630 — 3,630 
   Total other comprehensive income— — — 14,868 — 14,868 
Stock-based compensation13,017 — 718 — — 718 
Dividends paid to related party stockholder ($0.01 per share)— — — — (1,993)(1,993)
Dividends paid to non-related party stockholders ($0.01 per share)— — — — (679)(679)
Common stock withheld for taxes on equity award settlement(3,133)— (9)— (16)(25)
Balance as of June 30, 2020267,188,547 $2,672 $756,812 $(49,442)$(1,284,756)$(574,714)
Comprehensive income (loss):
Net income— — — — 94,234 94,234 
Other comprehensive income (loss):
Commodity and interest rate derivative income (loss), net of tax of $(1,009)— — — 3,852 — 3,852 
Commodity derivatives reclassification adjustments, net of tax of $269— — — (1,026)— (1,026)
Foreign currency translation adjustments, net of tax of $0— — — 7,455 — 7,455 
   Total other comprehensive income— — — 10,281 — 10,281 
Stock-based compensation— 764 — — 764 
Dividends paid to related party stockholder ($0.01 per share)— — — — (1,724)(1,724)
Dividends paid to non-related party stockholders ($0.01 per share)— — — — (948)(948)
Balance as of September 30, 2020267,188,547 $2,672 $757,576 $(39,161)$(1,193,194)$(472,107)
8

Table of Contents
 Issued
Shares of
Common
Stock
 Common
Stock
 Additional
Paid-in
Capital
 Accumulated
Other
Comprehensive
Income(Loss)
 Retained Earnings (Accumulated
Deficit)
 Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2018290,537,612
 $2,905
 $819,622
 $(5,800) $(1,893,496) $(1,076,769)
Comprehensive income (loss):           
Net income
 
 
 
 197,436
 197,436
Other comprehensive income (loss):          

Commodity and foreign currency derivatives income, net of tax of ($7,295)
 
 
 27,113
 
 27,113
Commodity and foreign currency derivatives reclassification adjustments, net of tax of $392
 
 
 (1,456) 
 (1,456)
Foreign currency translation adjustments, net of tax of ($3)
 
 
 (3,539) 
 (3,539)
   Total other comprehensive income
 
 
 22,118
 
 22,118
Stock-based compensation    293
     293
Dividends paid to related party
stockholder ($0.085 per share)

 
 
 
 (19,502) (19,502)
Dividends paid to non-related party
stockholders ($0.085 per share)

 
 
 
 (5,194) (5,194)
Balance as of March 31, 2019290,537,612
 $2,905
 $819,915
 $16,318
 $(1,720,756) $(881,618)
Comprehensive income (loss):           
Net income
 
 
 
 196,368
 196,368
Other comprehensive income (loss):           
Commodity and foreign currency derivatives income, net of tax of $603
 
 
 (2,472) 
 (2,472)
Commodity and foreign currency derivatives reclassification adjustments, net of tax of $393
 
 
 (1,609) 
 (1,609)
Foreign currency translation adjustments, net of tax of ($33)
 
 
 3,617
 
 3,617
   Total other comprehensive loss
 
 
 (464) 
 (464)
Stock-based compensation    570
     570
Dividends paid to related party
stockholder ($0.085 per share)

 
 
 
 (19,503) (19,503)
Dividends paid to non-related party
stockholders ($0.085 per share)

 
 
 
 (5,191) (5,191)
Balance as of June 30, 2019290,537,612
 $2,905
 $820,485
 $15,854
 $(1,549,082) $(709,838)
Comprehensive income (loss):           
Net income
 
 
 
 175,876
 175,876
Other comprehensive loss:           
Commodity, foreign currency and interest rate derivative income, net of tax of $6,306
 
 
 (23,456) 
 (23,456)
Commodity and foreign currency derivatives reclassification adjustments, net of tax of $666
 
 
 (2,478) 
 (2,478)
Foreign currency translation adjustments, net of tax of ($92)
 
 
 (13,597) 
 (13,597)
   Total other comprehensive loss
 
 
 (39,531) 
 (39,531)
Stock-based compensation    705
     705
Dividends paid to related party
stockholder ($0.085 per share)

 
 
 
 (19,502) (19,502)
Dividends paid to non-related party
stockholders ($0.085 per share)

 
 
 
 (5,118) (5,118)
Common stock repurchases and retirement(879,134) (8) (2,470)   (7,006) (9,484)
Balance as of September 30, 2019289,658,478
 $2,897
 $818,720
 $(23,677) $(1,404,832) $(606,892)
Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income(Loss)
Retained Earnings (Accumulated
Deficit)
Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2018290,537,612 $2,905 $819,622 $(5,800)$(1,893,496)$(1,076,769)
Comprehensive income (loss):
Net income— — — — 197,436 197,436 
Other comprehensive income (loss):
Commodity derivatives foreign currency derivatives income (loss), net of tax of $(7,295)— — — 27,113 — 27,113 
Commodity derivatives reclassification adjustments, net of tax of $392— — — (1,456)— (1,456)
Foreign currency translation adjustments, net of tax $(3)— — — (3,539)— (3,539)
   Total other comprehensive income— — — 22,118 — 22,118 
Stock-based compensation293 293 
Dividends paid to related party stockholder ($0.085 per share)— — — — (19,502)(19,502)
Dividends paid to non-related party stockholders ($0.085 per share)— — — — (5,194)(5,194)
Balance as of March 31, 2019290,537,612 $2,905 $819,915 $16,318 $(1,720,756)$(881,618)
Comprehensive income (loss):
Net income— — — — 196,368 196,368 
Other comprehensive income (loss):
Commodity derivatives income (loss), net of tax of $603— — — (2,472)— (2,472)
Commodity derivatives reclassification adjustments, net of tax of $393— — — (1,609)— (1,609)
Foreign currency translation adjustments, net of tax of $(33)— — — 3,617 — 3,617 
   Total other comprehensive (loss)— — — (464)— (464)
Stock-based compensation570 570 
Dividends paid to related party stockholder ($0.085 per share)— — — — (19,503)(19,503)
Dividends paid to non-related party stockholders ($0.085 per share)— — — — (5,191)(5,191)
Balance as of June 30, 2019290,537,612 $2,905 $820,485 $15,854 $(1,549,082)$(709,838)
Comprehensive income (loss):
Net income— — — — 175,876 175,876 
Other comprehensive income (loss):
Commodity and foreign currency derivatives loss, net of tax of $6,306— — — (23,456)— (23,456)
Commodity derivatives reclassification adjustments, net of tax of $666— — — (2,478)— (2,478)
Foreign currency translation adjustments of $(92)— — — (13,597)— (13,597)
   Total other comprehensive income— — — (39,531)— (39,531)
Stock-based compensation— — 705 — — 705 
Dividends paid to related party stockholder ($0.085 per share)— — — — (19,502)(19,502)
Dividends paid to non-related party stockholders ($0.085 per share)— — — — (5,118)(5,118)
Common stock repurchases and retirement(879,134)(8)(2,470)— (7,006)(9,484)
Balance as of September 30, 2019289,658,478 $2,897 $818,720 $(23,677)$(1,404,832)$(606,892)


Cont'dIssued
Shares of
Common
Stock
 Common
Stock
 Additional
Paid-in
Capital
 Accumulated
Other
Comprehensive
Income(Loss)
 Retained Earnings (Accumulated
Deficit)
 Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2017(1)
302,225,923
 $3,022
 $851,315
 $20,289
 $(261,411) $613,215
Comprehensive income (loss):          
Net income
 
 
 
 223,673
 223,673
Other comprehensive income (loss):           
Commodity and foreign currency derivatives loss, net of tax of $0
 
 
 (6,113) 
 (6,113)
Foreign currency translation adjustments
 
 
 5,040
 
 5,040
   Total other comprehensive loss
 
 
 (1,073) 
 (1,073)
Dividends paid to related party
stockholder ($3.68 per share)

 
 
 
 (1,112,000) (1,112,000)
Balance as of March 31, 2018(1)
302,225,923
 $3,022
 $851,315
 $19,216
 $(1,149,738) $(276,185)
Comprehensive income (loss):           
Net income
 
 
 
 201,448
 201,448
Other comprehensive income (loss):           
Commodity and foreign currency derivatives loss, net of tax of $0
 
 
 31,852
 
 31,852
Foreign currency translation adjustments
 
 
 (18,818) 
 (18,818)
   Total other comprehensive income
 
 
 13,034
 
 13,034
Stock-based compensation
 
 181
 
 
 181
Related-party promissory note repayment
 
 
 
 (750,000) (750,000)
Dividends paid to related party
stockholder ($0.59 per share)

 
 
 
 (177,040) (177,040)
Dividends paid to non-related party
stockholders ($0.085 per share)

 
 
 
 (2,457) (2,457)
Balance as of June 30, 2018302,225,923
 $3,022
 $851,496
 $32,250
 $(1,877,787) $(991,019)
Comprehensive income (loss):           
Net income
 
 
 
 199,466
 199,466
Other comprehensive income (loss):           
Commodity and foreign currency derivatives loss, net of tax of ($9,871)
 
 
 5,890
 
 5,890
Foreign currency translation adjustments
 
 
 (3,601) 
 (3,601)
   Total other comprehensive income
 
 
 2,289
 
 2,289
Stock-based compensation
 
 475
 
 
 475
Dividends paid to related party
stockholder ($0.085 per share)

 
 
 
 (19,498) (19,498)
Dividends paid to non-related party
stockholders ($0.085 per share)

 
 
   (5,194) (5,194)
Common stock repurchases and retirement(11,688,311) (117) (32,844) 
 (192,042) (225,003)
Balance as of September 30, 2018290,537,612
 $2,905
 $819,127
 $34,539
 $(1,895,055) $(1,038,484)
(1) On April 12, 2018, the Company effected a 3,022,259.23 to one split of the Company's common stock. We retrospectively applied this split to all previous periods presented.

9

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





(1)Organization and Summary of Significant Accounting Policies
(1)Organization and Summary of Significant Accounting Policies
A. Organization
GrafTech International Ltd. (the “Company”) is a leading manufacturer of high quality graphite electrode products essential to the production of electric arc furnace ("EAF") steel and other ferrous and non-ferrous metals. References herein to "GrafTech," “we,” “our,” or “us” refer collectively to GrafTech International Ltd. and its subsidiaries.
On August 15, 2015, we became an indirect wholly owned subsidiary of Brookfield Asset Management Inc. (together with its affiliates, “Brookfield”"Brookfield") through a tender offer to our former stockholders and subsequent merger transaction. On. In April 23, 2018, the Companywe completed itsour initial public offering ("IPO") of 38,097,525 shares of our common stock held by Brookfield at a price of $15.00 per share. We did not receive any proceeds related to the IPO. Our common stock is listed on the NYSE under the symbol “EAF.” On July 22, 2020, Brookfield distributed a portion of its GrafTech common stock to the owners in the Brookfield consortium, resulting in the reduction in Brookfield's ownership of outstanding shares of GrafTech common stock to 65%. Brookfield owned approximately 65% of our outstanding common stock as of September 30, 2020.
The Company’s only reportable segment, Industrial Materials, is comprised of our two2 major product categories: graphite electrodes and petroleum needle coke products. NeedlePetroleum needle coke is thea key raw material used in the production of graphite electrodes. The Company's vision is to provide highly engineered graphite electrode services, solutions and products to EAFelectric arc furnace 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, 20182019 financial position data included herein was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20182019 ("Annual Report on Form 10-K"), filed on February 22, 201921, 2020, 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 our Annual Report on Form 10-K filed on February 22, 2019.10-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 statement of financial position, results of operations, comprehensive income and cash flows 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.
Earnings per share
The calculation of basic earnings per share is based on the number of common shares outstanding after giving effect to the stock split effected on April 12, 2018 and the common stock repurchases on August 13, 2018 and during the third quarter of 2019. Diluted earnings per share recognizes the dilution that would occur if stock options, deferred stock units or restricted stock units were exercised or converted into common shares. See Note 13 "Earnings Per Share".
C. New Accounting Standards
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under this new guidance, a company will now recognize most leases on its balance sheet as lease liabilities with corresponding right-of-use assets. This ASU is effective for fiscal years beginning after December 15, 2018.  The Company adopted ASU No. 2016-02 on January 1, 2019. The adoption impact was not material to our financial position, results of operations or cash flows. See Note 3 "Leases" for information regarding this standard and its adoption.
Accounting Standards Not Yet Adopted
In January 2017, the FASBFinancial Accounting Standards Board ("FASB") issued ASU No. 2017‑04, Intangibles‑Goodwill2017-04, Intangibles-Goodwill and Other (Topic 350). This guidance was issued to simplify the accounting for goodwill impairment. The guidance removes the second step of the goodwill impairment test, which requires that a hypothetical purchase price allocation be performed to determine the amount of impairment, if any. Under this new guidance, a goodwill impairment charge will be based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU No. 2017-04 is effective beginning January 1, 2020. The guidance will become effective on a prospective basis for the Company adopted ASU No. 2017-04 on January 1, 2020, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expectedno impact to have a material effect on the Company’sour financial position, results of operations or cash flows.

10

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


In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326), which introduces the Current Expected Credit Losses ("CECL") accounting model. CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk. CECL utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. ASU No. 2016-13 iswas effective for the the Company on January 1, 2020. The Companyadoption of ASU No. 2016-13 resulted in a cumulative-effect adjustment of $2.0 million included as an adjustment to our accounts receivable reserve and to retained earnings on January 1, 2020.

10

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

Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This pronouncement contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 can be elected for both interim and annual periods from March 12, 2020 through December 31, 2022. We plan to adopt ASU 2020-04 as of January 1, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application of Topic 740 and simplify the accounting for income taxes. This pronouncement removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020, with early adoption permitted. The Company is currently evaluating the impacteffects of this standard.on our financial position, results of operations or cash flows.

