GrafTech International (EAF) 10-Q 31 Jul 09 2009 Q2 Quarterly report Financial data

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Thousands	Jun. 30, 2009	Dec. 31, 2008
Current Assets:
Cash and cash equivalents	$17,629	$11,664
Accounts and notes receivable, net of allowance for doubtful accounts of $4,110 at December 31, 2008 and $5,042 at June 30, 2009	92,208	146,986
Inventories	275,773	290,397
Prepaid expenses and other current assets	6,199	14,376
Total current assets	391,809	463,423
Property, plant and equipment	927,115	873,932
Less: accumulated depreciation	572,061	536,562
Net property, plant and equipment	355,054	337,370
Deferred income taxes	8,366	1,907
Goodwill	8,573	7,166
Other assets	13,486	12,887
Investment in non-consolidated affiliate	65,413	118,925
Restricted cash	1,470	1,451
Total assets	844,171	943,129
Current liabilities:
Accounts payable	38,980	55,132
Interest payable	967	953
Short-term debt	12,019	9,347
Accrued income and other taxes	22,964	34,861
Other accrued liabilities	55,052	140,330
Total current liabilities	129,982	240,623
Long-term debt:
Principal value	53,514	50,328
Fair value adjustments for hedge instruments	165	191
Unamortized bond premium	33	38
Total long-term debt	53,712	50,557
Other long-term obligations	121,251	118,272
Deferred income taxes	28,727	29,087
(see Contingencies - Note 14)	0	0
Stockholders' equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued	0	0
Common stock, par value $.01, 150,000,000 shares authorized at December 31, 2008 and 225,000,000 authorized at June 30, 2009, 122,634,854 shares issued at December 31, 2008 and 123,894,101 shares issued at June 30, 2009	1,239	1,226
Additional paid-in capital	1,296,494	1,290,381
Accumulated other comprehensive loss	(327,500)	(355,960)
Accumulated deficit	(346,373)	(317,752)
Less: cost of common stock held in treasury, 3,974,345 shares at December 31, 2008 and June 30, 2009	(112,511)	(112,511)
Less: common stock held in employee benefit and compensation trusts, 55,728 shares at December 31, 2008 and 68,809 shares at June 30, 2009.	(850)	(794)
Total stockholders' equity	510,499	504,590
Total liabilities and stockholders' equity	$844,171	$943,129

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
In Thousands, except Share data	Jun. 30, 2009	Dec. 31, 2008
Accounts and notes receivable, allowance for doubtful accounts	$5,042	$4,110
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	225,000,000	150,000,000
Common stock, shares issued	123,894,101	122,634,854
Less: cost of common stock held in treasury, shares	3,974,345	3,974,345
Less: common stock held in employee benefit and compensation trusts, shares	68,809	55,728

Statement Of Income

Statement Of Income (USD $)
In Thousands, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Net sales	$157,774	$319,538	$291,800	$609,540
Cost of sales	112,086	205,188	214,018	387,089
Gross profit	45,688	114,350	77,782	222,451
Research and development	3,109	1,835	5,177	4,100
Selling and administrative	23,095	23,688	44,730	46,279
Restructuring charges (credits)	0	190	(32)	342
Operating income	19,484	88,637	27,907	171,730
Equity in losses of and write-down of investment in non-consolidated affiliate	54,602	0	53,390	0
Other expense (income), net	3,270	2,919	(2,264)	23,954
Interest expense	1,421	5,782	3,068	13,432
Interest income	(184)	(206)	(301)	(578)
Income (loss) before provision for income taxes	(39,625)	80,142	(25,986)	134,922
Provision for (benefit from) income taxes	(2,534)	34,285	2,636	52,383
Net income (loss)	($37,091)	$45,857	($28,622)	$82,539
Basic income (loss) per common share:
Net income (loss) per share	-0.31	0.43	-0.24	0.79
Weighted average common shares outstanding	119,893	106,050	119,402	104,161
