GrafTech International (EAF) 10-Q 29 Apr 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 19, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	GTI
Entity Registrant Name	GRAFTECH INTERNATIONAL LTD
Entity Central Index Key	0000931148
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		124,474,769

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
Current Assets:
Cash and cash equivalents	$88,532	$50,181
Accounts and notes receivable, net of allowance for doubtful accounts of $4,545 at December 31, 2009 and $4,482 at March 31, 2010	123,066	117,620
Inventories	258,779	245,511
Loan to non-consolidated affiliate		6,000
Prepaid expenses and other current assets	9,536	9,586
Total current assets	479,913	428,898
Property, plant and equipment	970,989	982,173
Less: accumulated depreciation	607,008	610,182
Net property, plant and equipment	363,981	371,991
Deferred income taxes	23,813	11,437
Goodwill	9,047	9,037
Other assets	7,480	7,298
Investment in non-consolidated affiliate	62,541	63,315
Restricted cash	555	632
Total assets	947,330	892,608
Current liabilities:
Accounts payable	36,269	33,928
Short-term debt		1,113
Accrued income and other taxes	46,126	38,977
Supply chain financing liability	39,073	14,404
Other accrued liabilities	94,413	91,907
Total current liabilities	215,881	180,329
Long-term debt	1,327	1,467
Other long-term obligations	106,535	108,267
Deferred income taxes	26,605	25,486
Contingencies - Note 14
Stockholders' equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued
Common stock, par value $.01, 225,000,000 shares authorized, 124,027,399 shares issued at December 31, 2009 and 124,426,634 shares issued at March 31, 2010	1,244	1,240
Additional paid-in capital	1,303,180	1,300,051
Accumulated other comprehensive loss	(321,247)	(305,644)
Accumulated deficit	(271,674)	(305,202)
Less: cost of common stock held in treasury, 3,974,345 shares at December 31, 2009 and 4,065,473 at March 31, 2010	(113,649)	(112,511)
Less: common stock held in employee benefit and compensation trusts, 71,493 shares at December 31, 2009 and 68,958 shares at March 31, 2010	(872)	(875)
Total stockholders' equity	596,982	577,059
Total liabilities and stockholders' equity	$947,330	$892,608

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Dec. 31, 2009
Accounts and notes receivable, allowance for doubtful accounts	$4,482	$4,545
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	225,000,000
Common stock, shares issued	124,426,634	124,027,399
Less: cost of common stock held in treasury, shares	4,065,473	3,974,345
Less: common stock held in employee benefit and compensation trusts, shares	68,958	71,493

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net sales	$215,664	$134,026
Cost of sales	147,561	101,900
Gross profit	68,103	32,126
Research and development	2,535	2,068
Selling and administrative expenses	22,511	21,635
Operating income	43,057	8,423
Equity in (earnings) losses of non-consolidated affiliate	774	(1,212)
Other (income), net	(3,259)	(5,534)
Interest expense	906	1,647
Interest income	(561)	(117)
Income before provision for income taxes	45,197	13,639
Provision for income taxes	11,669	5,170
Net income	$33,528	$8,469
Basic income per common share:
Net income per share	0.28	0.07
Weighted average common shares outstanding	120,231	118,956
Diluted income per common share:
Net income per share	0.28	0.07
Weighted average common shares outstanding	120,957	119,245