(2)Revenue from Contracts with Customers
(2)Revenue from Contracts with Customers
Disaggregation of Revenue
The following table provides information about disaggregated revenue by type of product and contract for the three and nine months ended September 30, 20192020 and 2018:2019:
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
2020201920202019
(Dollars in thousands)
Graphite Electrodes - Three-to-five-year take-or-pay contracts$250,011 $334,097 $771,400 $1,107,742 
Graphite Electrodes - Short-term agreements and spot sales32,303 67,704 93,232 191,249 
By-products and other4,673 18,996 21,719 77,190 
Total Revenues$286,987 $420,797 $886,351 $1,376,181 
 For the Three Months Ended September 30, For the Nine Months
Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands)
Graphite Electrodes - Three-to-five-year take-or-pay contracts$334,097
 $359,405
 $1,107,742
 $976,852
Graphite Electrodes - Short-term agreements and spot sales67,704
 51,475
 191,249
 261,949
By-products and other18,996
 44,010
 77,190
 124,320
Total Revenues$420,797
 $454,890
 $1,376,181
 $1,363,121
Effective the first quarter of 2019, theThe Graphite Electrodes revenue categories include only graphite electrodes manufactured by GrafTech. The revenue category “By-products and Other” now includes re-salesresales of low-grade electrodes purchased from third partythird-party suppliers, which represent a minimal contribution to our profitability. For comparability purposes, the prior period has been recast to conform to this presentation.
Contract Balances
Receivables, net of allowances for doubtful accounts, were $264.2$164.2 million as of September 30, 20192020 and $248.3$247.1 million as of December 31, 2018.2019. 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.operate.
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, under ASC 606, Revenue from Contracts with Customers, deferred revenue originatesor 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.obligations and contract assets are realized through the contract invoicing.
Contract assets as of September 30, 2020 were $0.8 million and are included in "Prepaid expenses and other current assets" on the Condensed Consolidated Balance Sheets. There were 0 contract assets as of December 31, 2019.
Current deferred revenue is included in "Other accrued liabilities" and long-term deferred revenue is included in "Other long-term obligations" on the Condensed Consolidated Balance Sheets.
The following table provides information about deferred revenue from contracts with customers (in thousands):
 Current deferred revenue Long-Term deferred revenue
 (Dollars in thousands)
Balance as of December 31, 2018$5,380
 $7,716
Revenue recognized that was included in the deferred revenue balance
   at the beginning of the period
(4,606) 
Increases due to cash received, excluding amounts recognized as revenue during the period2,144
 
Foreign currency impact4
 (220)
Balance as of September 30, 2019$2,922
 $7,496

11

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



The following table provides information about deferred revenue from contracts with customers (in thousands):
Current Deferred RevenueLong-Term Deferred Revenue
(Dollars in thousands)
Balance as of December 31, 2019$11,776 $3,858 
Increases due to cash received10,535 
Revenue recognized(3,684)
Foreign currency impact(924)
Balance as of September 30, 2020$17,703 $3,858 
Transaction Price Allocated to the Remaining Performance Obligations
The following table presents estimated revenues
We estimate that our long-term contract revenue in 2020 will be in the range of $1,000 million to $1,080 million. We recorded $771 million of revenue in the first nine months of 2020, and we expect to record approximately $230 million to $310 million of revenue for the remainder of 2020. As a result of recent contract modifications, as well as on-going discussions with many of our customers, the remaining revenue associated with our long-term sales agreements is expected to be recognized in the future relatedapproximately as follows:
202120222023 through 2024
(Dollars in millions)
Estimated LTA revenue$925-$1,025$910-$1,010
$350-$450(1)
(1) Includes expected termination fees from a few customers that have failed to performancemeet certain obligations that are unsatisfied (or partially unsatisfied) at the endunder their long-term agreements ("LTAs").
The majority of the reporting period. The estimated revenues do not includelong-term take-or-pay contracts are defined as pre-determined fixed annual volume contracts while a small portion are defined with a specified volume range. For the year 2021 and beyond, the contractual revenue amounts above are based upon the minimum volume for those contracts with original duration of one year or less.
 Three-to-five-year take-or-pay contracts
 (Dollars in thousands)
Remainder of 2019347,097
20201,366,579
20211,211,036
20221,144,574
Thereafter29,461
Total$4,098,747
In additionspecified ranges. The actual revenue realized from these contracted volumes may vary in timing and total due to the expected remaining revenue to be recognizedcredit risk associated with the longer-term salescertain customers facing financial challenges and non-performance on contracts, the Company recorded $1,107.7 million of revenue pursuant to these contracts in the nine months ended September 30, 2019.
(3)Leases
We lease certain transportation and mobile manufacturing equipment such as railcars and forklifts, as well as real estate.customer demand related to contracted volume ranges. Some of our customers are struggling to take their committed volumes. This is causing some non-performance and disputes including a few arbitrations associated with, among other things, efforts to modify existing contracts.
(3)Retirement Plans and Postretirement Benefits
The Company adopted ASU 2016-02 "Leases: (Topic 842) ("ASC 842") on January 1, 2019. ASC 842 requires that all leases, financing and operating, be included on the balance sheet. The Company adopted ASC 842 using the modified retrospective approach under which prior periods’ financial statementscomponents of our consolidated net pension costs are not restated and a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption is recorded, if applicable. The Company elected to adopt the transition package of practical expedients for lease identification, classification, initial direct costs and hindsight. At the adoption of ASC 842 on January 1, 2019, the Company recognized right-of-use ("RoU") assets and corresponding operating lease liabilities of $7.5 million, with no cumulative-effect adjustment to retained earnings.
We determine if an arrangement is a lease at lease inception. When an arrangement contains a lease, we then determine if it meets any of the criteria for a financing lease. Leases with a term of 12 months or less are not recorded on the balance sheet.
RoU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. RoU assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term.
In order to compute the lease liability, when the rate implicitset forth in the lease is not readily determinable, we discount the lease payments using our estimated incremental borrowing rate for secured fixed rate debt over the same term, derived from information available at the lease commencement date. Our lease term includes the option to extend the lease when it is reasonably certain that we will exercise that option.following table:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020201920202019
 (Dollars in thousands)
Service cost$623 $574 $1,863 $1,724 
Interest cost1,033 1,316 3,098 3,948 
Expected return on plan assets(1,283)(1,339)(3,849)(4,015)
Net cost$373 $551 $1,112 $1,657 
The Company has elected to account for the lease and non-lease components as a single lease component, except for leases of warehouse space where they will be accounted for separately. Leases may include variable lease and variable non-lease componentsour consolidated net postretirement costs which are accounted for as variable lease expenseset forth in the income statement.following table: 

For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020201920202019
 (Dollars in thousands)
Interest cost$180 $236 545 717 
Net cost$180 $236 $545 $717 


12

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



Components of lease expense are as follows:
 For the Three Months Ended September 30, 2019 For the Nine
Months Ended September 30, 2019
 (Dollars in thousands)
Operating lease cost1,078
 3,162
Short-term lease cost2
 12
Variable lease cost49
 234
Total lease cost$1,129
 $3,408

Supplemental cash-flow(4)Goodwill and other information related to leases is as follows:Other Intangible Assets
 For the Three Months Ended September 30, 2019 For the Nine
Months Ended September 30, 2019
 (Dollars in thousands)
RoU assets obtained in exchange for new operating lease liabilities (non-cash)676
 2,752
Operating (use of cash) from operating leases(1,120) (3,192)
Supplemental balance sheet information related to leases is as follows:
  
As of
September 30, 2019
  (Dollars in thousands)
Operating RoU Assets* $7,228
*Amount included in Other assets  
   
Current operating lease liabilities 3,752
Non-current operating lease liabilities 3,462
Total operating lease liabilities** $7,214
**Amounts included in other accrued liabilities and other long-term obligations  
   
Weighted average remaining lease term (in years) 2.60
Weighted average discount rate - operating leases 5.62%
As of September 30, 2019, lease commitments under non-cancelable operating leases extending for one year or more will require the following future payments:
  (Dollars in thousands)
Remainder 2019 $1,085
2020 3,422
2021 2,085
2022 561
2023 322
2024 and thereafter 381
Total lease payments $7,856
Less: Imputed interest (642)
Present value of lease payments 7,214
Less: Current operating lease liability (3,752)
Non-current operating lease liability $3,462

13

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


As of September 30, 2019, we have not entered into any additional operating lease commitments that have yet to commence.
Disclosure related to periods prior to adoption of the new lease standard
As of December 31, 2018, lease commitments under non-cancelable operating leases required the following future payments:
 (Dollars in thousands)
2019$4,474
20202,747
20211,497
2022334
2023269
2024 and thereafter343
Total lease payments$9,664
Total lease expenses under non-cancelable operating leases approximated $4.9 million in 2018.
(4)Retirement Plans and Postretirement Benefits
The components of our consolidated net pension costs are set forth in the following table:
 For the Three Months
Ended September 30,
 For the Nine Months
Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands)
Service cost$574
 $498
 $1,724
 $1,494
Interest cost1,316
 1,239
 3,948
 3,721
Expected return on plan assets(1,339) (1,502) (4,015) (4,506)
Net cost$551
 $235
 $1,657
 $709
The components of our consolidated net postretirement costs are set forth in the following table: 
 For the Three Months
Ended September 30,
 For the Nine Months
Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands)
Service cost$
 $3
 $
 $3
Interest cost236
 229
 717
 731
Net cost$236
 $232
 $717
 $734
(5)Goodwill and Other Intangible Assets
We are required to review goodwill and indefinite-lived intangible assets annually for impairment. Goodwill impairment is tested at the graphite electrodes reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
The following tables represent the changes in the carrying value of goodwill and intangibles for the nine months ended September 30, 20192020, which are reported in "Other assets" on the balance sheets:

Goodwill
(Dollars in thousands)
Balance as of December 31, 2019$171,117 
   Adjustments
Balance as of September 30, 2020$171,117 
Intangible Assets
 As of September 30, 2020As of December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
(Dollars in thousands)
Trade name$22,500 $(11,425)$11,075 $22,500 $(9,861)$12,639 
Technological know-how55,300 (32,945)22,355 55,300 (29,112)26,188 
Customer–related
intangible
64,500 (22,759)41,741 64,500 (19,473)45,027 
Total finite-lived
intangible assets
$142,300 $(67,129)$75,171 $142,300 $(58,446)$83,854 
Amortization expense of acquired intangible assets was $2.8 million and $3.0 million in the three months ended September 30, 2020 and 2019, respectively, and $8.7 million and $9.2 million in the nine months ended September 30, 2020 and 2019, respectively. Estimated amortization expense will be approximately $2.7 million for the remainder of 2020, $10.7 million in 2021, $10.1 million in 2022, $9.2 million in 2023 and $8.0 million in 2024.
(5)Debt and Liquidity
The following table presents our long-term debt: 
As of
September 30, 2020
As of
December 31, 2019
 (Dollars in thousands)
2018 Credit Facility (2018 Term Loan and 2018 Revolving Credit Facility)$1,563,903 $1,812,204 
Other debt675 619 
Total debt1,564,578 1,812,823 
Less: Short-term debt(147)(141)
Long-term debt$1,564,431 $1,812,682 

During 2019, we repaid a total of $350 million under our 2018 Term Loan Facility (as defined below). These payments satisfied our then-current obligations relative to the minimum quarterly installments. During the nine months ended September 30, 2020, we executed several transactions to repurchase a total of $80 million of principal of our 2018 Term Loan facility. Additionally, during the nine months ended September 30, 2020, we repaid a total of $173 million of principal of our 2018 Term Loan Facility. The fair value of the 2018 Term Loan Facility was approximately $1,576 million and $1,813 million as of September 30, 2020 and December 31, 2019, respectively. The fair value of the debt is measured using level 3 inputs.
14
13

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



Goodwill
(Dollars in thousands)
Balance as of December 31, 2018$171,117
   Adjustments
Balance as of September 30, 2019$171,117
Intangible Assets
 As of September 30, 2019 As of December 31, 2018
 
Gross
Carrying
Amount
 Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 (Dollars in Thousands)
Trade name$22,500
 $(9,336) $13,164
 $22,500
 $(7,721) $14,779
Technological know-how55,300
 (27,808) 27,492
 55,300
 (23,503) 31,797
Customer–related
    intangible
64,500
 (18,377) 46,123
 64,500
 (15,070) 49,430
Total finite-lived
    intangible assets
$142,300
 $(55,521) $86,779
 $142,300
 $(46,294) $96,006
Amortization expense of acquired intangible assets was $3.0 million and $3.2 million in the three months ended September 30, 2019 and 2018 respectively, and $9.2 million and $9.8 million in the nine months ended September 30, 2019 and 2018, respectively. Estimated amortization expense will approximate $2.9 million in the remainder of 2019, $11.4 million in 2020, $10.7 million in 2021, $10.1 million in 2022 and $9.2 million in 2023.
(6)Debt and Liquidity
The following table presents our long-term debt: 
 As of
September 30, 2019
 As of
December 31, 2018
 (Dollars in thousands)
2018 Credit Facility (2018 Term Loan and 2018 Revolving Facility)$2,035,624
 $2,155,883
Other Debt738
 751
Total debt2,036,362
 2,156,634
Less: Short-term debt(70,861) (106,323)
Long-term debt$1,965,501
 $2,050,311
On February 13, 2019, we repaid $125 million on our 2018 Term Loan Facility.    The fair value of debt approximated the book value of $2,036.4 million as of September 30, 2019.
Senior Notes and Old Credit Agreement
As of December 31, 2017, the Company had $300 million of principal amount of 6.375% Senior Notes due 2020 (the "Senior Notes"). The Senior Notes were scheduled to mature on November 15, 2020.
Additionally, as of December 31, 2017, the Company was party to the Amended and Restated Credit Agreement ("Old Credit Agreement") which consisted of the "Old Revolving Facility" and the "Old Term Loan Facility". As of December 31, 2017, the Company had $39.5 million of borrowings on the Old Revolving Facility and $8.7 million of letters of credit drawn against the Old Credit Facility. The balance of the Old Term Loan Facility was $18.7 million as of December 31, 2017.

15

PART I (CONT'D)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


As described below, the outstanding indebtedness under the Senior Notes, Old Revolving Credit Facility and the Old Term Loan was repaid as of February 12, 2018 and all commitments thereunder have been terminated.
Refinancing
On February 12, 2018, the Company entered into a credit agreement (the “2018 Credit Agreement”) among the Company, GrafTech Finance Inc., a Delaware corporation and a wholly owned subsidiary of (“GrafTech (“Finance”), GrafTech Switzerland SA a Swiss corporation and a wholly owned subsidiary of GrafTech (“Swissco”), GrafTech Luxembourg II S.à.r.l., a Luxembourg société à responsabilité limitée and a wholly owned subsidiary of GrafTech (“(“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co‑Borrowers”“Co-Borrowers”), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A. as administrative agent (the "Administrative Agent") and as collateral agent, which provides for (i) a $1,500 million senior secured term facility (the “2018 Term Loan Facility”) and (ii) a $250 million senior secured revolving credit facility (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, the “Senior Secured Credit Facilities”), which may be used from time to time for revolving credit borrowings denominated in dollars or Euro, the issuance of one or more letters of credit denominated in dollars, Euro, Pounds Sterlingeuro, pounds sterling or Swiss Francsfrancs and one or more swing line loans denominated in dollars. GrafTech Finance is the sole borrower under the 2018 Term Loan Facility, while GrafTech Finance, Swissco and LuxembourgLux Holdco are Co‑BorrowersCo-Borrowers under the 2018 Revolving Credit Facility. On February 12, 2018, GrafTech Finance borrowed $1,500 million under the 2018 Term Loan Facility (the "2018 Term Loans"). The 2018 Term Loans mature on February 12, 2025. The maturity date for the 2018 Revolving Credit Facility is February 12, 2023.
The proceeds of the 2018 Term Loans were used to (i) repay in full all outstanding indebtedness of the Co‑BorrowersCo-Borrowers under the Old Credit Agreementour previous credit agreement and terminate all commitments thereunder, (ii) redeem in full the Senior Notesour previously held senior notes at a redemption price of 101.594% of the principal amount thereof plus accrued and unpaid interest to the date of redemption, (iii) pay fees and expenses incurred in connection with (i) and (ii) above and the Senior Secured Credit Facilities and related expenses, and (iv) declare and pay a dividend to the sole pre-IPO stockholder, with any remainder to be used for general corporate purposes. See Note 87 "Interest Expense" for a breakdown of expenses associated with these repayments. In connection with the repayment of the Old Credit Agreementour previous credit agreement and redemption of the Senior Notes,our previously held senior notes, all guarantees of obligations under the Old Credit Agreement,previous credit agreement, the Senior Notessenior notes and related indenture were terminated, all mortgages and other security interests securing obligations under the Old Credit Agreementprevious credit agreement were released and the Old Credit Agreement and the indenture werewas terminated.
Borrowings under the 2018 Term Loan Facility bear interest, at GrafTech Finance’s option, at a rate equal to either (i) the Adjusted LIBO Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 3.50% per annum or (ii) the ABR Rate (as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 2.50% per annum, in each case with one step down of 25 basis points based on achievement of certain public ratings of the 2018 Term Loans.
Borrowings under the 2018 Revolving Credit Facility bear interest, at the applicable Co‑Borrower’sCo-Borrower’s option, at a rate equal to either (i) the Adjusted LIBO Rate, plus an applicable margin initially equal to 3.75% per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.75% per annum, in each case with two 25 basis point step downs based on achievement of certain senior secured first lien net leverage ratios. In addition, the Co‑BorrowersCo-Borrowers will be required to pay a quarterly commitment fee on the unused commitments under the 2018 Revolving Credit Facility in an amount equal to 0.25% per annum.
All obligations under the 2018 Credit Agreement are guaranteed by GrafTech, Finance and each domestic subsidiary of GrafTech, subject to certain customary exceptions, and all obligations under the 2018 Credit Agreement of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) are guaranteed by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech ("Luxembourg Parent"), Luxembourg Holdco and Swissco (collectively, the "Guarantors").
For borrowings under both the 2018 Term Loan Facility and the 2018 Revolving Credit Facility, if the Administrative Agent determines that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate and such circumstances are unlikely to be temporary or the relevant authority has made a public statement identifying a date after which the LIBO Rate shall no longer be used for determining interest rates for loans, then the Administrative Agent and the Co-Borrowers shall endeavor to establish an alternate rate of interest, which shall be effective so long as the majority in interest of the lenders for each Class (as defined in the 2018 Credit Agreement) of loans under the 2018 Credit Agreement do not notify the Administrative Agent otherwise. Until such an alternate rate of interest is determined, (a) any request for a borrowing denominated in dollars based on the Adjusted LIBO Rate will be deemed to be a request for a borrowing at the ABR Rate plus the applicable margin for an ABR Rate borrowing of such loan while any request for a borrowing denominated in any other currency will be ineffective and (b) any outstanding borrowings based on the Adjusted LIBO Rate denominated in dollars will be converted to a