Diluted earnings (loss) per common share:
Net income (loss) per share	-0.31	0.41	-0.24	0.75
Weighted average common shares outstanding	119,893	119,521	119,402	118,581

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Thousands	6 Months Ended Jun. 30, 2009		6 Months Ended Jun. 30, 2008
Cash flow from operating activities:
Net income (loss)	($28,622)		$82,539
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	16,202		17,416
Deferred income taxes	848		11,092
Equity in losses of and write-down of investment in non-consolidated affiliate	53,390		0
Gain on redemption of Debentures	0		(4,060)
Currency losses (gains)	(3,682)		14,313
Post retirement obligation, severance and pension plan changes	5,398		1,581
Stock based compensation, including incentive compensation paid in company stock	4,958		2,373
Interest expense	660		6,969
Other charges, net	12,599		2,617
Dividends from non-consolidated affiliate	122		0
(Increase) decrease in working capital	3,403	[1]	(35,002)	[1]
Long-term assets and liabilities	(4,845)		2,523
Net cash provided by operating activities	60,431		102,361
Cash flow from investing activities:
Capital expenditures	(29,964)		(27,554)
Proceeds from derivative instruments	263		224
Investment in non-consolidated affiliate, net of $388 cash received	0		(134,611)
Proceeds from sale of assets	69		18
Increase in restricted cash	(19)		(166)
Net cash used in investing activities	(29,651)		(162,089)
Cash flow from financing activities:
Short-term debt borrowings	2,529		14,993
Revolving Facility borrowings	114,715		155,625
Revolving Facility reductions	(112,000)		(70,810)
Long-term debt reductions	(129)		(124,508)
Excess tax benefit from stock-based compensation	10		12,136
Supply chain financing	(30,115)		0
Long-term financing obligations	(536)		0
Purchase of treasury shares	0		(5,323)
Proceeds from exercise of stock options	57		36,315
Net cash provided by (used in) financing activities	(25,469)		18,428
Net (decrease) increase in cash and cash equivalents	5,311		(41,300)
Effect of exchange rate changes on cash and cash equivalents	654		122
Cash and cash equivalents at beginning of period	11,664		54,741
Cash and cash equivalents at end of period	$17,629		$13,563
[1] Net change in working capital due to the following components: (Increase) decrease in current assets: Accounts and notes receivable $ (48,186 ) $ 73,693 Effect of factoring on accounts receivable 23,773 (15,818 ) Inventories (5,559 ) 30,467 Prepaid expenses and other current assets (976 ) (841 ) Restructuring payments (816 ) (11 ) Increase (decrease) in accounts payable and accruals 3,276 (84,101 ) (Decrease) increase in interest payable (6,514 ) 14 (Increase) decrease in working capital $ (35,002 ) $ 3,403

2_Statement Of Cash Flows Indir

Statement Of Cash Flows Indirect (Parenthetical) (USD $)
In Thousands	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Investment in non-consolidated affiliate, cash received	$0	$388

Notes to Financial Statements

Notes to Financial Statements
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements [Abstract]
(1) Interim Financial Presentation	(1) Interim Financial Presentation These interim 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). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. These interim 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 for the year ended December31, 2008 (the Annual Report). The year-end Consolidated Balance Sheet was derived from audited Consolidated Financial Statements, and has been adjusted to reflect the change in accounting as described in Note 4. The unaudited 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 and cash flows for the interim periods presented. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.