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Cash flow from operating activities:
Net income	$33,528		$8,469
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization	10,084		8,028
Deferred income tax provision	(8,241)		1,686
Equity in (earnings) losses of non-consolidated affiliate	774		(1,212)
Post-retirement and pension plan changes	2,452		1,415
Currency (gains)	(5,617)		(9,161)
Stock-based compensation	1,779		517
Interest expense	326		329
Other charges, net	489		5,514
Dividends from non-consolidated affiliate			122
Decrease (increase) in working capital	(13,347)	[1]	1,608	[1]
(Increase) in long-term assets and liabilities	(1,785)		(2,991)
Net cash provided by operating activities	20,442		14,324
Cash flow from investing activities:
Capital expenditures	(10,764)		(12,637)
Proceeds from repayments of loan to non-consolidated affiliate	6,000
(Payments) proceeds from derivative instruments	35		(419)
Net change in restricted cash	77		60
Other	109		17
Net cash used in investing activities	(4,543)		(12,979)
Cash flow from financing activities:
Short-term debt borrowings (reductions), net	(1,076)		3,597
Revolving Facility borrowings			62,975
Revolving Facility reductions			(48,000)
Principal payments on long-term debt	(56)		(129)
Supply chain financing	24,669		(24,696)
Proceeds from exercise of stock options	175		54
Purchase of treasury shares	(1,138)		(14)
Excess tax benefit from stock-based compensation	669		10
Long-term financing obligations	(281)		(275)
Net cash (used in) provided by financing activities	22,962		(6,478)
Net (decrease) increase in cash and cash equivalents	38,861		(5,133)
Effect of exchange rate changes on cash and cash equivalents	(510)		(418)
Cash and cash equivalents at beginning of period	50,181		11,664
Cash and cash equivalents at end of period	88,532		6,113
Decrease (increase) in current assets:
Accounts and notes receivable, net	(7,593)		69,092
Effect of factoring of accounts receivable	(1,115)		(15,869)
Inventories	(21,039)		4,049
Prepaid expenses and other current assets	(1,133)		409
Restructuring payments	(256)		(6)
(Decrease) increase in accounts payables and accruals	17,790		(55,584)
(Decrease) in interest payable	(1)		(483)
Decrease (increase) in working capital	($13,347)	[1]	$1,608	[1]
[1] Net change in working capital due to the following components: Decrease (increase) in current assets: Accounts and notes receivable, net $ 69,092 $ (7,593 ) Effect of factoring of accounts receivable (15,869 ) (1,115 ) Inventories 4,049 (21,039 ) Prepaid expenses and other current assets 409 (1,133 ) Restructuring payments (6 ) (256 ) (Decrease) increase in accounts payables and accruals (55,584 ) 17,790 (Decrease) in interest payable (483 ) (1 ) Decrease (increase) in working capital $ 1,608 $ (13,347 )

Interim Financial Presentation

Interim Financial Presentation
	3 Months Ended Mar. 31, 2010
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, 2009 (the Annual Report). 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.

New Accounting Standards

New Accounting Standards
	3 Months Ended Mar. 31, 2010
New Accounting Standards	(2) New Accounting Standards Recently Adopted Accounting Standards Consolidation In June 2009, the FASB amended the consolidation accounting guidance. We are required to qualitatively assess the determination of our being the primary beneficiary (consolidator) of a variable interest entity (VIE) on whether we (1)have the power to direct matters that most significantly impact the activities of the VIE, and (2)have the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. It also requires an ongoing reconsideration of the primary beneficiary and amends events that trigger a reassessment of whether an entity is a VIE. The new model is applicable to all new and existing VIEs. The prospective adoption of this new guidance on January1, 2010, had no impact on our consolidated financial position or results of operation. Transfers of Financial Assets In June 2009 the FASB amended the accounting guidance for determining whether a transfer of a financial asset qualifies for sale accounting. The amended guidance also provided four broad disclosure objectives designed to provide users of the financial statements with an understanding of: 1. The transferors continuing involvement with the transferred assets. 2. The nature of any restrictions on the transferors assets that relate to a transferred financial asset, including the carrying amount of those assets. 3. How servicing assets and servicing liabilities are reported by the transferor. 4. How a transfer of financial assets affects the companys balance sheet, earnings, and cash flows. The prospective adoption of this guidance to our accounts receivable factoring arrangement beginning January1, 2010 had no impact on our consolidated financial position or results of operation.

Stock-Based Compensation

Stock-Based Compensation
	3 Months Ended Mar. 31, 2010
Stock-Based Compensation	(3) Stock-Based Compensation For the three months ended March31, 2009 and 2010, we recognized stock-based compensation expense totaling $0.5 million and $1.8 million, respectively. A majority of the expense, $0.5 million and $1.6 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. At March31, 2010, the total compensation cost related to non-vested restricted stock, performance shares and stock options not yet recognized was $12.4 million, which will be recognized over the weighted average life of 1.5 years. Restricted Stock and Performance Shares Restricted stock and performance share awards activity under the plans for the three months ended March31, 2010 was: Number of Shares Weighted- Average GrantDate Fair Value Outstanding unvested at January 1, 2010 1,146,256 $ 12.07 Granted 104,873 13.58 Vested (348,037 ) 7.07 Forfeited (5,619 ) 10.19 Outstanding at March 31, 2010 897,473 $ 14.19 Stock Options Stock option activity under the plans for the three months ended March31, 2010 was: Number of Shares Weighted- Average Exercise Price Outstanding at January 1, 2010 1,512,538 $ 9.80 Granted 10,400 14.49 Exercised (14,050 ) 12.43 Forfeited (27,451 ) 15.81 Outstanding at March 31, 2010 1,481,437 $ 9.70