16

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


borrowing at the ABR Rate plus the applicable margin for an ABR Rate borrowing of such loan while any outstanding borrowings denominated in any other currency will be repaid.
All obligations under the 2018 Credit Agreement are guaranteed by GrafTech Finance and each domestic subsidiary of GrafTech, subject to certain customary exceptions, and all obligations under the 2018 Credit Agreement of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")) are guaranteed by GrafTech Luxembourg I S.à.r.l., a Luxembourg
14

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

société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech, Luxembourg Holdco and Swissco (collectively, the "Guarantors").
All obligations under the 2018 Credit Agreement are secured, subject to certain exceptions and Excluded Assets (as defined in the 2018 Credit Agreement), by: (i) a pledge of all of the equity securities of GrafTech Finance and each domestic Guarantor (other than GrafTech) and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65% of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of ("the Code)Code")), and (iii) security interests in, and mortgages on, personal property and material real property of GrafTech Finance and each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement. The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.
The 2018 Term Loans amortize at a rate equal to 5% per annum of the original principal amount of the 2018 Term Loans payable in equal quarterly installments, with the remainder due at maturity. The Co‑BorrowersCo-Borrowers are permitted to make voluntary prepayments at any time without premium or penalty, except in the case of prepayments made in connection with certain repricing transactions with respect to the 2018 Term Loans effected within twelve months of the closing date of the 2018 Credit Agreement, to which a 1.00% prepayment premium applies.penalty. GrafTech Finance is required to make prepayments under the 2018 Term Loans (without payment of a premium) with (i) net cash proceeds from non‑ordinarynon-ordinary course asset sales (subject to customary reinvestment rights and other customary exceptions and exclusions), and (ii) commencing with the Company’s fiscal year endingended December 31, 2019, 75% of Excess Cash Flow (as defined in the 2018 Credit Agreement), subject to step‑downsstep-downs to 50% and 0% of Excess Cash Flow based on achievement of a senior secured first lien net leverage ratio greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00 and less than or equal to 1.25 to 1.00, respectively. Scheduled quarterly amortization payments of the 2018 Term Loans during any calendar year reduce, on a dollar‑for‑dollardollar-for-dollar basis, the amount of the required Excess Cash Flow prepayment for such calendar year, and the aggregate amount of Excess Cash Flow prepayments for any calendar year reduce subsequent quarterly amortization payments of the 2018 Term Loans as directed by GrafTech Finance.
The 2018 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to GrafTech and restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions. The 2018 Credit Agreement contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00:1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility. The 2018 Credit Agreement also contains customary events of default.
Brookfield Promissory Note
On April 19, 2018, we declared a dividend in the form of a $750 million promissory note (the “Brookfield Promissory Note”) to the sole pre-IPO stockholder. The $750 million Brookfield Promissory Note was conditioned upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (each as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the $750 million Brookfield Promissory Note and (iii) the satisfaction of the conditions occurring within 60 days from the dividend record date. Upon publication of our 2018 first quarter report on Form 10-Q, these conditions were met and, as a result, the Brookfield Promissory Note became payable.
The Brookfield Promissory Note had a maturity of eight years from the date of issuance and bore interest at a rate equal to the Adjusted LIBO Rate (as defined in the Brookfield Promissory Note) plus an applicable margin equal to 4.50% per annum, with an additional 2.00% per annum starting from the third anniversary from the date of issuance. We were permitted to make voluntary prepayments at any time without premium or penalty. All obligations under the Brookfield Promissory Note were unsecured and guaranteed by all of our existing and future domestic wholly owned subsidiaries that guarantee, or are borrowers under, the Senior Secured Credit Facilities. No funds were lent or otherwise contributed to us by the pre-IPO stockholder in connection with the Brookfield Promissory Note. As a result, we received no consideration in connection with its issuance. As described below, the Promissory Note was repaid in full on June 15, 2018.

17

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


First Amendment to 2018 Credit Agreement
On June 15, 2018, the Company entered into a first amendment (the “First Amendment”) to its 2018 Credit Agreement. The First Amendment amended the 2018 Credit Agreement to provide for an additional $750 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”) to GrafTech Finance. The Incremental Term Loans increased the aggregate principal amount of term loans incurred by GrafTech Finance under the 2018 Credit Agreement from $1,500 million to $2,250 million. The Incremental Term Loans have the same terms as those applicable to the 2018 Term Loans, including interest rate, payment and prepayment terms, representations and warranties and covenants. The Incremental Term Loans mature on February 12, 2025, the same date as the 2018 Term Loans. GrafTech paid an upfront fee of 1.00% of the aggregate principal amount of the Incremental Term Loans on the effective date of the First Amendment.
The proceeds of the Incremental Term Loans were used to repay, in full, the $750 million of principal outstanding on a promissory note to the Brookfield Promissory Note.Company's sole pre-IPO stockholder.
15
(7)Inventories

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

(6)Inventories
Inventories are comprised of the following: 
As of
September 30, 2020
As of
December 31, 2019
 (Dollars in thousands)
Inventories:
Raw materials$95,136 $104,820 
Work in process126,673 137,230 
Finished goods77,427 71,598 
         Total$299,236 $313,648 
 As of
September 30, 2019
 As of
December 31, 2018
 (Dollars in thousands)
Inventories:   
Raw materials$94,471
 $99,935
Work in process143,192
 125,767
Finished goods77,292
 68,015
         Total$314,955
 $293,717
(8)(7)Interest Expense
The following tables present the components of interest expense: 
For the Three Months Ended September 30, For the Nine Months
Ended September 30,
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
2019 2018 2019 20182020201920202019
(Dollars in thousands) (Dollars in thousands)
Interest incurred on debt$30,222
 $32,278
 $93,731
 $67,751
Interest incurred on debt$20,893 $30,222 $64,285 $93,731 
Related-party Promissory Note interest expense
 
 
 5,090
Senior Note redemption premium
 
 
 4,782
Accretion of fair value adjustment on Senior Notes
 
 
 19,414
Accretion of original issue discount on 2018 Term Loans549
 549
 1,647
 906
Accretion of original issue discount on 2018 Term Loans549 549 1,647 1,647 
Amortization of debt issuance costs1,032
 1,028
 3,094
 2,444
Amortization of debt issuance costs1,032 1,032 3,094 3,094 
Total interest expense$31,803
 $33,855
 $98,472
 $100,387
Total interest expense$22,474 $31,803 $69,026 $98,472 
Interest Rates
The 2018 Credit Agreement had an effective interest rate of 5.54%4.50% as of September 30, 2019. The Old Revolving Facility2020 and Old Term Loan Facility had an effective interest rate of 4.57%5.30% as of December 31, 2018 and the Senior Notes had a fixed interest rate of 6.375%, both of which were repaid on February 12, 2018 as part of our refinancing (see Note 6 "Debt and Liquidity").2019. During the third quarter of 2019, the Company entered into four interest rate swap contracts to fix our cash flows associated with the risk in variability in the one-month U.S. London Interbank Offered Rate ("US LIBO RateLIBOR") for a portion of our outstanding debt. See Note 1110 "Derivative Instruments" for details of these transactions.
As a result of our February 12, 2018 refinancing, we paid a prepayment premium for the redemption of our Senior Notes totaling $4.8 million. The accretion of the August 15, 2015 fair value adjustment to our Senior Notes totaling $19.4 million included

(8) Contingencies
18

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


accelerated accretion of $18.7 million for the nine months ended September 30, 2018 resulting from the prepayment. Amortization of debt issuance costs included $0.3 million of accelerated amortization related to the refinancing.
(9)Contingencies
Legal Proceedings
We are involved in various investigations, lawsuits, claims, demands, environmental compliance programs and other legal proceedings arising out of or incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of these matters, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows. Additionally, we are involved in the following legal proceedings described below.
LitigationPending litigation in Brazil has been pending in Brazil 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.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 is currently evaluating the merits of seekinghas 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 have appealed this state court ruling, as well and the appellate court issued a decision in our favor on May 19, 2020.The employees have further appealed and we intend to vigorously defend it. As of September 30, 2019,2020, we are unable to assess the
16

PART I (CONT'D)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
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 nine months ended September 30, 2019,2020, are presented below: 
 (Dollars in thousands)
Balance as of December 31, 2018$1,528
Product warranty accruals and adjustments700
Settlements(656)
Balance as of September 30, 2019$1,572
(Dollars in thousands)
Balance as of December 31, 2019$1,835 
Product warranty accruals and adjustments920 
Settlements(613)
Balance as of September 30, 2020$2,142 
Tax Receivable Agreement
On April 23, 2018, the Company entered into a tax receivable agreement (the "TRA") that provides Brookfield, as the sole pre-IPO stockholder, the right to receive future payments from us for 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses ("NOLs"), previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in Swissco (collectively, the "Pre‑IPO Tax Assets").GrafTech Switzerland SA. In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to the LIBO Rate plus 1.00% per annum. The term of the TRA commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments.
There was no liability recognized on the date we entered into the TRA as there was a full valuation allowance recorded against our deferred tax assets. During the second quarter of 2018, it was determined that the conditions were appropriate for the Company to release a valuation allowance of certain tax assets as we exited our three year cumulative loss position. This release and subsequent adjustmentresulted in the fourth quarter resulted in anrecording of a $86.5 million liability related to the TRA on the Consolidated Statements of Operationsas "Related Party Tax Receivable Agreement Expense."
As of December 31, 2018. In2019, the first quartertotal TRA liability was $89.9 million, of 2019, we reclassified $23.9which $27.9 million to thewas classified as a current liability in "Related party payable - taxpayable-tax receivable agreement" on the balance sheet, as we expect this portion to be settled within twelve months. $62.6and $62.0 million of the liability remainsremained as a long-term liability in "Related party payable - taxpayable-tax receivable agreement" on the balance sheetsheet. The 2019 current liability was settled in the first quarter of 2020. In the first quarter of 2020, the TRA liability was reduced by $3.3 million due to the revised profit expectation for 2020, caused by the COVID-19 pandemic. The reduction was recorded as a "Related Party Tax Receivable Agreement Benefit" on the Consolidated Statement of Operations. As of September 30, 2019.

19

PART I (CONT'D)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


2020, the total TRA liability was $58.6 million, of which $16.1 million was classified as a current liability in "Related party payable-tax receivable agreement" and $42.5 million remained as a long-term liability in "Related party payable-tax receivable agreement" on the balance sheet.
Long-term Incentive Plan
The long-term incentive plan ("LTIP") was adopted by the Company effective as of August 17, 2015, as amended and restated as of March 15, 2018. The purpose of the plan is to retain senior management of the Company, to incentivize them to make decisions with a long-term view and to influence behavior in a way that is consistent with maximizing value for the pre-IPO stockholder of the Company in a prudent manner. Each participant is allocated a number of profit units, with a maximum of 30,000 profit units (or ("Profit Units)Units") available under the plan. Awards of Profit Units generally vest in equal increments over a five-year period beginning on the first anniversary of the grant date and subject to continued employment with the Company through each vesting date. Any unvested Profit Units that have not been previously forfeited will accelerate and become fully vested upon a ‘‘Change in Control’’ (as defined below).
Profit Units will generally be settled in a lump sum payment within 30 days following a Change in Control based on the ‘‘Sales Proceeds’’ (as defined below) received by Brookfield Capital Partners IV, L.P. (or, together(together with its affiliates, Brookfield"Brookfield Capital IV)IV") in connection with the Change in Control. The LTIP defines ‘‘Change in Control’’ as any transaction
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(Unaudited)

or series of transactions (including, without limitation, the consummation of a combination, share purchases, recapitalization, redemption, issuance of capital stock, consolidation, reorganization or otherwise) pursuant to which (a) a Person not affiliated with Brookfield Capital IV acquires securities representing more than seventy percent (70%) of the combined voting power of the outstanding voting securities of the Company or the entity surviving or resulting from such transaction, (b) following a public offering of the Company’s stock, Brookfield Capital IV has ceased to have a beneficial ownership interest in at least 30% of the Company’s outstanding voting securities (effective on the first of such date), or (c) the Company sells all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis. It is intended that the occurrence of a Change in Control in which Sales Proceeds exceed the Threshold Value would constitute a ‘‘substantial risk of forfeiture’’ within the meaning of Section 409A of the Code. The LTIP defines ‘‘Threshold Value’’ as, as of any date of determination, an amount equal to $855,000,000 (which represents the amount of the total invested capital of Brookfield Capital IV as of August 17, 2015), plus the dollar value of any cash or other consideration contributed to or invested in the Company by Brookfield Capital IV after August 17, 2015. The Threshold Value shall be determined by the Company's Board of Directors in its sole discretion. The LTIP defines ‘‘Sales Proceeds’’ as, as of any date of determination, the sum of all proceeds actually received by the Brookfield Capital IV, net of all Sales Costs (as defined below), (i) as consideration (whether cash or equity) upon the Change in Control and (ii) as distributions, dividends, repurchases, redemptions or otherwise as a holder of such equity interests in the Company. Proceeds that are not paid upon or prior to or in connection with the Change in Control, including earn-outs, escrows and other contingent or deferred consideration shall become ‘‘Sale Proceeds’’ only as and when such proceeds are received by Brookfield Capital IV. ‘‘Sales Costs’’ means any costs or expenses (including legal or other advisoradvisory costs), fees (including investment banking fees), commissions or discounts payable directly by Brookfield Capital IV in connection with, arising out of or relating to a Change in Control, as determined by the Company's Board of Directors in its sole discretion.
Given the successful completion of the IPO in the second quarter of 2018, it is reasonably possible that a Change in Control, as defined above, may ultimately happen and that the awarded Profit Units will be subsequently paid out to the participants. Assuming 100% vesting of the awarded Profit Units and dependingDepending on Brookfield’s sales proceeds, the potential liability triggered by a Change in Control is estimated to be in the range of $65$55 million to $90$70 million. As of September 30, 2019,2020, the Profit Unit awards are 80%100% vested.
(10)Income Taxes
(9) 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 (loss) before income tax expense 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.

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(Unaudited)



The following tables summarizetable summarizes the provision for income taxes for the three and nine months ended September 30, 20192020 and 2019:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020201920202019
(Dollars in thousands)
Tax expense$18,104 $20,755 $61,838 $90,940 
Pretax income112,338 196,631 371,116 660,620 
Effective tax rates16.1 %10.6 %16.7 %13.8 %
The effective tax rate for the three months ended September 30, 2018:2020 was 16.1%. This rate differs from the U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates, which is partially offset by the net combined impact related to the U.S. taxation of global intangible low taxed income ("GILTI") and Foreign Tax Credits ("FTCs").
 
For the Three Months
Ended September 30,
 For the Nine Months
Ended September 30,
 2019 2018 2019 2018
 (Dollars in thousands)
      
Tax expense$20,755
 $24,871
 $90,940
 $36,250
Pretax income196,631
 225,063
 660,620
 660,252
Effective tax rates10.6% 11.1% 13.8% 5.5%

The effective tax rate for the three months ended September 30, 2019 was 10.6%. This rate differs from the U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates and was further improved by the provision to return adjustment recorded in the third quarter of 2019 as a result of filing income tax returns in foreign jurisdictions.rates.