(2) New Accounting Standards	(2) New Accounting Standards Recently Adopted Accounting Standards Convertible Debentures In January 2009, we adopted the Financial Accounting Standards Board (FASB) Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). FSP APB 14-1 applied to our convertible debt instruments (Debentures) that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement of the conversion option. Even though we extinguished our Debentures in June 2008, we were required to apply FSP APB 14-1 retrospectively to our previously issued financial statements for the periods in which the Debentures were outstanding. The effect and disclosures required by the adoption of FSP APB 14-1 are included in Note 4. Earnings Per Share In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. Under this FSP, if our instruments granted in share-based payment transactions are determined to be participating securities prior to vesting, we are required to use the two-class method of calculating earnings per share as described in SFAS No.128, Earnings per Share, and to adjust our prior period earnings per share calculations. We adopted this FSP in 2009 and determined there was no material impact on our consolidated financial statements. Derivative Instruments In March 2008, the FASB issued SFAS No.161, Disclosures about Derivative Instruments and Hedging Activities. The statement amends and expands the disclosure requirements of FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.161 is effective for our fiscal and interim period financial statements beginning 2009. The adoption of SFAS No.161 did not have a material impact our financial position or results of operation because it only provides for additional disclosure. The required disclosures are included in Note 17. Subsequent Events In May 2009, the FASB issued SFAS No.165, Subsequent Events, which establishes general standards of accounting for and disclosure of subsequent events, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No.165, which is effective beginning with this Quarterly Report on Form 10-Q, requires disclosure of the date through which we evaluated subsequent events which, for a public entity is the date the financial statements are issued. We evaluated subsequent events through July30, 2009, the date we issued these financial statements. Long-lived Assets In April 2008 the FASB approved FSP FAS 142-3, Determination of the Useful Life of Intangible Assets. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No.142, Goodwill and Other Intangible Assets. It is effective for financial statements issued for fiscal years beginning after December15, 2008 and in
(3) Stock-Based Compensation	(3) Stock-Based Compensation In the three months ended June30, 2008 and 2009, we recognized $1.5 million and $0.8million, respectively, in stock-based compensation expense. A majority of the expense, $1.4million and $0.7million 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 six months ended June30, 2008 and 2009, we recognized $2.7 million and $1.3million, respectively, in stock-based compensation expense. A majority of the expense, $2.5million and $1.2 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 June30, 2009, the total compensation cost related to non-vested restricted stock and stock options not yet recognized was $3.2million, which will be recognized over the weighted average life of 1.1years. During 2008, we approved a performance share award program under our long-term incentive plan. Under this program, a maximum of 597,000 shares of performance shares, which represent the right to receive shares contingent upon the achievement of one or more performance measures, will be issued to eligible employees. These new awards are both service and performance based. Eligible employees must remain employed with the company for a three year period, which began in the first quarter of 2009, and also meet specific performance targets established for each year for the awards to vest. If performance targets are not met at a minimum of a 50% level, the employees forfeit their awards for that specific annual grant. The maximum number of shares that can be earned, 597,000, is based on meeting the targets at a 150% of target level for all three years. The performance targets for 2009 were established in February 2009. We recognized expense of $0.1 million in the six months ended June30, 2009 related to these awards, which assumes the 2009 targets will be met at a 100% target level. Restricted stock activity under the plans for the six months ended June30, 2009 was as follows: Numberof Shares Weighted- Average GrantDate FairValue Outstanding unvested at January 1, 2009 640,152 $ 9.05 Granted 326,881 8.36 Vested (386,437 ) 9.19 Forfeited (21,701 ) 11.70 Outstanding at June 30, 2009 558,895 $ 8.45 Stock option activity under the plans for the six months ended June30, 2009 was as follows: Number of Shares Weighted- Average Exercise Price Outstanding at January 1, 2009 1,359,238 $ 8.84 Granted 5,000 9.52 Vested Exercised (10,500 ) 5.50 Forfeited (14,000 ) 15.80 Outstanding at June 30, 2009 1,339,738 $ 8.79 During the three months ended June30, 2009, we made payments under our employee incentive compensation plan to eligible employees. Our executive officers and certain members of senior management rece