Earnings Per Share

Earnings Per Share
	3 Months Ended Mar. 31, 2010
Earnings Per Share	(4) Earnings Per Share The following table shows the information used in the calculation of our share counts for basic and diluted earnings per share: For the Three Months Ended March31, 2009 2010 Weighted average common shares outstanding for basic calculation 118,955,516 120,230,559 Add: Effect of stock options and restricted stock 289,057 726,645 Weighted average common shares outstanding for diluted calculation 119,244,573 120,957,204 Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued. The weighted average common shares outstanding for the diluted calculation excludes consideration of stock options covering 1,190,703 and 227,000 shares at March31, 2009 and 2010, respectively, because the exercise prices were greater than the weighted average market price of our common stock for each of those periods.

Segment Reporting

Segment Reporting
	3 Months Ended Mar. 31, 2010
Segment Reporting	(5) 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 continue to 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 net sales. The following tables summarize financial information concerning our reportable segments: For the ThreeMonthsEnded March31, 2009 2010 (Dollars in thousands) Net sales to external customers: Industrial Materials $ 104,521 $ 182,423 Engineered Solutions 29,505 33,241 Total net sales $ 134,026 $ 215,664 Segment operating income: Industrial Materials $ 6,788 $ 41,834 Engineered Solutions 1,635 1,223 Total segment operating income 8,423 43,057 Reconciliation of segment operating income to income before provision for income taxes Equity in earnings of and write-down in non-consolidated affiliate (1,212 ) 774 Other (income), net (5,534 ) (3,259 ) Interest expense 1,647 906 Interest income (117 ) (561 ) Income before provision for income taxes $ 13,639 $ 45,197

Investment in and Loan to Non-C

Investment in and Loan to Non-Consolidated Affiliate
	3 Months Ended Mar. 31, 2010
Investment in and Loan to Non-Consolidated Affiliate	(6) Investment in and Loan 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. Seadrift is one of the four main producers of needle coke. Needle coke is a critical raw material, without substitutes, required to produce a graphite electrode and represents approximately 40% of our total cost to produce. At the time of the acquisition, industry sales of graphite electrodes were at an all-time high and needle coke production was at or near full capacity. The availability and rising cost of needle coke was creating a compelling threat to the profitability and growth of our business model. In order to partially hedge the impact of rising needle coke cost and, more importantly, to potentially position ourselves to gain a controlling interest, we purchased our 18.9% ownership interest in Seadrift. The substance of the transaction was the acquisition of an asset, the limited partnership units. The cost of our acquisition was $136.5 million (net of $0.4 million cash received) of which $135.0 million cash was paid to the prior sole shareholder of GTSD. In addition to the limited partnership units of Seadrift, we obtained certain rights associated with these interests. These include: the right to one of five seats on Seadrifts board of directors (or, at our election, board observation rights in lieu thereof); the right of approval with respect to certain mergers and other transactions; and the right to veto Seadrifts repurchase of its own equity (other than from former employees). There are also customary rights permitting or requiring us to sell our interests on the same terms and conditions if the majority owners sell their interests. Beginning May1, 2011, we have the right to require Seadrift to purchase our interests (a put to Seadrift) at the then fair market value (determined by a third-party assuming a sale of Seadrift as a going concern and without applying a discount for lack of liquidity, marketability, or lack of control). We accounted for the acquisition of GTSD as the acquisition of an asset limited partnership units in Seadrift rather than as a business combination. Because the amount we paid for the limited partnerships units exceeded their tax basis accounting required us to recognize a deferred tax liability for this difference. We increased the purchase price by $41.8 million to recognize the deferred tax liability applicable to the difference between the amount we paid and the tax basis of the Seadrift limited partnership units. At the time of the acquisition we had a deferred tax asset valuation allowance. The accounting for the acquisition of Seadrift resulted in a taxable temporary difference that is expected to reverse during the same period that our deferred tax assets are expected to reverse. Accounting guidance required us t

Other

Other (Income) Expense, Net
	3 Months Ended Mar. 31, 2010
Other (Income) Expense, Net	(7) Other (Income) Expense, Net The following table presents an analysis of other expense (income), net: FortheThree Months Ended March31, 2009 2010 (Dollars in thousands) Currency (gains) $ (6,351 ) $ (3,718 ) Bank and other financing fees 505 465 Discount on sale of accounts receivable 78 2 Other 234 (8 ) Total other (income) expense, net $ (5,534 ) $ (3,259 )