The effective tax rateexpense decreased from $20.8 million for the three months ended September 30, 2018 was 11.1%.2019 to $18.1 million for the three months September 30, 2020. This decrease is primarily related to the reduction in pretax income and worldwide earnings from various countries taxed at different rates, partially offset by a higher relative combined impact of GILTI and FTCs.
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(Unaudited)


For the nine months ended September 30, 2020, the effective tax rate of 16.7% differs from the U.S. statutory rate of 21% primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and the tax impact of worldwide earnings from various countries taxed at different rates.
Tax expense decreased from $24.9 million forrates which is partially offset by the three months ended September 30, 2018 to $20.8 million for the three months September 30, 2019. This change is primarilynet combined impact related to the reduction in profitsU.S. taxation of GILTI and further reduced by the provision to return adjustment recorded in the third quarter of 2019 as a result of filing income tax returns in foreign jurisdictions.FTCs.
The effective tax rate for
For the nine months ended September 30, 2019, wasthe effective tax rate of 13.8%. This rate differs from the 2019 U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates.

The effective tax rateexpense decreased from $90.9 million for the nine months ended September 30, 2018 was 5.5%.2019 to $61.8 million for the nine months ended September 30, 2020. This rate differs from the U.S. statutory rate of 21%decrease is primarily duerelated to the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributesreduction in pretax income and the tax impact of worldwide earnings from various countries taxed at different rates.rates, partially offset by a higher relative combined impact ofGILTI and FTCs.
Tax expense increased from $36.3 million in the nine months ended September 30, 2018 to $90.9 million in the nine months ended September 30, 2019, primarily due to a partial release in the first nine months of 2018 of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes.
As of September 30, 2019,2020, we had unrecognized tax benefits of $2.2$0.1 million, which, if recognized, would have a favorable impact on our effective tax rate.

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 2015 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. All other jurisdictions are still open to examination beginning after 2012.

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 valuation allowance is required, we have established and maintained valuation allowances on those net deferred tax assets.

Tax Cuts and Jobs Act(10) Derivative Instruments
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revised the U.S. corporate income tax system. These changes included a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures which have the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income ("GILTI"). In general, these changes were effective beginning in 2018. The

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(Unaudited)


Tax Act also included a one-time mandatory deemed repatriation or transition tax on the accumulated previously untaxed foreign earnings of our foreign subsidiaries.
On August 1, 2018, the U.S. Department of Treasury and the U.S. Internal Revenue Service ("IRS") issued proposed regulations under code section 965 and on January 15, 2019, the IRS issued final 965 regulations. As of September 30, 2019, the tax impact of the final 965 regulations to the Company’s financial statements was immaterial. The Company continues to analyze the effects of the Tax Act and newly issued proposed regulation on its financial statements. The final impact of the Tax Act may differ from the amounts that have been recognized, possibly materially, due to, among other things, changes in the Company’s interpretation of the Tax Act, legislative or administrative actions to clarify the intent of the statutory language provided that differ from the Company’s current interpretation, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates utilized to calculate the impacts, including changes to current year earnings estimates and applicable foreign exchange rates.
The Company also continues to evaluate the impact of the GILTI provisions under the Tax Act, which are complex and
subject to continuing regulatory interpretation by the IRS. The Company is required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred.
(11)Derivative Instruments
We use derivative instruments as part of our overall foreign currency, interest rate and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows, manage the risk associated with fluctuations in interest rate indices and to minimize commodity price volatility. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the U.S. dollar.
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. Our
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, sales, receivables, payables and purchases. 
We have no foreign currency cash flow hedges outstanding as of September 30, 2020 and December 31, 2019 and, therefore, no unrealized gains or losses reported under accumulated other comprehensive income (loss).
As of September 30, 2020, we had outstanding Mexican peso, euro, Swiss franc, South African rand and Japanese yen currency contracts with an aggregate notional amount of $63.5 million. As of December 31, 2019, we had outstanding Mexican peso, South African rand, euro, Swiss franc and Japanese yen currency contracts, with an aggregate notional amount of $78.8 million. The foreign currency derivatives outstanding as of September 30, 2020 have maturities through December 31, 2020, and were not designated as hedging instruments.
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(Unaudited)

Commodity derivative assets and liabilitiescontracts
We have entered into commodity derivative contracts for refined oil products. These contracts are includedentered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. We had outstanding commodity derivative contracts as of September 30, 2020 with a notional amount of $67.2 million with maturities from October 2020 to June 2022. The outstanding commodity derivative contracts represented a pre-tax net unrealized loss within "Other long-term assets", "Prepaid expenses and other current assets", "Long-term liabilities" and "Other current liabilities" on the Condensed Consolidated Balance Sheets and effects"Accumulated Other Comprehensive Income" of these derivatives are recorded in "Other comprehensive income", "Cost$8.9 million as of sales", "Interest expense" and "Other income (expense)" on the Condensed Consolidated StatementsSeptember 30, 2020. We had outstanding commodity derivative contracts as of Operations.December 31, 2019 with a notional amount of $99.5 million representing a pre-tax net unrealized loss of $3.7 million.
Interest rate swap contracts
During the third quarter of 2019, the Company entered into four interest rate swap contracts. The contracts are "pay fixed, receive variable" with notional amounts of $500 million maturing in two years and another $500 million maturing in five years. The Company’s risk management objective was to fix its cash flows associated with the risk in variability in the one-month USU.S. LIBO Rate for a portion of our outstanding debt. It is expected that these swaps will fix the cash flows associated with the forecasted interest payments on this notional amount of debt to an effective fixed interest rate of 5.1%, which could be lowered to 4.85% depending on credit ratings. Within Accumulated Other"Other Comprehensive IncomeIncome", we recorded a net unrealized pre-tax gainloss of $0.7$16.2 million as offor the nine months ended September 30, 2019.2020. The fair value of these contracts was determined using Level 2 inputs.
Foreign currency derivativesNet investment hedges
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, sales, receivables, payables, and purchases. 
We had no foreign currency cashflow hedges outstanding as of September 30, 2019 and December 31, 2018 and therefore, no unrealized gains or losses reported under accumulated other comprehensive income (loss).
As of September 30, 2019, we had outstanding Mexican peso, euro, Swiss franc, South African rand, and Japanese yen currency contracts with an aggregate notional amount of $75.1 million. These foreign currency derivatives outstanding as of

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(Unaudited)


September 30, 2019 have maturities through December 31, 2019. As of December 31, 2018, we had outstanding Mexican peso, South African rand, euro, Swiss franc and Japanese yen currency contracts, with an aggregate notional amount of $19.6 million.
Commodity derivative contracts
We have entered into commodity derivative contracts for refined oil products. These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. We had outstanding commodity derivative contracts as of September 30, 2019 with notional amount of $111.0 million with maturities from October 2019 to June 2022. The outstanding commodity derivative contracts represented a pre-tax net unrealized loss within "Other Comprehensive Income" of $17.2 million as of September 30, 2019. We had outstanding commodity derivative contracts as of December 31, 2018 with notional amount of $142.1 million representing a pre-tax net unrealized loss of $10.7 million.
Net Investment Hedges
We use certain intercompany debt to hedge a portion of our net investment in our foreign operations against currency exposure (net investment hedge). Intercompany In the second quarter of 2020, we discontinued our net investment hedge following a reduction in the investment that materially decreased the currency exposure. As of December 31, 2019, intercompany debt denominated in foreign currency and designated as a non-derivative net investment hedging instrument was $9.0 million as of September 30, 2019 and $9.5 million as of December 31, 2018.$5.5 million. Within the currency translation adjustment portion of "Other Comprehensive Income", we recorded 0 pre-tax gains or losses and $1.2 million pre-tax gains for the three and nine months ended September 30, 2020, respectively. Within the currency translation adjustment portion of "Other Comprehensive Income", we recorded pre-tax loss of $0.7 million and $0.5 million for the three and nine months ended September 30, 2019, respectively. We recorded gains of $0.4 million and $1.9 million in the three and nine months ended September 30, 2018, respectively.2019.
The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Condensed Consolidated Balance Sheets. As of September 30, 20192020 and December 31, 2018,2019, the fair value of our derivatives and their respective balance sheet locations are presented in the following table:tables:
Asset DerivativesLiability Derivatives
 Location   Fair  ValueLocation   Fair  Value
As of September 30, 2020(Dollars in thousands)
Derivatives designated as cash flow hedges:
Commodity derivative contractsPrepaid and other current assets$Other accrued liabilities$4,653 
Other long-term assetsOther long-term obligations4,261 
Interest rate swap contractsPrepaid and other current assetsOther accrued liabilities5,730 
Other long-term assetsOther long-term obligations7,609 
Total fair value$$22,253 
As of December 31, 2019
Derivatives designated as cash flow hedges:
Commodity derivative contractsPrepaid and other current assets$104 Other accrued liabilities$1,872 
Other long-term assets369 Other long-term obligations2,255 
Interest rate swap contractsPrepaid and other current assets253 Other accrued liabilities
Other long-term assets2,684 Other long-term obligations72 
Total fair value$3,410 $4,199 
20
 Asset Derivatives Liability Derivatives
 Location Fair  Value Location Fair  Value
As of September 30, 2019(Dollars in thousands)
Derivatives designated as cash flow hedges:      
Commodity derivative contractsPrepaid and other current assets $6
 Other accrued liabilities $9,290
 Other long-term assets 49
 Other long-term obligations 7,940
Interest rate swap contractsPrepaid and other current assets 1,033
 Other accrued liabilities 
 Other long-term assets 22
 Other long-term obligations 317
Total fair value  $1,110
   $17,547
        
As of December 31, 2018 
Derivatives designated as cash flow hedges:      
Commodity derivative contractsPrepaid and other current assets $90
 Other accrued liabilities $4,630
 Other long-term assets 260
 Other long-term obligations 6,393
Total fair value  $350
   $11,023

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



 Asset DerivativesLiability Derivatives
 Location   Fair  ValueLocation   Fair  Value
As of September 30, 2020(Dollars in thousands)
Derivatives not designated as hedges:
Foreign currency derivativesPrepaid and other current assets$817 Other current liabilities$161 
Commodity derivatives contractsPrepaid and other current assets165 Other accrued liabilities
$982 $161 
As of December 31, 2019
Derivatives not designated as hedges:
Foreign currency derivativesPrepaid and other current assets$239 Other current liabilities$81 
Commodity derivatives contractsPrepaid and other current assets376 Other accrued liabilities
$615 $81 
 Asset Derivatives Liability Derivatives
 Location Fair  Value Location Fair  Value
As of September 30, 2019(Dollars in thousands)
Derivatives not designated as hedges:      
Foreign currency derivativesPrepaid and other current assets $189
 Other current liabilities $971
        
As of December 31, 2018       
Derivatives not designated as hedges:      
Foreign currency derivativesPrepaid and other current assets $
 Other current liabilities $43
The realized (gains) losses resulting from the settlement of commodity derivative contracts designated as hedges remain in Accumulated"Accumulated Other Comprehensive IncomeIncome" until they are recognized in the Statement of Operations when the hedged item impacts earnings, which is when the finished product is sold. As of September 30, 20192020 and September 30, 2018,2019, net realized pre-tax losses of $8.0 million and pre-tax gains of $7.3 million, and $5.4 million, respectively, were reported under Accumulated"Accumulated Other Comprehensive IncomeIncome" and will be and were, respectively, released to earnings within the following 12 months. See the table below for amounts recognized in the Statement of Operations.

The location and amount of pre-tax realized (gains) losses on commodity derivatives interest rate swaps and on undesignated foreign currency derivativesare recognized in the StatementStatements of Operations as follows for the periods ended September 30, 20192020 and September 30, 2018 are as follows :2019:
  Amount of (Gain)/Loss
Recognized
Location of (Gain)/Loss Recognized in the Consolidated Statement of OperationsFor the Three Months Ended September 30,
20202019
Derivatives designated as cash flow hedges:(Dollars in thousands)
Commodity derivative contractsCost of sales$(1,295)$(3,145)
Interest rate swapInterest expense1,537 (323)
Derivatives not designated as hedges:
Foreign currency derivativesCost of sales, Other (income) expense$(243)$173 
Commodity derivative contractsCost of sales(207)
  Amount of (Gain)/Loss
Recognized
Location of (Gain)/Loss Recognized in the Consolidated Statement of OperationsFor the Nine Months Ended September 30,
20202019
Derivatives designated as cash flow hedges:(Dollars in thousands)
Commodity contract hedgesCost of sales$(5,234)$(6,994)
Interest rate swap contractsInterest expense2,852 (323)
Derivatives not designated as hedges:
Foreign currency derivativesCost of sales, Other (income) expense$(959)$(648)
Commodity derivative contractsCost of sales(321)
21
    
Amount of (Gain)/Loss
Recognized
  Location of (Gain)/Loss Recognized in the Consolidated Statement of Operations For the Three Months Ended September 30,
   2019 2018
Derivatives designated as cash flow hedges:   (Dollars in thousands)
Commodity contract hedges Cost of sales $(3,145) $421
Interest rate swap contracts Interest expense (323) 
    $(3,468) $421
       
Derivatives not designated as hedges:      
Foreign currency derivatives Cost of sales, Other (income) expense $173
 (159)
       
    
Amount of (Gain)/Loss
Recognized
  Location of (Gain)/Loss Recognized in the Consolidated Statement of Operations For the Nine Months Ended September 30,
   2019 2018
Derivatives designated as cash flow hedges:   (Dollars in thousands)
Commodity contract hedges Cost of sales $(6,994) 421
Interest rate swap contracts Interest expense (323) 
    $(7,317) $421
       
Derivatives not designated as hedges:      
Foreign currency derivatives Cost of sales, Other (income) expense $(648) 137
(12)Accumulated Other Comprehensive Income (Loss)
The balance in our accumulated other comprehensive income (loss) is set forth in the following table:
 As of
September 30, 2019
 As of
December 31, 2018
 (Dollars in thousands)
Foreign currency translation adjustments, net of tax$(16,441) $(2,922)
Commodities, interest rate and foreign currency derivatives, net of tax(7,236) (2,878)
Total accumulated comprehensive income (loss)$(23,677) $(5,800)

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(Unaudited)



(11) Accumulated Other Comprehensive Income (Loss)
(13)Earnings per Share
The balance in our accumulated other comprehensive income (loss) is set forth in the following table:
 As of
September 30, 2020
As of
December 31, 2019
 (Dollars in thousands)
Foreign currency translation adjustments, net of tax$(15,376)$(9,293)
Commodity and interest rate derivatives, net of tax(23,785)1,932 
Total accumulated comprehensive income (loss)$(39,161)$(7,361)
(12) Earnings per Share
During the nine months ended September 30, 2020, we repurchased 3,328,574 shares of our common stock under the repurchase program that was approved on July 30, 2019. These shares were subsequently retired. There were 0 shares repurchased under this program during the three months ended September 30, 2020.
The following table shows the information used in the calculation of our basic and diluted earnings per share calculation as offor the three and nine months ended September 30, 20192020 and September 30, 2018.2019:
For the Three Months Ended September 30, For the Nine Months
Ended September 30,
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
2019 2018 2019 20182020201920202019
       
Weighted average common shares outstanding for basic calculation290,112,233
 296,136,564
 290,410,859
 300,173,831
Weighted average common shares outstanding for basic calculation267,265,705 290,112,233 267,908,427 290,410,859 
Add: Effect of stock options, deferred stock units and restricted stock units15,063
 8,889
 11,492
 4,873
Add: Effect of stock options, deferred share units and restricted stock unitsAdd: Effect of stock options, deferred share units and restricted stock units13,850 15,063 12,463 11,492 
Weighted average common shares outstanding for diluted calculation290,127,296
 296,145,453
 290,422,351
 300,178,704
Weighted average common shares outstanding for diluted calculation267,279,555 290,127,296 267,920,890 290,422,351 
Basic earnings per common share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding, which includes 77,157 and 65,264 shares of participating securities in the three and nine months ended September 30, 2020, respectively, and 36,546 and 28,914 shares of participating securities in the three and nine months ended September 30, 2019, respectively, and 8,890 and 2,996 shares of participating securities in the three and nine months ended September 30, 2018, respectively.2019. Diluted earnings per share are calculated by dividing net income (loss) by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.
The weighted average common shares outstanding for the diluted earnings per share calculation excludes consideration of 1,730,960 and 1,644,002 equivalent shares in the three and nine months ended September 30, 2020, respectively, and 1,303,854 and 1,203,220 equivalent shares in the three and nine months ended September 30, 2019, respectively, and 946,610 and 544,292 equivalent shares in the three and nine months ended September 30, 2018, respectively, as these shares are anti-dilutive. During the three months ended September 30, 2019, we repurchased 879,134 shares of our common stock under the previously announced repurchase program. These shares were subsequently retired.
(14)(13) Stock-Based Compensation
Stock-based compensation awards granted by our Board of Directors for the three and nine months ended September 30, 20192020 and 20182019 were as follows:
 For the Three Months Ended September 30, For the Nine Months
Ended September 30,
 2019 2018 2019 2018
Award type:       
Stock options
 67,000
 207,000
 979,790
Deferred stock units16,176
 9,286
 23,121
 28,621
Restricted stock units1,551
 
 235,170
 6,740
In the three months ended September 30, 2019 and 2018, we recognized $0.7 million and $0.5 million, respectively, in stock-based compensation expense. A majority of the expense, $0.6 million and $0.4 million respectively, was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales and research and development.
In the nine months ended September 30, 2019 and 2018, we recognized $1.6 million and $0.7 million, respectively, in stock-based compensation expense. A majority of the expense, $1.4 million and $0.6 million respectively, was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales and research and development.
As of September 30, 2019, unrecognized compensation cost related to non-vested stock options, deferred stock units and restricted stock units represents $7.9 million, which will be recognized over the remaining weighted average life of 4.0 years.