(4) Adoption of FSP APB 14-1	(4) Adoption of FSP APB 14-1 As mentioned in Note 2, we were required to retrospectively change our method of accounting for the Debentures during the period they were outstanding to comply with FSP APB 14-1 (the FSP). Initial Measurement Accounting On January22, 2004, GTI issued $225.0 million aggregate principal amount of Debentures which were scheduled to mature on January15, 2024, unless earlier converted, redeemed or repurchased. The FSP required us to separate the proceeds from the Debentures into two accounting components at issuance: 1. a debt component, representing the fair value of the Debentures as if they had no conversion rights, and 2. an equity component, representing the difference between the proceeds from the issuance of the Debentures and the fair value of the debt component. The amount allocated to the equity component was accounted for as debt discount. We also allocated the transaction costs to the liability and equity components in proportion to the allocation of proceeds and accounted for them as debt issuance costs and equity issuance costs, respectively. The debt discount and debt issuance costs not allocated to equity were amortized over the period to the first conversion date (7 years) using the interest method and recorded as interest expense. Because the amounts allocated to equity were not deductible for income tax purposes, we recorded the tax effects as adjustments to additional paid-in capital. Redemption Accounting On May30, 2008, we called for the redemption of the $225.0 million outstanding principal amount of the Debentures. On June13, 2008, the redemption date, the Debenture holders who exercised their conversion rights received 60.3136 shares of our common stock for each $1,000 principal amount of Debentures on conversion, together with a make-whole payment totaling $9.0 million, which represented the present value of all remaining scheduled payments of interest on the redeemed Debentures from the date of conversion through January15, 2011. We also made payment of $0.2 million to the Debenture holders who did not exercise their conversion rights and opted to receive a redemption price in cash equal to 100% of the principal plus accrued but unpaid interest until the redemption date. These Debenture holders received the make-whole value in shares. Under the FSP, we allocated the fair value of the consideration transferred (13.6 million shares of common stock with an aggregate value of $366.4 million) to the fair values of the debt component ($194.7 million) and the equity component ($171.7 million) immediately prior to the redemption. A $4.1 million gain was recognized for the difference between the amount allocated to the debt component and the sum of the carrying amount of the debt, unamortized debt discount, and issuance costs at conversion. At redemption, we recorded additional valuation allowance of $9.9 million as a result of the reduction of the deferred tax liability for the difference in debt discount and debt issuance costs expense recognized for financial and tax reporting. Effect of restatement The effect of adopting the FSP on our balance sh
(5) Earnings Per Share	(5) Earnings Per Share Basic and diluted EPS are calculated using the following data: For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (In thousands, except share data) Net income (loss) as reported $ 45,857 $ (37,091 ) $ 82,539 $ (28,622 ) Interest on Debentures, net of tax benefit 802 1,718 Amortization of Debentures issuance costs, net of tax benefit 2,377 4,772 Net income (loss) as adjusted $ 49,036 $ (37,091 ) $ 89,029 $ (28,622 ) Weighted average common shares outstanding for basic calculation 106,050,313 119,892,961 104,160,899 119,401,815 Add: Effect of stock options and restricted stock 1,870,313 1,834,515 Add: Effect of Debentures 11,600,335 12,585,447 Weighted average common shares outstanding for diluted calculation 119,520,961 119,892,961 118,580,861 119,401,815 The calculation of weighted average common shares outstanding for the diluted calculation excludes consideration of stock options covering 92,398 shares in the three months ended June30, 2008 and 1,018,856 shares in the six months ended June30, 2008 because the exercise of these options would not have been dilutive for those periods due to the fact that the exercise prices were greater than the weighted average market price of our common stock for each of those periods. There is no dilution for the three or six months ended June30, 2009 as we are in a net loss position for both periods.
(6) Segment Reporting	(6) Segment Reporting Our businesses are reported in the following reportable segments: Industrial Materials. Our industrial materials segment manufactures and delivers high quality graphite electrodes and refractory products. Electrodes are key components of the conductive power systems used to produce steel and other non-ferrous metals. Refractory products are used in blast furnaces and submerged arc furnaces due to their high thermal conductivity and the ease with which they can be machined to large or complex shapes. Engineered Solutions. Engineered solutions include advanced graphite materials products for the transportation, solar, and oil and gas exploration industries, as well as natural graphite products. We evaluate the performance of our segments based on segment