Benefit Plans

Benefit Plans
	3 Months Ended Mar. 31, 2010
Benefit Plans	(8) Benefit Plans The components of our consolidated net pension cost are set forth in the following table: FortheThree MonthsEnded March31, 2009 2010 (Dollarsinthousands) Service cost $ 157 $ 151 Interest cost 2,619 2,486 Expected return on plan assets (2,909 ) (2,623 ) Amortization of transition obligation 2 Amortization of prior service cost 11 14 Amortization of unrecognized loss 319 1,271 Settlements/curtailments 41 (15 ) Net Cost $ 240 $ 1,284 The components of our consolidated net postretirement cost are set forth in the following table: FortheThree MonthsEnded March31, 2009 2010 (Dollarsinthousands) Service cost $ 93 $ 47 Interest cost 554 504 Amortization of prior service (benefit) (319 ) (48 ) Amortization of unrecognized loss 967 562 Net Cost $ 1,295 $ 1,065

Long-Term Debt and Liquidity

Long-Term Debt and Liquidity
	3 Months Ended Mar. 31, 2010
Long-Term Debt and Liquidity	(9) Long-Term Debt and Liquidity The following table presents our long-term debt: AtDecember31, 2009 AtMarch31, 2010 (Dollars in thousands) Other European debt $ 1,467 $ 1,327 We have a $215 million Revolving Facility that expires on July15, 2010 of which we have no borrowings outstanding at March31, 2010. We have completed the refinancing of our senior secured revolving credit facility effective April29, 2010, see footnote17, Subsequent Events on page18 for a further discussion. On September30, 2009, our Spanish subsidiary received a $1.8 million economic stimulus loan from the Ministry of Industry, Government of Spain. The loan is non-interest bearing and matures in October 2024. Repayment in 10 annual installments commences in October 2015. The loan is to be used for costs associated with a capital project. We must return a proportionate amount of the loan if we do not spend the amount budgeted for the capital project prior to June10, 2010. Since we have spent approximately 92% of the required amount as of March31, 2010, the remaining 8% of the cash received is reported as restricted cash in our consolidated balance sheet. Because the loan is non-interest bearing, we are required to record the loan at its present value of $1.1 million (determined using an interest rate of 4.33%). The difference between the proceeds received and the present value of debt is recorded as debt discount and deferred expense. The discount will be amortized to income using the interest method; the deferred charge will be amortized to income using the same basis and over the same period as the capital projects are depreciated. The loan balance, net of unamortized discount, was $1.1 million at March31, 2010.

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Inventories	(10) Inventories Inventories are comprised of the following: AtDecember31, 2009 AtMarch31, 2010 (Dollars in thousands) Inventories: Raw materials and supplies $ 89,855 $ 87,314 Work in process 106,606 120,046 Finished goods 51,568 53,580 248,029 260,940 Reserves (2,518 ) (2,161 ) $ 245,511 $ 258,779 We recognize abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) as current period charges. We are required to 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 at certain facilities being below normal capacity for the quarters ended March31, 2009 and 2010. Costs in excess of normal absorption at March31, 2009 and 2010 were $7.2 million and $2.5 million, respectively.

Interest Expense

Interest Expense
	3 Months Ended Mar. 31, 2010
Interest Expense	(11) Interest Expense The following table presents an analysis of interest expense: FortheThree Months Ended March 31, 2009 2010 (Dollarsinthousands) Interest incurred on debt $ 976 $ 139 Amortization of debt issuance costs 345 326 Interest incurred on supply chain financing and other items 326 441 Total interest expense $ 1,647 $ 906

Other Comprehensive

Other Comprehensive (Loss) Income
	3 Months Ended Mar. 31, 2010
Other Comprehensive (Loss) Income	(12) Other Comprehensive (Loss) Income Other comprehensive (loss) income consisted of the following: FortheThree MonthsEnded March31, 2009 2010 (Dollars in thousands) Net Income $ 8,469 $ 33,528 Other comprehensive (loss) income: Foreign currency translation adjustments (17,020 ) (17,831 ) Amortization of prior service costs and unrecognized gains and losses, net of tax (41 ) 2,121 Natural gas and foreign currency derivatives, net of tax 135 107 Total comprehensive (loss) income $ (8,457 ) $ 17,925