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Award type:
Stock options4,000 304,000 207,000 
Deferred share units20,027 16,176 44,670 23,121 
Restricted stock units16,729 1,551 328,720 235,170 
25
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




In the three months ended September 30, 2020 and 2019, we recognized $0.8 million and $0.7 million, respectively, in stock-based compensation expense. A majority of the expense, $0.7 million and $0.6 million respectively, was recorded as selling and administrative expense in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales.
In the nine months ended September 30, 2020 and 2019, we recognized $1.9 million and $1.6 million, respectively, in stock-based compensation expense. A majority of the expense, $1.6 million and $1.4 million, respectively, was recorded as selling and administrative expense in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales.
As of September 30, 2020, unrecognized compensation cost related to non-vested stock options, deferred share units and restricted stock units was $8.4 million, which will be recognized over the remaining weighted average life of 3.6 years.
Stock Option, Deferred StockShare Unit and Restricted Stock Unit awards activity under the Omnibus Equity Incentive Plan for the nine months ended September 30, 20192020 was as follows:
Stock optionsOptions
Number
of Shares
Weighted-
Average
Exercise
Price
Number
of Shares
 
Weighted-
Average
Exercise
Price
Outstanding unvested as of December 31, 2018968,720
 15.68
Outstanding unvested as of December 31, 2019Outstanding unvested as of December 31, 2019931,658 $15.06 
Granted207,000
 13.03
Granted304,000 8.99 
Vested(188,810) 15.70
Vested(186,162)15.20 
Forfeited(52,622) 15.00
Forfeited(143,960)14.82 
Outstanding unvested as of September 30, 2019934,288
 15.13
Outstanding unvested as of September 30, 2020Outstanding unvested as of September 30, 2020905,536 $13.03 
Deferred StockShare Unit and Restricted Stock Unit awards
Number
of Shares
Weighted-
Average
Grant Date
Fair Value
Outstanding unvested as of December 31, 2019282,716 $12.83 
    Granted373,390 8.77 
    Vested(87,112)10.18 
     Forfeited(45,760)12.24 
Outstanding unvested as of September 30, 2020523,234 $10.43 
 
Number
of Shares
 
Weighted-
Average
Grant Date
Fair Value
Outstanding unvested as of December 31, 201827,570
 12.88
    Granted258,291
 12.85
    Vested(22,687) 12.52
Outstanding unvested as of September 30, 2019263,174
 12.95
(15)(14) Subsequent Events
In October 2020, we repaid an additional $60 million under our term loan. We will continue to prioritize balance sheet flexibility and expect to use the majority of fourth quarter incremental free cash flow to further repay debt.    
On November 6, 2019, the2, 2020, our Board of Directors declared our regulara quarterly dividend of $0.085$0.01 per share to stockholders of record as of the close of business on November 29, 2019,30, 2020, to be paid on December 31, 2019.2020.
    

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OutlookThe Company
GrafTech is a leading manufacturer of graphite electrodes, the critical consumable for the electric arc furnace ("EAF") industry. We are the only graphite electrode producer that is substantially vertically integrated into petroleum needle coke, thea key raw material for graphite electrodes. Vertical integration has allowed us to adopt a commercial strategy with long-term, fixed price, fixed volume, take-or-pay contracts providing earnings stability and visibility. These contracts define volumes and prices, along with price‑escalationprice-escalation mechanisms for inflation, and include significant termination payments (typically, 50% to 70% of remaining contracted revenue) and, in certain cases, parent guarantees and collateral arrangements to manage our customer credit risk.
The outstanding three‑to‑five‑environmental and economic advantages of electric arc furnace steel production positions both that industry and the graphite electrode industry for continued long-term growth.
We believe GrafTech's leadership position, strong cash flows, and advantaged low cost structure and vertical integration are sustainable competitive advantages. Our services and solutions we provide will position our customers and us for a better future.
COVID-19 and Operational Update
GrafTech continues to proactively manage through the COVID-19 crisis. Our executive-led COVID-19 response team meets three times per week to monitor the ongoing situation and respond as needed.
Our plants have remained operational through the current pandemic and maintained a 98% on-time delivery rate. Our global footprint gives us the flexibility to move or adjust production if needed.
We continue to focus on containing our costs and aligning production to current sales levels for the remainder of the year. We expect to meet our reduced full year take‑or‑pay contracts representcapital expenditure estimate of approximately 146,000, 142,000, 125,000$35 million.
Commercial Update
GrafTech services customers at over 300 locations across the globe, all of which have been impacted by COVID-19. We are seeing a measured recovery in the global steel markets compared to the second quarter, with each region recovering at different rates, and 117,000anticipate this will have a positive influence on graphite electrode demand. In the third quarter, the global (ex-China) steel market capacity utilization rate improved to over 60%. In the U.S., the third quarter capacity utilization rate was approximately 64%. By late October, the capacity utilization rate in the U.S. steel market approached 70%.
The commercial team has worked diligently to achieve solid results in the current environment. Year-to-date sales volumes through the third quarter were 98 thousand metric tons ("MT") in 2019, 2020, 2021, consisting of LTA volumes of 82 thousand MT and 2022, respectively. These amounts are slightly lower than amounts reported in previous quarters due to the financial conditionnon-LTA volumes of certain of our customers. Approximately 83% of these volumes are under pre-determined fixed annual volume contracts, while approximately 17% of the volumes are under contracts with a specified volume range. The aggregate difference between the midpoint and the minimum volumes across our cumulative portfolio of take-or-pay contracts with specified volume ranges is approximately 5,000 MT per year. Volumes per year may further vary based on the actual timing of product shipments and the financial condition of our customers. We have contracted approximately two-thirds of our production capacity through these contracts.16 thousand MT.
We have announced a series of operational improvement projects at our Monterrey and St. Marys facilities. These projects are intended to help optimize our manufacturing footprint while improving environmental performance and increasing production flexibility. We expect these projects to be completed in the first half of 2021, at which time we will be able to shift additional graphitization and machining from Monterrey to St. Marys. We estimate that capital spending would be near current levels which includes these projects as well as maintenance and capital projects, subject to the approval by our Board.
Our weighted average realized price of GrafTech manufactured electrodes was $9,960 per MT inDuring the third quarter, of 2019 comparedour average price from LTAs declined slightly to $9,664approximately $9,300 per MT, reflecting the impacts of product mix, LTA modifications and other adjustments. Due to favorable mix in the quarter, the average price for our non-LTA business increased slightly to approximately $5,700 per MT. However, as anticipated, we believe the general spot price of graphite electrodes continued to trend lower during the third quarter. Given the continuing uncertainty caused by the pandemic and the macro-economic headwinds we and our customers face, we expect overall demand and pricing for our graphite electrodes to remain low for the remainder of 2020 as our customers continue to work through their existing graphite electrode inventories.
The current market conditions are challenging for our customers, including those with LTAs, and we have some customers that are continuing to struggle to take their committed volumes. This is causing some non-performance and disputes, including a few arbitrations associated with, among other things, efforts to modify existing contracts. As such, we will continue to work to preserve our rights under the LTAs.
We are working hard with our valued customers to develop mutually beneficial solutions and have successfully negotiated LTA modifications with several of these customers during the third quarter. We are able to provide near-term relief in exchange for additional contractual commitments going forward. We expect to continue to finalize more of these beneficial negotiations in the coming months.
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Capital Structure and Capital Allocation
During the third quarter, we reduced our debt by approximately $150 million. After the quarter end, we further reduced our debt by an additional $60 million, bringing 2020 debt reduction to $313 million through the end of 2018, which has been recast as described below. While spot prices have come down from recent historic highs, they still remain well above their historical average. Strong economics for the EAF producers that we serve has led to EAF production since 2016 resuming growth in line with its historical trend (2.8% annually from 1984-2017) in recent history. Steelmakers have announced EAF capacity expansions representing a potential 15 to 20% increase in graphite electrode demand in the U.S. by 2022. However, recent steel production and graphite electrode consumption has slowed in some regions, notably Europe and South America.
A tight needle coke market is also contributing to these elevated prices. Needle coke demand from electric vehicle batteries is currently disrupting the supply chain and resulting in increased pricing and higher costs of sales. Although our vertical integration largely protects us from the increase in needle coke costs, we expect to purchase approximately one third of our needle coke supply from third parties. These higher needle coke costsOctober. We will continue to impactprioritize balance sheet flexibility and expect to use the majority of fourth quarter incremental free cash flow to reduce debt.
Outlook
For the remainder of 2020, we anticipate our earnings.
We are impacted in varying degrees, both positively and negatively, as global, regional or country economic conditions fluctuate. Our discussions about market data and global economic conditions below are derived from published industry accounts and statistics. In its October 2019 report,full year LTA sales volumes to be above the International Monetary Fund ("IMF") reported that they were again lowering their 2019 growth forecast from their July forecast by 0.2% to 3.0% and lowering their 2020 forecast by 0.1% to 3.4%, as rising trade and geopolitical tensions have increased uncertainty about the futuremidpoint of the global trading system.expected range of 100 thousand - 115 thousand MT. We now expect our full year LTA revenue will be between $1,000 million and $1,080 million in 2020.
Graphite electrode demand is primarily linkedWith the LTA modifications and ongoing customer discussions, we are able to provide estimated shipments of graphite electrodes for the global productionfinal two years of steel in EAFs,the initial term under our LTAs and for the years 2023 through 2024 as follows:
202120222023 through 2024
Estimated LTA volume(1)
98-10895-10535-45
Estimated LTA revenue(2)
$925-$1,025$910-$1,010
$350-$450(3)

(1) In thousands of metric tons
(2) In millions
(3) Includes expected termination fees from a few customers that have failed to a lesser extent, with the total production of steel andmeet certain other metals. The World Steel Association's ("WSA") October 2019 Short Range Outlook estimated that global steel demand outside of China increased by 1.6% in 2018, which was revised down 0.6% fromobligations under their April 2019 estimate. WSA also decreased their growth forecast for steel demand outside of China for 2019 from 1.7% in their April forecast to 0.2% as uncertainty, trade tensions and geopolitical issues have weighed on investment and trade. WSA's growth forecast for steel demand outside of China for 2020 was revised down to 2.5% from their April estimate of 2.8%.LTAs
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 GAAP,U.S. generally accepted accounting principles ("GAAP"), we use certain other financial measures and operating metrics to analyze the performance of our company. The “non‑GAAP”“non-GAAP” financial measures consist of EBITDA from continuing operations and adjusted EBITDA, from continuing operations, which help us evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance. The key operating metrics consist of sales volume, weighted average realized price, production volume, production capacity and capacity utilization.

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Key financial measures
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
(in thousands)2020201920202019
Net sales$286,987 $420,797 $886,351 $1,376,181 
Net income94,234 175,876 309,278 569,680 
EBITDA (1)
150,960 242,026 483,634 802,569 
Adjusted EBITDA (1)
153,105 245,454 483,408 813,673 
 For the Three Months Ended September 30, For the Nine Months
Ended September 30,
(in thousands)20192018 20192018
Net sales$420,797
$454,890
 $1,376,181
$1,363,121
Net income175,876
199,466
 569,680
624,587
EBITDA from continuing operations(1)
242,026
274,406
 802,569
807,317
Adjusted EBITDA from continuing operations(1)
245,454
276,812
 813,673
879,108
(1) Non-GAAP financial measures; see below for information and a reconciliation of EBITDA and adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.


Key operating metrics
In an effort to improve transparency, beginning in the first quarter of 2019, we recast the key operating metrics of sales
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
(in thousands, except price data)2020201920202019
Sales volume (MT)(1)
33 40 98 130 
Production volume (MT)(2)
32 40 98 136 
Production capacity excluding St. Marys (MT)(3)(4)
48 48 150 150 
Capacity utilization excluding St. Marys (3)(5)
67 %83 %65 %91 %
Total production capacity (MT)(4)(6)
55 55 171 171 
Total capacity utilization(5)(6)
58 %73 %57 %80 %
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PART I (CONT’D)
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(1) Sales volume and weighted average realized price per metric ton as set forth in the table below to includereflects only graphite electrodes manufactured by GrafTech. This better reflects management’s assessment of our revenue and profitability and excludes re-sales of low grade graphite electrodes manufactured by third-party suppliers.  For comparability purposes, the prior periods have been recast to conform to this presentation.
 For the Three Months Ended September 30, For the Nine Months
Ended September 30,
(in thousands, except price data)20192018 20192018
Sales volume (MT)(1)
40
42
 130
126
Weighted average realized price(2)
$9,960
$9,664
 $9,977
$9,811
Production volume (MT)(3)
40
39
 136
127
Production capacity excluding St. Marys during idle period (MT)(4)(5)
48
39
 150
128
Capacity utilization excluding St. Marys during idle period(4)(6)
83%100% 91%99%
Total production capacity (MT)(5)(7)
55
46
 171
149
Total capacity utilization(6)(7)
73%85% 80%85%
(1) Sales volume has been recast to reflect the total sales volume of GrafTech manufactured electrodes for which revenue has been recognized during the period. For additional information see "Key Operating Metrics" below.
(2) Weighted average realized price has been recast to reflect the total revenues from sales of GrafTech manufactured electrodes for the period divided by the GrafTech manufactured electrode volume for that period. For additional information see "Key Operating Metrics" below.
(3) Production volume reflects graphite electrodes we produced during the period.
(4) The St. Marys, Pennsylvania facility was temporarily idled effective the second quarter of 2016 except for the machining of semi‑finished products sourced from other plants.(3) In the first quarter of 2018, our St. Marys facility began graphitizing a limited amount of electrodes sourced from our Monterrey, Mexico facility.
(5) (4) Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance outage. Actual production may vary.
(6)(5) Capacity utilization reflects production volume as a percentage of production capacity.
(7)(6) Includes graphite electrode facilities in Calais, France; Monterrey, Mexico; Pamplona, Spain and St. Marys, Pennsylvania.
Non‑GAAPNon-GAAP financial measures
In addition to providing results that are determined in accordance with GAAP, we have provided certain financial measures that are not in accordance with GAAP. EBITDA from continuing operations and adjusted EBITDA from continuing operations are non‑GAAPnon-GAAP financial measures. We define EBITDA, from continuing operations, a non‑GAAPnon-GAAP financial measure, as net income or loss plus interest expense, minus interest income, plus income taxes, discontinued operations and depreciation and amortization from continuing operations.amortization. We define adjusted EBITDA from continuing operations as EBITDA from continuing operations plus any pension and other post-employment benefit ("OPEB") plan expenses, initial and follow-on public offering and related expenses, non‑cashnon-cash gains or losses from foreign currency remeasurement of non‑operatingnon-operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar, related party Tax Receivable Agreement expense,adjustment, stock-based compensation and non‑cashnon-cash fixed asset write‑offs.write-offs. Adjusted EBITDA from continuing operations is the primary metric used by our management and our boardBoard of directorsDirectors to establish budgets and operational goals for managing our business and evaluating our performance.