operating income. Intersegment sales and transfers are not material and the accounting policies of the reportable segments are the same as those for our Consolidated Financial Statements as a whole. Corporate expenses are allocated to segments based on each segments percentage of consolidated sales. The following tables summarize financial information concerning our reportable segments: For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Net sales to external customers: Industrial materials $ 275,121 $ 129,834 $ 523,410 $ 234,355 Engineered solutions 44,417 27,940 86,130 57,445 Total net sales $ 319,538 $ 157,774 $ 609,540 $ 291,800 Segment operating income: Industrial materials $ 79,646 $ 16,369 $ 154,311 $ 23,158 Engineered solutions 8,991 3,115 17,419 4,749 Total segment operating income $ 88,637 $ 19,484 $ 171,730 $ 27,907 Reconciliation of segment operating income to income (loss) before provision for income taxes: Equity in loss and write-down of investment in non-consolidated affiliate 54,602 53,390 Other expense (income), net 2,919 3,270 23,954 (2,264 ) Interest expense 5,782 1,421 13,432 3,068 Interest income (206 ) (184 ) (578 ) (301 ) Income (loss) before provision for income taxes $ 80,142 $ (39,625 ) $ 134,922 $ (25,986 )
(7) Investment in and Advances to Non-Consolidated Affiliate	(7) Investment in and Advances to Non-Consolidated Affiliate Acquisition On June30, 2008, we acquired 100% of the common stock of Falcon-Seadrift Holding Corp., now named GrafTech Seadrift Holding Corp. (GTSD). The principal asset of GTSD is limited partnership units constituting approximately 18.9% of the equity interests of Seadrift Coke L.P. (Seadrift); a privately-held producer of needle coke, the primary raw material used in the manufacture of graphite electrodes. The substance of the transaction was the acquisition of an asset, the limited partnership units. The cost of our acquisition was $136.5 million of which $135.0 million was paid in cash. Write-down of Investment to Its Fair Value We perform an assessment of our investment in Seadrift for impairment whenever changes in the facts and circumstances indicate that a loss in value has occurred, which is other than temporary. Because Seadrift is privately-held, we determine the fair value using an income approach (based upon the present value of expected future cash flows using discount rates commensurate with the risks of the investment). At December31, 2008, we determined that the fair value of the investment was less than our carrying value and that the loss in value is not temporary. We recorded a $34.5 million noncash impairment to recognize this other than temporary loss in value. The fair value of Seadrift reflected reductions in the estimated future cash flows based on a lower expectation of tons shipped and reduced growth and profitability resulting primarily from the downturn in the economy. At June30, 2009, we determined that Seadrifts reported and projected operating losses were triggering events requiring us to assess if there was a loss in value that is other than temporary. The fair value of Seadrift reflected reductions in the estimated future cash flows based on a lower expectation of volume and reduced growth and profitability resulting primarily from the downturn in the economy. We determined that the fair value was less than our carrying value and that the loss in value was other than temporary. We recorded a $52.8 million noncash impairment to recognize this other than temporary loss in value. Because the impairment reduced the difference between the carrying amount of our investment and its tax basis, we recorded a net tax benefit of $7.4 million representing the net change of the deferred tax liability and the restoration of the valuation allowance recognized at the acquisition. Given the current economic environment and the uncertainties regarding the impact on steel producers and their suppliers, including Seadrift, there can be no assurances that our estimates and assumptions regarding the fair value of Seadrift will prove to be accurate. If the assumptions regarding forecasted revenue, growth rates, and expected profitability are not achieved, we may be required to record additional impairment charges in future periods. Equity in Earnings (Losses) and Summarized Financial Information Our equity earnings are based on Seadrifts results of operations with a one-month lag because its accounting close cycle and preparation of financial
(8) Other Expense (Income), Net	(8) Other Expense (Income), Net The following table presents an analysis of other expense (income), net: For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Currency (gains) losses $ (2,772 ) $ 2,973 $ 12,692 $ (3,378 ) Loss on extinguishment of debt 4,725 Gain on derecognition of Debentures (4,060 ) (4,060 ) Debenture make-whole payment 9,034 9,034 Loss (gain) on sale of assets 40 (47 ) (8 ) (64 ) Bank and other financing fees 538 431 983 936 Loss on the sale of accounts receivable 235 69 575 147 Other (96 ) (156 ) 13 95 Total other expense (income), net $ 2,919 $ 3,270 $ 23,954 $ (2,264 ) We have non-dollar-denominated intercompany loans between GrafTech Finance and certain of our foreign subsidiaries. At December31, 2008 and June30, 2009, the aggregate principal amount of these loans was $558.4 million and $565.7 million, respectively (based on currency exchange rates in effect at such dates). These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. Certain of these loans had been deemed to be essentially permanent prior to settlement and, as a result, remeasurement gains and losses on these loans were recorded as a component of accumulated other comprehensive loss in the stockholders equity section of the Consolidated Balance Sheets. The loans remaining are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency gains / losses in other income (expense), net, on the Consolidated Statements of Operations. For the three months ended June30, 2008 and 2009, we had a net total of $2.8 million of currency gains and $3.0 million of currency losses, respectively, due to the remeasurement of intercompany loans and the effect of transaction gains and losses related to foreign subsidiaries whose functional currency is the US dollar. For the six months ended June30, 2008 and 2009, we had a net total of $12.7 million of currency losses and $3.4 million of currency gains, respectively, due to the remeasurement of intercompany loans and the effect of transaction gains and losses related to foreign subsidiaries whose functional currency is the US dollar. In connection with the redemption of $125 million of the outstanding principal of the Senior Notes during the six months ended June30, 2008, we incurred a $4.7 million loss on the extinguishment of debt, which includes $4.3million related to the call premium and $0.4 million of charges for the accelerated amortization of the debt issuance fees, terminated interest rate swaps and the premium related to the Senior Notes. In connection with the conversion of our $225 million of Convertible Senior Debentures in the three months ended June30, 2008, we incurred a $9.0 million charge related to the make-wh
(9) Benefit Plans	(9) Benefit Plans The components of our consolidated net pension and postretirement cost (benefit) are set forth in the following tables: Pension Benefits For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Service cost $ 246 $ 157 $ 492 $ 313 Interest cost 2,890 2,619 5,780 5,239 Expected return on plan assets (3,254 ) (2,909 ) (6,509 ) (5,819 ) Amortization of transition obligation (22 ) 2 (43 ) 3 Amortization of prior service cost 34 11 68 22 Amortization of unrecognized loss 497 319 995 639 Settlements 171 171 Net cost $ 562 $ 199 $ 954 $ 397 Post Retirement Benefits For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Service cost $ 120 $ 93 $ 240 $ 186 Interest cost 554 554 1,108 1,107 Amortization of prior service benefit (332 ) (319 ) (664 ) (639 ) Amortization of unrecognized loss 1,051 967 2,102 1,936 Net cost $ 1,393 $ 1,295 $ 2,786 $ 2,590 We provide postretirement benefits for eligible retired employees pooled participants, a closed group of retirees that existed under the former parent company; and non-pooled participants, GrafTech employees who began working prior to 2001 and remain working for us until retirement. Effective July1, 2009, we amended our plan to eliminate the benefit for certain non-pooled participants. The effect of this amendment is to reduce our accumulated plan benefit by $0.8 million which will be recorded in the third quarter of 2009.
(10) Long-Term Debt and Liquidity	(10) Long-Term Debt and Liquidity The following table presents our long-term debt: AtDecember31, 2008 AtJune30, 2009 (Dollars in thousands) Revolving Facility $ 30,000 $ 33,312 Senior Notes: Senior Notes due 2012 19,906 19,906 Fair value adjustments for terminated hedge instruments* 191 165 Unamortized bond premium 38 33 Total Senior Notes 20,135 20,104 Other European debt 422 296 Total $ 50,577 $ 53,712 * Fair value adjustments for terminated hedge instruments will be amortized as a credit to interest expense over the remaining term of the Senior Notes. Our Revolving Facility will mature in July 2010, and will be classified as current debt in our Consolidated Balance Sheet beginning July 2009, unless refinanced prior to issuance of such financial statements. In the six months ended June30, 2008, we redeemed a total of $125 million of the outstanding principal amount of the 101/4% Senior Notes, due 2012, at 103.417% plus accrued interest, as discussed in Note 8. The fair value of our long-term debt was $52.6 million at June 30, 2009.
(11) Inventories	(11) Inventories Inventories are comprised of the following: AtDecember31, 2008 AtJune30, 2009 (Dollars in thousands) Inventories: Raw materials and supplies $ 130,615 $ 119,004 Work in process 111,995 110,263 Finished goods 49,895 47,853 292,505 277,120 Reserves (2,108 ) (1,347 ) $ 290,397 $ 275,773 Costs in excess of normal absorption at June30, 2009 were $9.3 million, which were accounted for under the provisions of SFAS No.151, Inventory Costs an amendment of APB No.43, Chapter 4. SFAS No.151 requires us to recognize abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) as current period charges. SFAS No.151 also requires that we allocate fixed production overheads to the costs of conversion based on normal capacity of the production facilities. The unabsorbed costs were attributable to adjustments of fixed production overheads to the costs of conversion based on normal capacity versus actual levels, due to production levels being below normal capacity in the first and second quarter.