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We monitor adjusted EBITDA from continuing operations as a supplement to our GAAP measures, and believe it is useful to present to investors, because we believe that it facilitates evaluation of our period‑to‑periodperiod-to-period operating performance by eliminating items that are not operational in nature, allowing comparison of our recurring core business operating results over multiple periods unaffected by differences in capital structure, capital investment cycles and fixed asset base. In addition, we believe adjusted EBITDA from continuing operations and similar measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance and debt‑servicedebt-service capabilities.
Our use of adjusted EBITDA from continuing operations has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
adjusted EBITDA from continuing operations does not reflect changes in, or cash requirements for, our working capital needs;
adjusted EBITDA from continuing operations does not reflect our cash expenditures for capital equipment or other contractual commitments, including any capital expenditure requirements to augment or replace our capital assets;
adjusted EBITDA from continuing operations does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
adjusted EBITDA from continuing operations does not reflect tax payments that may represent a reduction in cash available to us;
adjusted EBITDA from continuing operations does not reflect expenses relating to our pension and OPEB plans;
adjusted EBITDA from continuing operations does not reflect the non‑cashnon-cash gains or losses from foreign currency remeasurement of non‑operatingnon-operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar;
adjusted EBITDA from continuing operations does not reflect initial and follow-on public offering and related expenses;
adjusted EBITDA from continuing operations does not reflect related party Tax Receivable Agreement expense;adjustments;
adjusted EBITDA from continuing operations does not reflect stock-based compensation or the non‑cash write‑offnon-cash write-off of fixed assets; and
other companies, including companies in our industry, may calculate EBITDA from continuing operations and adjusted EBITDA from continuing operations differently, which reduces its usefulness as a comparative measure.
In evaluating EBITDA from continuing operations and adjusted EBITDA, from continuing operations, you should be aware that in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of EBITDA from continuing operations and adjusted EBITDA from continuing operations should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non‑recurringnon-recurring items. When evaluating our performance, you should consider EBITDA from continuing operations and adjusted EBITDA from continuing operations alongside other financial performance measures, including our net income (loss) and other GAAP measures.

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The following table reconciles our non‑GAAPnon-GAAP key financial measures to the most directly comparable GAAP measures:
For the Three Months Ended September 30, For the Nine Months
Ended September 30,
For the Three Months Ended September 30,For the Nine Months
Ended September 30,
20192018 201920182020201920202019
(in thousands)(in thousands)
Net income175,876
199,466
 569,680
624,587
Net income$94,234 $175,876 $309,278 $569,680 
Add:   Add:
Discontinued operations
726
 
(585)
Depreciation and amortization15,357
16,050
 46,387
47,746
Depreciation and amortization16,241 15,357 45,074 46,387 
Interest expense31,803
33,855
 98,472
100,387
Interest expense22,474 31,803 69,026 98,472 
Interest income(1,765)(562) (2,910)(1,068)Interest income(93)(1,765)(1,582)(2,910)
Income taxes20,755
24,871
 90,940
36,250
Income taxes18,104 20,755 61,838 90,940 
EBITDA from continuing operations242,026
274,406
 802,569
807,317
EBITDAEBITDA150,960 242,026 483,634 802,569 
Adjustments:   Adjustments:
Pension and OPEB plan expenses (1)
800
483
 2,397
1,478
Pension and OPEB plan expenses (1)
583 800 1,666 2,397 
Initial and follow-on public offering expenses (2)
160
43
 1,409
5,164
Non‑cash loss on foreign currency remeasurement (3)
(185)1,404
 842
1,629
Initial and follow-on public offering and related expenses (2)
Initial and follow-on public offering and related expenses (2)
— 160 1,409 
Non-cash loss (gain) on foreign currency remeasurement (3)
Non-cash loss (gain) on foreign currency remeasurement (3)
798 (185)(441)842 
Stock-based compensation (4)
706
476
 1,568
657
Stock-based compensation (4)
764 706 1,891 1,568 
Non‑cash fixed asset write-off (5)
1,947

 4,888
1,062
Related party Tax Receivable Agreement expense (6)


 
61,801
Adjusted EBITDA from continuing operations245,454
276,812
 813,673
879,108
Non-cash fixed asset write-off (5)
Non-cash fixed asset write-off (5)
— 1,947 — 4,888 
Related party Tax Receivable Agreement adjustment(6)
Related party Tax Receivable Agreement adjustment(6)
— — (3,346)— 
Adjusted EBITDAAdjusted EBITDA$153,105 $245,454 $483,408 $813,673 
(1)Service and interest cost of our OPEB plans. Also includes a mark‑to‑market loss (gain) for plan assets as of December of each year.
(2)Legal, accounting, printing and registration fees associated with the initial and follow-on public offerings.
(3)Non‑cash loss from foreign currency remeasurement of non‑operating liabilities of our non‑U.S. subsidiaries where the functional currency is the U.S. dollar.
(4)Non-cash expense for stock-based compensation grants.
(5)Non‑cash fixed asset write‑off recorded for obsolete assets.
(6)Non-cash expense for future payment to our sole pre-IPO stockholder for tax assets that are expected to be utilized.
(1)Service and interest cost of our OPEB plans. Also includes a mark-to-market loss (gain) for plan assets as of December of each year.
(2)Legal, accounting, printing and registration fees associated with the initial and follow-on public offering and related expenses.
(3)Non-cash gains and losses from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar.
(4)Non-cash expense for stock-based compensation grants.
(5)Non-cash fixed asset write-off recorded for obsolete assets.
(6)Non-cash expense adjustment for future payment to our sole pre-IPO stockholder for tax assets that are expected to be utilized.
Key Operating Metrics
KeyIn addition to measures of financial performance presented in accordance with GAAP, we use certain operating metrics to analyze the performance of our company. The key operating metrics consist of sales volume, weighted average realized price, production volume, production capacity and capacity utilization.
Sales volume reflects the total volume of GrafTech manufactured graphite electrodes sold for which revenue has been recognized during the period.  Weighted average realized price reflects the total revenues from sales of GrafTech manufactured graphite electrodes for the period divided by the sales volume of the GrafTech manufactured electrodes for that period. Beginning in the first quarter of 2019, sales volume and weighted average realized price are presented excluding re-sales of low-grade graphite electrodes manufactured by third-party suppliers. Sales of these third-party manufactured electrodes are now included in the revenue category of “by-products and other,” which represents a minimal contribution to our profitability.  This change aligns these 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 only graphite electrodes manufactured by GrafTech. For comparability purposes,a discussion of our revenue recognition policy, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies-Revenue Recognition.” in our Annual Report on Form 10-K. Sales volume helps investors understand the prior period sales volume and weighted average realized price have been recast to conform to this presentation. factors that drive our net sales.
Production volume reflects graphite electrodes produced during the period. Production capacity reflects expected maximum production volume during the period under normal operating conditions, standard product mix and expected maintenance downtime. Capacity utilization reflects production volume as a percentage of production capacity. Production volume, production capacity and capacity utilization help us understand the efficiency of our production, evaluate cost of sales and consider how to approach our contract initiative.

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PART I (CONT’D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES



Results of Operations
The Three Months Ended September 30, 20192020 Compared to the Three Months Ended September 30, 20182019
The tables presented in our period-over-period comparisons summarize our Condensed Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results. Throughout our Management's Discussion and Analysis ("MD&A"), insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
For the Three Months Ended September 30,Increase/ Decrease% Change
20202019
(Dollars in thousands)
Net sales$286,987 $420,797 $(133,810)(32)%
Cost of sales131,862 178,497 (46,635)(26)%
     Gross profit155,125 242,300 (87,175)(36)%
Research and development650 611 39 %
Selling and administrative expenses19,062 15,708 3,354 21 %
     Operating income135,413 225,981 (90,568)(40)%
Other expense (income), net694 (688)1,382 (201)%
Interest expense22,474 31,803 (9,329)(29)%
Interest income(93)(1,765)1,672 (95)%
Income before provision for income taxes112,338 196,631 (84,293)(43)%
Provision for income taxes18,104 20,755 (2,651)(13)%
Net income$94,234 $175,876 $(81,642)(46)%

 For the Three Months Ended September 30, Increase/ Decrease % Change
  2019 2018  
  (Dollars in thousands)    
         
Net sales $420,797
 $454,890
 $(34,093) (7)%
Cost of sales 178,497
 180,280
 (1,783) (1)%
     Gross profit 242,300
 274,610
 (32,310) (12)%
Research and development 611
 518
 93
 18 %
Selling and administrative expenses 15,708
 14,234
 1,474
 10 %
     Operating income 225,981
 259,858
 (33,877) (13)%
Other (income) expense, net (688) 1,502
 (2,190) (146)%
Interest expense 31,803
 33,855
 (2,052) (6)%
Interest income (1,765) (562) (1,203) 214 %
Income from continuing operations before
provision for income taxes
 196,631
 225,063
 (28,432) (13)%
 Provision for income taxes 20,755
 24,871
 (4,116) (17)%
Net income from continuing operations 175,876
 200,192
 (24,316) (12)%
Loss from discontinued operations, net of tax 
 (726) 726
 (100)%
Net income $175,876
 $199,466
 $(23,590) (12)%
Net sales. Net sales decreased from $454.9 million in the three months ended September 30, 2018 to $420.8 million in the three months ended September 30, 2019. The decrease was primarily driven by a 5% decrease in sales volume of graphite electrodes. Partially offsetting this decrease in volumes was an increase in the weighted average realized price2019 to $9,960 per MT$287.0 million in the three months ended September 30, 20192020. Lower net sales reflect an 18% decrease in sales volume driven primarily by the impact of COVID-19 on steel production levels and continued customer inventory destocking. We realized lower average spot prices resulting from $9,664 per MTthis lower demand. Prices achieved from our long-term agreements ("LTAs") were also lower in the three months ended September 30, 2020 as compared to the same period of the prior year. These increases were partially offset by decreased sales of by-products2019 due primarily to mix, LTA modifications and other.other adjustments.
Cost of sales. We experienced a decrease in cost of sales from $180.3 million in the three months ended September 30, 2018 to $178.5 million in the three months ended September 30, 2019 as a result of lower sales volume. This decrease was partially offset by sales of inventory that was manufactured using higher priced third-party needle coke.
Selling and administrative expenses. Selling and administrative expenses increased by $1.5 million, or 10%, from $14.2to $131.9 million in the three months ended September 30, 20182020, primarily due to the 18% decrease in sales volume of manufactured electrodes. Additionally, cost of sales was lower due to less usage of third-party needle coke.
Selling and administrative expenses. Selling and administrative expenses increased from $15.7 million in the three months ended September 30, 2019. This change was primarily due2019 to the write-off of receivables related to a customer that entered into bankruptcy proceedings.
Other expense (income). Other expense (income) decreased from $1.5 million of expense in the three months ended September 30, 2018 to $0.7 million of income in the three months ended September 30, 2019, primarily due to $1.6 million of advantageous non‑cash foreign currency impacts on non‑operating assets and liabilities.
Interest Expense. Interest expense decreased from $33.9$19.1 million in the three months ended September 30, 2018,2020 primarily due to higher legal costs.
Interest expense. Interest expense decreased from $31.8 million in the three months ended September 30, 2019 to $22.5 million in the three months ended September 30, 2020, primarily due to lower interest rates and lower average borrowings. During the three months ended September 30, 2020, we reduced borrowingsour term loan by $150.0 million. We realized a $0.8 million benefit to interest expense resulting from our $125.0 million paymentgains on our term loanscertain of these transactions in February 2019.

the three months ended September 30, 2020.
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Provision for income taxes. The following table summarizes the expense for income taxes:  
For the Three Months Ended September 30,
 20202019
(Dollars in thousands)
Tax expense$18,104 $20,755 
Pretax income112,338 196,631 
Effective tax rates16.1 %10.6 %
 For the Three Months Ended September 30,
 2019 2018
 (Dollars in thousands)
    
Tax expense$20,755
 $24,871
Pretax income196,631
 225,063
Effective tax rates10.6% 11.1%
The effective tax rate for the three months ended September 30, 2020 was 16.1%. This rate differs from the U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates which are offset by the net increase related to the U.S. taxation of global intangible low taxed income ("GILTI") and the Section 250 Deduction and Foreign Tax Credits ("FTC").
The effective tax rate for the three months ended September 30, 2019 was 10.6%. This rate differs from the U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates and further improved by the provision to return adjustment recorded in the third quarter as a result of filing income tax returns in foreign jurisdictions
The effective tax rate for the three months ended September 30, 2018 was 11.1%. This rate differs from the U.S. statutory rate of 21% primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and the tax impact of worldwide earnings from various countries taxed at different rates.
Tax expense decreased from $24.9 million for the three months ended September 30, 2018 to $20.8 million for the three months ended September 30, 2019.2019 to $18.1 million for the three months ended September 30, 2020. This change is primarily related to the reduction in profits and further reduced by the provision to return adjustment recorded in the third quarter as a result of filing income tax returns in foreign jurisdictions.profits.
The Nine Months Ended September 30, 20192020 Compared to the Nine Months EndedSeptember 30, 20182019
The tables presented in our period-over-period comparisons summarize our Condensed Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results. Throughout our MD&A, insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
For the Nine Months
Ended September 30,
Increase/ Decrease% Change
20202019
(Dollars in thousands)
Net sales$886,351 $1,376,181 $(489,830)(36)%
Cost of sales401,379 571,068 (169,689)(30)%
     Gross profit484,972 805,113 (320,141)(40)%
Research and development2,072 1,961 111 %
Selling and administrative expenses49,995 46,328 3,667 %
     Operating income432,905 756,824 (323,919)(43)%
Other (income) expense(2,309)642 (2,951)(460)%
Related party Tax Receivable Agreement benefit(3,346)— (3,346)N/A
Interest expense69,026 98,472 (29,446)(30)%
Interest income(1,582)(2,910)1,328 (46)%
Income before provision for income taxes371,116 660,620 (289,504)(44)%
Provision for income taxes61,838 90,940 (29,102)(32)%
Net income$309,278 $569,680 $(260,402)(46)%
 For the Nine Months
Ended September 30,
 Increase/ Decrease % Change
 2019 2018  
 (Dollars in thousands)    
        
Net sales$1,376,181
 $1,363,121
 $13,060
 1 %
Cost of sales571,068
 491,339
 79,729
 16 %
     Gross profit805,113
 871,782
 (66,669) (8)%
Research and development1,961
 1,528
 433
 28 %
Selling and administrative expenses46,328
 46,349
 (21)  %
     Operating income756,824
 823,905
 (67,081) (8)%
Other expense642
 2,533
 (1,891) (75)%
Related party Tax Receivable Agreement expense
 61,801
 (61,801) N/A
Interest expense98,472
 100,387
 (1,915) (2)%
Interest income(2,910) (1,068) (1,842) 172 %
Income from continuing operations before
provision for income taxes
660,620
 660,252
 368
  %
Provision for income taxes90,940
 36,250
 54,690
 151 %
Net income from continuing operations569,680
 624,002
 (54,322) (9)%
Income from discontinued operations, net of tax
 585
 (585) (100)%
Net income$569,680
 $624,587
 $(54,907) (9)%
Net sales. Net sales increaseddecreased by $13.1$489.8 million, or 1%36%, from $1,363.1 million in the nine months ended September 30, 2018 to $1,376.2 million in the nine months ended September 30, 2019. This increase was driven by2019 to $886.4 million in the nine months ended September 30, 2020. Lower net sales reflect a 3% increase25% decrease in sales volume driven primarily by the impact of COVID-19 on steel production levels and continued customer inventory destocking. Additionally, during the same period, spot prices declined significantly and we experienced a reduction in the resale of purchased electrodes.
Cost of sales. Cost of sales decreased by $169.7 million, or 30%, from $571.1 million in the nine months ended September 30, 2019 compared to $401.4 million in the same period in 2018,nine months ended September 30, 2020. This decrease was primarily due to the completion of our