(12) Interest Expense	(12) Interest Expense The following table presents an analysis of interest expense: For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Interest incurred on debt $ 2,999 $ 1,038 $ 7,831 $ 2,302 Amortization of fair value adjustments for terminated hedge instruments (45 ) (13 ) (116 ) (26 ) Amortization of premium on Senior Notes (9 ) (3 ) (23 ) (6 ) Amortization of discount on Debentures 2,204 4,409 Amortization of debt issuance costs 566 345 1,191 690 Interest incurred on other items 67 54 140 108 Total interest expense $ 5,782 $ 1,421 $ 13,432 $ 3,068
(13) Other Comprehensive Income	(13) Other Comprehensive Income Other comprehensive income consisted of the following: For the Three Months Ended June30, For the Six Months Ended June30, 2008 2009 2008 2009 (Dollars in thousands) Net income (loss) $ 45,857 $ (37,091 ) $ 82,539 $ (28,622 ) Other comprehensive income: Foreign currency translation adjustments (6,008 ) (42,107 ) (29,613 ) (25,087 ) Amortization of prior service costs and unrecognized gains and losses, net of tax of $0, $0, $0, and $982, respectively (1,210 ) (1,841 ) (2,442 ) (1,800 ) Natural gas derivatives and other, net of tax of $0, $30, $0, and $30, respectively 113 (1,438 ) (131 ) (1,573 ) Total comprehensive income $ 38,752 $ (82,477 ) $ 50,353 $ (57,082 )
(14) Contingencies	(14) Contingencies 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. 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. The following table presents the activity in this accrual for the six months ended June30,2009: (DollarsinThousands) Balance at January1, 2009 $ 913 Product warranty charges 1,721 Payments and settlements (707 ) Balance at June30, 2009 $ 1,927
(15) Financial Information About the Issuers and Guarantors of Our Debt Securities and Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees	(15) Financial Information About the Issuers and Guarantors of Our Debt Securities and Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees On February15, 2002, GrafTech Finance (Finco), a direct subsidiary of GTI (the Parent), issued $400million aggregate principal amount of Senior Notes and, on May6, 2002, $150million aggregate principal amount of additional Senior Notes. All of the Senior Notes have been issued under a single Indenture and constitute a single class of debt securities. The Senior Notes mature on February15, 2012. The Senior Notes have been guaranteed on a senior basis by the Parent and the following wholly-owned direct and indirect subsidiaries of the Parent: GrafTech Global, GrafTech International Holdings Inc., GrafTech International Trading Inc., and GrafTech Technology LLC. The Parent, Finco and these subsidiaries together hold a substantial majority of our U.S. assets. The guarantors of the Senior Notes, solely in their respective capacities as such, are collectively called the U.S. Guarantors. Our other subsidiaries, which are not guarantors of the Senior Notes, are called the Non-Guarantors. All of the guarantees are unsecured. All of the guarantees are full, unconditional and joint and several. Finco and each of the other U.S. Guarantors (other than the Parent) are 100% owned, directly or indirectly, by the Parent. All of the guarantees of the Senior Notes continue until the Senior Notes have been paid in full, and payment under such guarantees could be required immediately upon the occurrence of an event of default under the Senior Notes. If a guarantor makes a payment under its guarantee of the Senior Notes, it would have the right under certain circumstances to seek contribution from the other guarantors of the Senior Notes. Provisions in the Revolving Facility restrict the payment of dividends by our subsidiaries to the Parent. At June30, 2009, retained earnings of our subsidiaries subject to such restrictions were approximately $1,276 million. Investments in subsidiaries are recorded on the equity basis. The following table sets forth condensed consolidating balance sheets at December31, 2008 and June30, 2009 and condensed consolidating statements of operations and cash flows for each of the three month and six months ended June30, 2008 and 2009 of the Parent, Finco, all other U.S. Guarantors and the Non-Guarantors. Condensed Consolidating Balance Sheet at December31, 2008 Parent (Guarantorof Senior Notes) Finco(Issuer of Senior Notes) All Other U.S. Guarantors Non- Guarantors Consolidation/ Eliminations Consolidated (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 131 $ 713 $ 341 $ 10,479 $ $ 11,664 Intercompany loans 244,463 684,297 (928,760 ) Intercompany accounts receivable 9,846 9,880 (19,726 ) Accounts receivable - third party 26,783 120,203 146,986 Accounts and notes