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25% decrease in sales volume of manufactured electrodes, as well as less usage of third-party needle coke. Additionally, cost of sales was lower due to a reduction in the resale of purchased electrodes.
debottlenecking initiative. The weighted average realized price of GrafTech manufactured graphite electrodes was $9,977 per MTSelling and administrative expenses. Selling and administrative expenses increased from $46.3 million in the nine months ended September 30, 2019 which was slightly higher than the $9,811 per MT we realized in the nine months ended September 30, 2018. These increases were partially offset by decreased sales of by-products and other.
Cost of sales. Cost of sales increased by $79.7 million, or 16%, from $491.3to $50.0 million in the nine months ended September 30, 20182020 primarily due to $571.1 million in the nine months ended September 30, 2019. This increase was primarily the result of higher input costs for needle coke and higher volumes, increasing as a result of our debottlenecking projects coming online.increased legal costs.
Selling and administrative expenses. Selling and administrative expenses were flat for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 as decreased costs related to our public offerings of $3.8 million were offset by an increase to the allowance for doubtful accounts related to a customer that entered into bankruptcy proceedings and the ongoing costs of being a public company.
Other (income) expense.Other expense (income). Otherchanged by $3.0 million, from an expense decreased by $1.9 million, or 75%, from $2.5 million in the nine months ended September 30, 2018 toof $0.6 million in the nine months ended September 30, 2019.2019 to income of $2.3 million in the nine months ended September 30, 2020. This decreasechange was primarily due to advantageous non‑cashnon-cash foreign currency impacts on non‑operatingnon-operating assets and liabilities.
Related party Tax Receivable Agreement expense. benefit. During the secondfirst quarter of 2018,2020, the Company recorded $61.8an adjustment to our Related-party payable-Tax Receivable Agreement liability resulting in a benefit of $3.3 million of expense as a result of our tax receivable agreement liability, after it was estimated that we would realize certain deferred tax assets.due to the revised profit expectation for the year 2020, primarily caused by the COVID-19 pandemic.
Interest expense. Interest expense was largely consistentdecreased by $29.4 million from $98.5 million in the nine months ended September 30, 2019 compared to $69.0 million in the same period of 2018. In2020, primarily due to lower interest rates and lower average borrowings. We made repayments of $125 million on our term loans in the first quarter of 2018,2019 and $225 million in the fourth quarter of 2019. During the nine months ended September 30, 2020, we redeemedreduced our Senior Notesterm loan by $253 million. We realized a $3.8 million benefit to interest expense resulting in accelerated accretionfrom gains on certain of the fair value adjustment on the Senior Notes of $18.7 million and a premium redemption of $4.8 million. This decrease was offset by increased borrowing costs due to higher levels of debtthese transactions in the nine months ended September 30, 2019.2020.
Provision for income taxes. The following table summarizes the expense for income taxes:
 For the Nine Months Ended September 30,
20202019
(Dollars in thousands)
 
Tax expense$61,838 $90,940 
Pre-tax income371,116 660,620 
Effective tax rates16.7 %13.8 %
 For the Nine Months Ended September 30,
 2019 2018
 (Dollars in thousands)
  
Tax expense$90,940
 $36,250
Pretax income660,620
 660,252
Effective tax rates13.8% 5.5%
The effective tax rate for the nine months ended September 30, 20192020 was 13.8%16.7%. This rate differs from the U.S. statutory rate of 21% primarily due to worldwide earnings from various countries taxed at different rates.rates,which was offset by a net increase related to the U.S. taxation of GILTI and FTC.
The tax expense decreased from $90.9 million for the nine months ended September 30, 2019 to $61.8 million for the nine months ended September 30, 2020 primarily from the decrease in earnings.
The effective tax rate for the nine months ended September 30, 20182019 was 5.5%13.8%.This rate differed from the U.S. statutory rate of 21% primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes worldwide earnings from various countries taxed at different rates.
Tax expense increased from $36.3 million forGrafTech has considered the nine months ended September 30, 2018,tax impact of COVID-19 legislation, including the U.S. Coronavirus Aid, Relief and Economic Security (CARES) Act and has concluded that there is no material tax impact. The Company continues to $90.9 million formonitor the nine months ended September 30, 2019. This change is primarily due to a partial release in the first nine monthstax effects of 2018 of a valuation allowance recorded against the deferred tax asset related to US tax attributes.any legislative changes.
Effects of Changes in Currency Exchange Rates
When the currencies of non-U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. dollar equivalent cost of sales and other expenses with respect to those facilities. In certain countries in which we have manufacturing facilities, and in certain export markets, we sell in currencies other than the U.S. dollar. Accordingly, when these currencies increase (or decline) in value relative to the U.S. dollar, this has the effect of increasing (or reducing) net sales. The result of these effects is to increase (or decrease) operating profit and net income.

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Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic and political changes, which have significantly impacted currency exchange rates. We cannot predict changes in currency
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exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales, cost of sales or net income.
The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our net sales was an increase of $0.2$2.5 million and a decrease of $4.0$0.5 million for the three and nine months ended September 30, 2019,2020, respectively, compared to the same period of 2018.2019. The impact of these changes on our cost of sales was decreasesa decrease of $2.1$0.7 million and $10.6$5.0 million for the three and nine months ended September 30, 2019,2020, respectively, compared to the same period of 2018.2019.
We have in the past and may in the future use various financial instruments to manage certain exposures to risks caused by currency exchange rate changes, as described under “Part I, Item 3–Quantitative and Qualitative Disclosures about Market Risk”.Risk.”
Liquidity and Capital Resources
Our sources of funds have consisted principally of cash flow from operations and debt, including our credit facilities (subject to continued compliance with the financial covenants and representations). Our uses of those funds (other than for operations) have consisted principally of dividends, capital expenditures, scheduled debt repayments, optional debt prepayments,repayments, share repurchases and other obligations. Disruptions in the U.S. and international financial markets could adversely affect our liquidity and the cost and availability of financing to us in the future.
We believe that we have adequate liquidity to meet our needs. As of September 30, 2019,2020, we had liquidity of $628.1$405.7 million, consisting of $246.9 million of availability onunder our 2018 Revolving Facility (subject to continued compliance with the financial covenants and representations) and cash and cash equivalents of $381.2$158.8 million. We had long‑termlong-term debt of $1,965.5$1,564.4 million and short‑termshort-term debt of $70.9$0.1 million as of September 30, 2019.2020. As of December 31, 2018,2019, we had liquidity of $295.4$327.8 million consisting of $245.5$246.9 million available on our 2018 Revolving Facility (subject to continued compliance with the financial covenants and representations) and cash and cash equivalents of $49.9$80.9 million. We had long‑termlong-term debt of $2,050.3$1,812.7 million and short‑termshort-term debt of $106.3$0.1 million as of December 31, 2018.2019.
As of September 30, 20192020 and December 31, 2018, $176.62019, $130.3 million and $38.4$41.4 million, respectively, of our cash and cash equivalents were located outside of the United States.U.S. We repatriate funds from our foreign subsidiaries through dividends. All of our subsidiaries face the customary statutory limitation that distributed dividends do not exceed the amount of retained and current earnings. In addition, for our subsidiary in South Africa, the South Africa Central Bank requires that certain solvency and liquidity ratios remain above defined levels after the dividend distribution, which historically has not materially affected our ability to repatriate cash from this jurisdiction. The cash and cash equivalents balances in South Africa were $1.6$0.6 million and $0.2$0.8 million as of September 30, 20192020 and December 31, 2018,2019, respectively. Upon repatriation to the United States,U.S., the foreign source portion of dividends we receive from our foreign subsidiaries is no longer subject to U.S. federal income tax as a result of theThe Tax Act.Cuts and Jobs Act (the "Tax Act").
Cash flow and plans to manage liquidity.liquidity. Our cash flow typically fluctuates significantly between quarters due to various factors. These factors include customer order patterns, fluctuations in working capital requirements, timing of tax payments, timing of capital expenditures, acquisitions, divestitures and other factors. Cash flow from operations is expected to remain at positive sustained levels due to the predictable earnings generated by our three-to-five-year sales contracts with our customers.
As of September 30, 2019, we had access to the $250 million 2018 Revolving Facility. We had $3.1 million of letters of credit, for a total availability onunder the 2018 Revolving Facility of $246.9 million. We also had $2.5 million of surety bonds outstanding as of September 30, 2019. As of2020 and December 31, 2018, we had availability on2019, which consisted of the 2018 Revolving Faciltity of $245.5$250 million resulting from $4.5limit reduced by $3.1 million of outstanding letters of credit. We also had $0.5 million of surety bonds outstanding as of December 31, 2018.
On February 12, 2018, we entered into the 2018 Credit Agreement, which provides for the 2018 Revolving Facility and the 2018 Term Loan Facility. On February 12, 2018, our wholly owned subsidiary, GrafTech Finance, borrowed $1,500 million under the 2018 Term Loan Facility. The funds received were used to pay off our outstanding debt, including borrowings under our Old Credit Agreementprior credit facility and the Senior Notespreviously outstanding senior notes and accrued interest relating to those borrowings and the Senior Notes,senior notes, declare and pay a dividend of $1,112.0$1,112 million to our sole pre-IPO stockholder, pay fees and expenses incurred in connection therewith and for other general corporate purposes.
On April 19, 2018, we declared a dividend in the form of the Brookfield Promissory Note to the sole pre-IPO stockholder. The $750 million Brookfield Promissory Note was conditioned upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (each as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the $750 million Brookfield Promissory Note and (iii) the satisfaction of the conditions

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described in (i) and (ii) above occurring within 60 days from the dividend record date. Upon publication of our 2018 first quarter report on Form 10-Q, these conditions were met and, as a result, the Brookfield Promissory Note became payable.
The Brookfield Promissory Note had a maturity of eight years from the date of issuance and bore interest at a rate equal to the Adjusted LIBO Rate (as defined in the Brookfield Promissory Note) plus an applicable margin equal to 4.50% per annum, with an additional 2.00% per annum starting from the third anniversary from the date of issuance. We were permitted to make voluntary prepayments at any time without premium or penalty. All obligations under the Brookfield Promissory Note were unsecured and guaranteed by all of our existing and future domestic wholly owned subsidiaries that guarantee, or are borrowers under, the Senior Secured Credit Facilities. No funds were lent or otherwise contributed to us by Brookfield in connection with the Brookfield Promissory Note. As a result, we received no consideration in connection with its issuance. As described below, the Brookfield Promissory Note was repaid, in full, on June 15, 2018.
On April 19, 2018, we declared a $160 million cash dividend payable to Brookfield, the sole pre-IPO stockholder. Payment of this dividend was conditional upon (i) the Senior Secured First Lien Net Leverage Ratio (as defined in the 2018 Credit Agreement), as calculated based on our final financial results for the first quarter of 2018, being equal to or less than 1.75 to 1.00, (ii) no Default or Event of Default (as defined in the 2018 Credit Agreement) having occurred and continuing or that would result from the payment of the dividend and (iii) the payment occurring within 60 days from the dividend record date. The conditions of this dividend were met upon filing of our first quarter 2018 report on Form 10-Q and the dividend was paid on May 8, 2018.
On June 15, 2018, GrafTech entered into the First Amendment to its 2018 Credit Agreement. The First Amendment amends the 2018 Credit Agreement to provide for thean additional $750 million in aggregate principal amount of the Incremental Term Loans to GrafTech Finance. The Incremental Term Loans increase the aggregate principal amount of term loans incurred by GrafTech Finance under the 2018 Credit Agreement from $1,500 million to $2,250 million. The Incremental Term Loans have the same terms as those applicable to the existing term loans under the 2018 Credit Agreement, including interest rate,
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payment and prepayment terms, representations and warranties and covenants. The Incremental Term Loans mature on February 12, 2025, the same date as the existing term loans. GrafTech paid an upfront fee of 1.00% of the aggregate principal amount of the Incremental Term Loans on the effective date of the First Amendment. The proceeds of the Incremental Term Loans were used to repay, in full, the $750 million in principal outstanding on the Brookfield Promissory Note.
On August 13, 2018, the Company repurchased 11,688,311 shares directly from Brookfield. These shares were retired upon repurchase. The price per share paid by the Company was equal to the price at which the underwriters purchased the shares from Brookfield in Brookfield’s August 2018 public secondary offering of 23,000,000 shares of our common stock, net of underwriting commissions and discounts. GrafTech funded the share repurchase from cash on hand.existing debt to our sole pre-IPO stockholder.
On July 30, 2019, our Board of Directors authorized a program to repurchase up to $100 million of our outstanding common stock. We may purchase shares from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans. The amount and timing of repurchases are subject to a variety of factors including liquidity, stock price, applicable legal requirements, other business objectives and market conditions. As of September 30, 2019 we hadWe have repurchased 879,1344,333,259 shares of common stock totaling $9.5for a total purchase price of $40.9 million under this program.program since inception. There were no shares repurchased under this program during the three months ended September 30, 2020.
We currently payIn April 2020, as a quarterly cashresult of the deteriorating economic environment, our Board of Directors reduced our dividend of $0.085rate to $0.01 per share or an aggregate of $0.34 per share$0.04 on an annualized basis. Additionally, on December 31, 2018, we paid a specialWe expect our Board of Directors to revisit the dividend of $0.70 per share totaling $203.4 million.level when economic conditions improve. There can be no assurance that we will pay dividends in the future in these amounts or at all. Our Board of Directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders. Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our Board of Directors.
On February 13, 2019, weWe repaid $125$350 million on our 2018 Term Loan Facility. We are targeting to return approximately 50-60%Facility in 2019. During the three and nine months ended September 30, 2020, we retired $149.7 million and $253.0 million of principal of our term loans, respectively. Subsequent to September 30, 2020, we repaid an additional $60.0 million of our term loans. In light of the recent economic downturn, we are now prioritizing balance sheet flexibility and debt repayment. We anticipate using a majority of the cash flow after capital expendituresthat we generate to stockholdersrepay debt, but we will continue to examine opportunities to repurchase our common stock. As a result of government enacted COVID-19 relief in 2019 with the remaindera foreign jurisdiction, we were able to defer a tax payment of approximately $50 million that was scheduled to be used for debt repayment.made in the first quarter of 2020 until the fourth quarter of 2020. During the nine months ended September 30, 2019,2020, we paid $87.0$31.9 million to various tax collecting agencies worldwide.
Potential uses of our liquidity include dividends, share repurchases, capital expenditures, acquisitions, scheduled debt repayments, optional debt prepaymentsrepayments and other general purposes. An improving economy, while resulting in improved results of operations, could increase our cash requirements to purchase inventories, make capital expenditures and fund payables and other obligations until increased accounts receivable are converted into cash. A downturn, including the current downturn caused by the COVID-19 pandemic, could significantly and negatively impact our results of operations and cash flows, which, coupled with increased borrowings, could negatively impact our credit ratings, our ability to comply with debt covenants, our ability to secure additional financing and the cost of such financing, if available.