(16) Income Taxes	(16) Income Taxes We compute an estimated annual effective tax rate on a quarterly basis, considering ordinary income and related income tax expense. 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. These items may include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, impairment charges, adjustments to prior period uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment of the realizability of deferred tax assets. The provision for income taxes for the three months ended June30, 2009 and 2008 was a tax benefit of $2.5 million on pretax loss of $39.6 million, and a tax expense of $34.3 million on pretax income of $80.1 million. The effective tax rates were 6.4% and 42.8% for the three months ended June30, 2009 and 2008, respectively. The effective tax rate for the three months ended June30, 2009 results from not fully realizing the benefit of the $52.8 million Seadrift impairment charge, as described in note 7 above, due to the reestablishment of valuation allowances against tax attributes in the U.S. The provision for income taxes for the six months ended June30, 2009 and 2008 was a tax expense of $2.6 million on pretax loss of $26.0 million and a tax expense of $52.4 million on pretax income of $134.9 million. The effective tax rates were 10.1% and 38.8% for the six months ended June30, 2009 and 2008, respectively. The effective tax rate for the six months ended June30, 2009 results from not fully realizing the benefit of the $52.8 million Seadrift impairment charge, as described in Note 7, due to the reestablishment of valuation allowances against tax attributes in the U.S. Our cumulative year-to-date unrecognized tax benefits have decreased by $1.8 million, primarily as a result of the settlement of tax positions taken in a prior period, of which $0.9 million has a favorable impact on our effective tax rate. As of June30, 2009, we had unrecognized tax benefits of $9.0 million, which would have a favorable impact on our effective tax rate. It is reasonably possible that a reduction in a range of $1.5 million to $2.5 million of unrecognized tax benefits may occur within 12 months as a result of the expiration of statutes of limitation. We file income tax returns in the U.S. federal and state jurisdictions, and various non-U.S. jurisdictions. All U.S. tax years prior to 2005 are closed by statute or have been audited and settled with the U.S. tax authorities. We have also closed our 2005-2007 income tax audit with the French tax authorities, and for most other jurisdictions we are still open to examination beginning after 2003. Our tax provisions for the three months ended June30, 2009 and 2008 were primarily for taxes onour internationalincome. We continue to adjust the tax provision rate through the establishment, or release, of non-cash valuation allowances attributable to the U.S. and certain non-U.S. taxing jurisdictions, including U.S. foreign
(17) Derivative Instruments	(17) Derivative Instruments We use derivative instruments as part of our overall foreign currency and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows and to minimize commodity price volatility. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the US Dollar. We do not enter into derivative financial instruments for speculative or trading purposes and did not during the three or six months ended June30, 2009 or 2008. None of our derivative contracts contain provisions that would require us to provide collateral. Derivative contracts that we may enter into in the future may contain such provisions. 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, despite the current worldwide economic situation. We do not anticipate nonperformance by any of the counter-parties to our instruments. The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Consolidated Balance Sheets. At June30, 2009 and December31, 2008, the fair values of our derivatives and their respective balance sheet locations are presented in the following table: Asset Derivatives Liability Derivatives Location FairValue Location FairValue (Dollarsinthousands) As of June30, 2009 Foreign currency contracts Othercurrentassets $ 554 $ Commodity forward contracts Othercurrentliabilities 327 Total fair value $ 554 $ 327 As of December31, 2008 Foreign currency contracts Other current assets $ 203 $ Commodity forward contracts Other current liabilities 1,511 Total fair value $ 203 $ 1,511 The location and amount of realized (gains) losses recognized in the Statement of Operations for derivatives are as follows for the three and six months June30, 2009: Amountof(Gain)Loss Recognized (Dollarsinthousands) Three months ended June30, Location 2009 2008 Foreign currency contracts Cost of goods sold / Other (income) expense $ (1,790 ) $ Commodity forward contracts Cost of goods sold 1,108 (143 ) Six months ended June30, Location 2009 2008 Foreign currency contracts Cost of goods sold / Other (income) expense $ (2,330 ) $ Commodity forward contracts Cost of goods sold 2,066 (252 ) Foreign Currency Contracts In 2008 and 2009, we entered into foreign exchange contracts as economic hedges of anticipated cash flows denominated in the Mexican peso and Brazilian real. These contracts were entered into to protect the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates between the US Doll

Document Information

Document Information
	6 Months Ended Jun. 30, 2009 USD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	2009-06-30

Entity Information

Entity Information (USD $)
	6 Months Ended Jun. 30, 2009	Jul. 14, 2009	Jun. 30, 2008
Entity [Text Block]
Trading Symbol	GTI
Entity Registrant Name	GRAFTECH INTERNATIONAL LTD
Entity Central Index Key	0000931148
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		120,347,841
Entity Public Float			$3,197,000,000