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In order to seek to minimize our credit risks, we may reduce our sales of, or refuse to sell (except for prepayment, cash on delivery or under letters of credit or parent guarantees), our products to some customers and potential customers. Our unrecovered trade receivables worldwide have not been material during the last two years individually or in the aggregate.
We manage our capital expenditures by taking into account quality, plant reliability, safety, environmental and regulatory requirements, prudent or essential maintenance requirements, global economic conditions, available capital resources, liquidity, long‑termlong-term business strategy and return on invested capital for the relevant expenditures, cost of capital and return on invested capital of the Company as a whole and other factors.
Capital expenditures totaled $30.7 million in the nine months ended September 30, 2020. We have announcedpreviously reduced our planned capital expenditures for the full year by approximately one-half to a serieslevel of operational improvement projects at our Monterreyapproximately $35 million and St. Marys facilities. These projectswe remain committed to this goal. We are intendedmanaging inventory levels to help optimize our manufacturing footprint while improving environmental performance and increasing production flexibility.match demand. Due to timing of purchases, inventory levels increased during the first quarter of 2020. We expect these projectsoverall inventory levels to be completed indecrease over the first halfremainder of 2021, at which time we will be able to shift additional graphitization and machining from Monterrey to St. Marys. We estimate that capital spending would be near current levels which includes these projects as well as maintenance and capital projects, subject to the approval by our Board.2020.
In the event that operating cash flows fail to provide sufficient liquidity to meet our business needs, including capital expenditures, any such shortfall would need to be made up by increased borrowings under our 2018 Revolving Facility, to the extent available.
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Cash Flows
The following table summarizes our cash flow activities:
For the Nine Months
Ended September 30,
For the Nine Months
Ended September 30,
2019 2018 20202019
in millions (in millions)
Cash flow provided by (used in):   Cash flow provided by (used in):
Operating activities$584.8
 $612.2
Operating activities$416.7 $584.8 
Investing activities$(44.0) $(46.8)Investing activities$(30.6)$(44.0)
Financing activities$(208.5) $(474.7)Financing activities$(307.6)$(208.5)
Operating Activities
Cash flow from operating activities represents cash receipts and cash disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting net income (loss) for:
Non-cash items such as depreciation and amortization, impairment, post retirement obligations, and severance and pension plan changes;
Gains and losses attributed to investing and financing activities such as gains and losses on the sale of assets and unrealized currency transaction gains and losses; and
Changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.
The net impact of the changes in working capital (operating assets and liabilities), which are discussed in more detail below, include the impact of changes in: receivables, inventories, prepaid expenses, accounts payable, accrued liabilities, accrued taxes, interest payable and payments of other current liabilities.
During the nine months ended September 30, 2020, changes in working capital resulted in a net source of funds of $85.1 million, which was impacted by:
net cash inflows in accounts receivable of $78.4 million from the decrease in accounts receivable due to lower sales;
net cash inflows in inventory of $10.4 million from our efforts to reduce inventory levels and lower production levels;
net cash inflows of $5.4 million from the decrease in other current assets primarily due to value-added tax refunds received from foreign governments;
net cash inflows from increased income taxes payable of $16.0 million resulting from our ability to defer approximately $50.0 million of tax payment in a foreign jurisdiction resulting from government enacted COVID-19 relief, partially offset by lower required tax payments due to lower profitability; and
net cash outflows from decreases in accounts payable and accruals of $25.1 million, due to lower purchases of third-party needle coke and payments.
Uses of cash in the nine months ended September 30, 2020 included contributions to pension and other benefit plans of $5.3 million, cash paid for interest of $68.0 million, payments under our Tax Receivable Agreement of $27.9 million and taxes paid of $31.9 million.
During the nine months ended September 30, 2019, changes in working capital resulted in a net use of funds of $80.3 million, which was impacted by:
net cash outflows in accounts receivable of $20.7 million from the increase in accounts receivable due to the timing of sales and collections;
net cash outflows from increases in inventory of $19.9 million, due primarily to higher priced raw materials;
net cash inflows from the utilization of prepaid assets of $5.7 million;

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net cash inflows from the utilization of prepaid assets of $5.7 million;
net cash outflows from decreased income taxes payable of $28.2 million, resulting from required tax payments as our profitability has increased; and
net cash outflowsinflows from decreasesincreases in accounts payable and accruals of $17.3 million, due to the timing of payments.
Uses of cash in the ninesix months ended September 30, 2019 included contributions to pension and other benefit plans of $2.3 million, cash paid for interest of $93.6 million and taxes paid of $87.0 million.
DuringInvesting Activities
Net cash used in investing activities was $30.6 million during the nine months ended September 30, 2018, changes in working capital resulted in a net use of funds of $143.7 million which was impacted by:
net cash outflows in accounts receivable of $96.0 million from the increase in accounts receivable due to increased sales driven by higher weighted average realized prices, partially offset by improved collections;
net cash outflows from increases in inventory of $93.8 million, due primarily to higher priced raw materials;
net cash inflows from increases in accounts payable of $4.3 million, due primarily to higher priced raw materials;
net cash inflows from decreased prepaid expense of $7.8 million due to the reduction of advanced payments; and
net cash inflows from increased income taxes payable of $35.4 million2020, resulting from increased profitability.
Other uses of cash in the nine months ended September 30, 2018 included contributions to pension and other benefit plans of $6.6 million, cash paid for interest of $74.5 million and taxes paid of $19.4 million.
Investing Activitiescapital expenditures.
Net cash used in investing activities was $44.0 million during the nine months ended September 30, 2019, resulting from capital expenditures.
Financing Activities
Net cash used in investingoutflow from financing activities was $46.8$307.6 million during the nine months ended September 30, 2018, resulting from capital expenditures2020, which was the result of $47.6the repayment of $249.2 million partially offset by proceeds from the saleon our Term Loans, $28.2 million of fixed assetstotal dividends to stockholders and $30.1 million of $0.9 million.
Financing Activitiesstock repurchases.
Net cash outflow from financing activities was $208.5 million during the nine months ended September 30, 2019, which was the result of our $125.0 million payment on our long-termTerm Loan debt, $74.0 million of total dividends to stockholders and $9.5 million of stock repurchases.
Net cash outflow from financing activities was $474.7 million during the nine months ended September 30, 2018, which was the net impact of our February 12, 2018 refinancing and subsequent amendment, proceeds of which were used to repay outstanding debt, pay dividends of $1,316.2 million, and repay the $750 million Brookfield Promissory Note to Brookfield. We also repurchased $225 million of our common stock from Brookfield on August 13, 2018.
Related Party Transactions
We have engaged from time to time, in transactions with affiliates or related parties during 2020 and we expect to continue to do so in the future. These transactions include among others, entry into agreements with Brookfield such as the Stockholder Rights Agreement, the Registration Rights Agreement,ongoing obligations under the Tax Receivable Agreement, Stockholders Rights Agreement and the Share Repurchase Agreement.  Registration Rights Agreement, each with Brookfield.
We have also reimbursed certain costs incurred by Brookfield as required under the Investment Agreement dated May 4, 2015 between Brookfield and GrafTech, including in connection with, transactions with our current or former subsidiaries, compensatory transactions with directors and officers including employee benefits (including reimbursement to Brookfield for compensation costs incurred by it for certain personnel who devote substantially all of their working time to us), stock option and restricted stock grants, compensation deferral, stock purchases, and customary indemnification and expense advancement arrangements.
Recent Accounting Pronouncements
We discuss recently adopted accounting standards in Note 1, “Organization"Organization and Summary of Significant Accounting Policies”Policies" of the Notes to Condensed Consolidated Financial Statements.

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Description of Our Financing Structure
We discuss our financing structure in more detail in Note 6, “Debt5, "Debt and Liquidity”Liquidity" of the Notes to Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks, primarily from changes in interest rates, currency exchange rates, energy commodity prices and commercial energy rates. From time to time, we enter into transactions that have been authorized according to documented policies and procedures in order to manage these risks. These transactions primarily relate primarily to financial instruments described below. 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 use financial instruments for trading purposes.
Our exposure to changes in interest rates results primarily from floating rate long‑termlong-term debt tied to LIBO Rate or Euro LIBO Rate.
Our exposure to changes in currency exchange rates results primarily from:
sales made by our subsidiaries in currencies other than local currencies;
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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and
investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the U.S. dollar.
Our exposure to changes in energy commodity prices and commercial energy rates results primarily from the purchase or sale of refined oil products and the purchase of natural gas and electricity for use in our manufacturing operations.
Interest rate risk management. We periodically enter into agreements with financial institutions that are intended to limit our exposure to additional interest expense due to increases in variable interest rates. These instruments effectively cap our interest rate exposure. During the third quarter of 2019, we entered into interest rate swaps resulting in a net unrealized pre-tax gainloss of $0.7$13.3 million as of September 30, 2020 and net unrealized pre-tax gain of $2.9 million as of December 31, 2019.
Currency rate management. We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency derivatives, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. Forward exchange contracts and purchased currency options are carried at marketfair value.
The outstanding foreign currency derivatives represented a$0.7 million pre-tax net loss of $0.8 milliongain as of September 30, 20192020 and noa net pre-tax gain or lossof $0.2 million as of December 31, 2018.2019.
Energy commodity management. We have entered into commodity derivative contracts to effectively fix some or all of our exposure to refined oil products. The outstanding commodity derivative contracts represented a net unrealized pre-tax loss of $17.2$8.9 million and $10.7$3.7 million as of September 30, 20192020 and December 31, 2018,2019, respectively.
Sensitivity analysis. We use sensitivity analysis to quantify potential impacts that market rate changes may have on the underlying exposures as well as on the fair values of our derivatives. The sensitivity analysis for the derivatives represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction.
A hypothetical increase in interest rates of 100 basis points (1%) would have increased our interest expense by $15.0$3.5 million, net of the impact of our interest rate swap, for the nine months ended September 30, 2019.2020. The same 100 basis points increase would have resulted in an increase of $28.9$13.7 million in the fair value of our interest rate swap portfolio.
As of September 30, 2019,2020, a 10% appreciation or depreciation in the value of the U.S. dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding decrease of $4.8$5.3 million or a corresponding increase of $4.8$5.3 million, respectively, in the fair value of the foreign currency hedge portfolio.

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A 10% increase or decrease in the value of the underlying commodity prices that we hedge would have resulted in a corresponding increase or decrease of $11.1$6.7 million in the fair value of the commodity hedge portfolio as of September 30, 2019.2020. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments are generally offset by reciprocal changes in the value of the underlying exposure.
For further information related to the financial instruments described above, see Note 1110 "Derivative Instruments" to the Notes to Condensed Consolidated Financial Statements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Management is responsible for establishing and maintaining adequate disclosure controls and procedures at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a reporting company in the reports that it files or submits under the Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by it in the reports that it files under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
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Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2019.2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these controls and procedures arewere effective at the reasonable assurance level as of September 30, 2019.2020.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during the three months ended September 30, 20192020 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES



Item 1. 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.
LitigationWe are involved in various arbitrations pending before the International Chamber of Commerce with several customers who, among other things, have failed to perform under their LTAs and in certain instances are seeking to modify or frustrate their contractual commitments to us. We intend to vigorously enforce our rights under these agreements.

On September 30, 2020, a stockholder of the Company filed a lawsuit in the Delaware Court of Chancery. The stockholder challenges the fairness of the Company's repurchase of shares of its common stock from Brookfield Asset Management Inc. (“Brookfield”), for $250 million pursuant to a December 3, 2019 share repurchase agreement and also a related block trade by Brookfield of GrafTech shares of common stock. The stockholder, on behalf of an alleged class of holders of GrafTech shares of common stock as of December 3, 2019 and also purportedly on behalf of the Company, asserts claims for breach of fiduciary duty against certain members of the Company’s Board of Directors and Brookfield. The stockholder also challenges the appointment of the newest independent director to the Company's Board of Directors, as allegedly in violation of the Company's Amended and Restated Certificate of Incorporation and the Stockholder Rights Agreement with certain Brookfield entities and affiliates. The stockholder seeks, among other things, an award of monetary relief to the Company and a declaration that the appointment of the newest independent director to the Board of Directors is invalid.

Pending litigation in Brazil has been pending in Brazil 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.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 is currently evaluating the merits of seekinghas 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 have appealed this state court ruling, as well and the appellate court issued a decision in our favor on May 19, 2020.The employees have further appealed and we intend to vigorously defend it. As of September 30, 2019,2020, we are unable to assess the potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
On March 1, 2019, the Department of Sustainable Development of the State of Nuevo León provided notice ofThe National Water Commission in Mexico ("CONAGUA"), initiated an administrative proceeding with respect to water usage at the Company'sCompany’s Monterrey facility on November 26, 2018. The inquiry relates to an audit of historical water usage fees and related assessments for the facility. The proceeding requires the Company to design and implement certain corrective measures involving certain potential violations of state environmental law relating to emissions. The Company cooperatedis cooperating with the DepartmentCONAGUA with respect to this matter, including payment of certain fines that were not material to the Company.  In September 2019, the Department of Sustainable Development formally closed the proceeding.matter.
Item 1A. Risk Factors
There have been no material changes toThe following disclosure modifies the Risk Factorsdiscussion of certain risks and uncertainties previously disclosed in Part I - Item 1A1A. of our Annual Report on Form 10-K. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business or financial results. Additional risks and uncertainties that are not presently known to us or that we deem immaterial may also impact our business or financial results.
The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business, results of operations, financial position and cash flows. 
In December 2019, there was an outbreak of a novel strain of coronavirus ("COVID-19") identified in China that has since spread to nearly all regions of the world.  The outbreak was subsequently declared a pandemic by the World Health Organization in March 2020.  To date, the COVID-19 outbreak and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas and significant disruption in the financial markets and economy both globally and in the U.S. 
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In response to the pandemic and related mitigation measures, we began implementing changes in our business in February 2020 to protect our employees and customers, and to support appropriate health and safety protocols, which included: (i) canceling travel and eliminating in-person meetings, (ii) working from home where possible, and (iii) establishing a "Safe-Work Playbook" for our sites. Our plant procedures include temperature measurements where permitted, personal protective equipment, mandatory use of gloves, social distancing, frequent cleaning and disinfecting and the use of daily check sheets to keep team members highly focused on these new procedures.  As the pandemic continues, we continue to limit travel and have certain employees working from home on rotations so that all employees are not in our offices at the same time. While all of these measures have been necessary and appropriate, they have resulted in additional costs and have adversely impacted our business and financial performance.
While the outbreak had begun to subside in certain areas of the world where we operate and serve our customers, the infection rates in some of these areas have experienced a resurgence in the spread of COVID-19 and the infection rates in other areas continue to escalate.As a result, we are unable to predict the ultimate impact of the COVID-19 outbreak at this time.The pandemic has adversely affected, and is expected to continue to adversely affect, our business, results of operations, financial position and cash flows. Such effects may be material and the potential impacts include, but are not limited to:
adverse impact on our customers, and resultant impact on demand for our products;
disruptions at our facilities, including  reductions in operating hours, labor shortages and changes in operating procedures, including for additional cleaning and disinfecting procedures;
disruptions in our supply chain due to transportation delays, travel restrictions, raw material cost increases and shortages, and closures of businesses or facilities;
reductions in our operating effectiveness due to workforce disruptions from COVID-19 restrictions and social distancing resulting from, among other things, “shelter in place” and “stay at home” orders, and the unavailability of key personnel necessary to conduct our business activities; and
volatility in the global financial markets, which could have a negative impact on our ability to access capital and additional sources of financing in the future. 
In addition, we cannot predict the impact that the COVID-19 pandemic will have on our customers, employees, suppliers and distributors, and any adverse impacts on these parties may have a material adverse impact on our business. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A, “Risk Factors” section included in our Annual Report on Form 10-K filedfor the fiscal year ended December 31, 2019, any of which could have a material effect on February 22, 2019.us. This situation is continues to change rapidly and additional impacts may arise that we are not aware of currently.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
The table below sets forth the information on a monthly basis regarding GrafTech's purchases of its common stock, par value $0.01 per share, during the third quarter of 2019.2020.
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 through July 31, 2020— $— — $59,030,305 
August 1 through August 31, 2020— $— — $59,030,305 
September 1 through September 30, 2020— $— — $59,030,305 
Total— — 
PeriodTotal Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
        
July 1 through July 31, 2019
 $
 
 $
August 1 through August 31, 2019879,134
 $10.79
 879,134
 90,515,936
September 1 through September 30, 2019
 $
 
 $
Total879,134
 $10.79
 879,134
 $90,515,936
(1) Represents shares repurchased in open market transactions pursuant to the Share Repurchase Program.
(2) Share repurchases were made Authorization remaining pursuant to our previously announced program to repurchase, which was authorized by our Board of Directors on July 30, 2019 (the “Share Repurchase Program”). The Share Repurchase Program was announced on July 31, 2019 and allows for the purchase of up to $100 million of outstanding shares of our common stock from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans.


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PART II. OTHER INFORMATION
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 6. Exhibits
The exhibits listed in the following table have been filed as part of this Report.
 
Exhibit
Number
Description of Exhibit
3.1
3.2
31.1*
31.2*
32.1*
32.2*
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
____________________________
*101Filed herewithThe following financial information from GrafTech International Ltd.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Stockholders' Equity (Deficit), and (vi) Notes to the Condensed Consolidated Financial Statements.
104Cover Page Interactive Data file (formatted as Inline XBRL and contained in Exhibit 101).


____________________________
*    Filed herewith



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
GRAFTECH INTERNATIONAL LTD.
Date:November 7, 20193, 2020By:/s/ Quinn J. Coburn
Quinn J. Coburn
Chief Financial Officer, Vice President Finance and Treasurer (Principal Financial Officer)



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