Supply Chain Financing

Supply Chain Financing
	3 Months Ended Mar. 31, 2010
Supply Chain Financing	(13) Supply Chain Financing During the third quarter of 2008, we entered into a supply chain financing arrangement with a financing party. Under this arrangement, we essentially assign our rights to purchase needle coke from our supplier to the financing party.The financing party purchases the product from our supplier under the standard payment terms and then immediately resells it to us under longer payment terms.The financing party pays the supplier the purchase price for the product and then we pay the financing party.Our payment to the financing party for this needle coke includes a mark up (the Mark-Up). The Mark-Up is a premium expressed as a percentage of the purchase price. The Mark-Up is subject to quarterly reviews. This arrangement helps us to maintain a balanced cash conversion cycle between inventory payments and the collection of receivables. Based on the terms of the arrangement, the total amount that we owe to the financing party may not exceed $49.3 million at any point in time. We record the inventory once title and risk of loss transfers from the supplier to the financing party. The amount recorded as a liability to the financing party was $14.4 million and $39.1 million at December 31, 2009 and March 31, 2010, respectively. The financing party invoiced us $25.4 million and $51.2 million for the three months ended March31, 2009 and 2010, respectively, for purchases of inventory under this arrangement. We recognized Mark-Up of $0.3 million and $0.4 million for the three months ended March31, 2009 and 2010, respectively as interest expense.

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
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. Claims accrued but not yet paid amounted to $1.2 million at December31, 2009 and $1.4 million at March31, 2010. The following table presents the activity in this accrual for the three months ended March31, 2010 (dollars in thousands): Balance at January1, 2010 $ 1,239 Product warranty charges 270 Payments and settlements (87 ) Balance at March31, 2010 $ 1,422

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Income Taxes	(15) 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, impairment charges, adjustments to prior period uncertain tax positions, or 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 March 31, 2009 and 2010 was a tax expense of $5.2 million on pretax income of $13.6 million, and a tax expense of $11.7 million on pretax income of $45.2 million, respectively. The effective tax rates were 37.9% and 25.8% for the three months ended March 31, 2009 and 2010, respectively. The decrease in the effective tax rate is primarily due to jurisdictional shifts of income, currency fluctuations, and changes in the utilization of attributes and related valuation allowances. Our cumulative year-to-date unrecognized tax benefits have increased by $14.9 million, primarily as a result of tax positions taken in a prior period. This has an unfavorable impact on our effective rate of $3.4 million. We are able to utilize attributes and release related valuation allowances against the remainder of this amount. As of March 31, 2010, we had unrecognized tax benefits of $35.6 million, which would have a favorable impact on our effective tax rate. It is reasonably possible that a reduction in a range of $1.0 million to $2.0 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. We are currently under federal audit by the Internal Revenue Service for tax year 2007. All U.S. tax years prior to 2006 are closed by statute or have been audited and settled with the U.S. tax authorities. We are also under audit in Italy for our 2006 tax year. All other jurisdictions are still open to examination beginning after 2003. Our tax provision for the three months ended March 31, 2009 and 2010 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 tax credit utilization. We weigh both positive and negative evidence in determining whether a valuation allowance is required. 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. The balance of significant positive evidence does not yet outweigh the negative evidence in regards to whether or not a valuation allowance is requ

Derivative Instruments

Derivative Instruments
	3 Months Ended Mar. 31, 2010
Derivative Instruments	(16) 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. Foreign currency contracts We enter into foreign currency contracts from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures, net, relating to non-dollar denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. For the three months ended March31, 2010, there was no ineffectiveness on these contracts. In 2009 and 2010, we entered into foreign forward exchange contracts where we sold currency forward 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 dollar and either the Mexican peso or Brazilian real. As of March 31, 2010, we had outstanding Mexican peso and Brazilian real forward exchange contracts, with aggregate notional amounts of $14.3 million. The forward exchange contracts outstanding as of March 31, 2010 have several maturity dates ranging from June to December 2010. Commodity forward contracts We periodically enter into commodity forward contracts to purchase natural gas and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. These contracts were entered into to protect against the risk that eventual cash flows related to purchases of natural gas will be adversely affected by future changes in prices. For the three months ended March31, 2010, there was no ineffectiveness on these contracts. In 2009 and 2010, we entered into commodity forward contracts as economic hedges of exposure to variability of commodity prices for natural gas. These contracts were entered into to protect against the risk that the eventual cash flows related to purchases of natural gas will be adversely affected by future changes in prices. As of March 31, 2010, we had outstanding natural gas commodity forward contracts with an aggregate notional amount of $2.4 million. The commodity forward contracts outstanding as of March 31, 2010 have several maturity dates ranging from April to December 2010. 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 f

Subsequent Events

Subsequent Events
	3 Months Ended Mar. 31, 2010
Subsequent Events	(17) Subsequent Events Credit Agreement Refinancing On April 29, 2010, we announced the successful completion of the refinancing of our senior secured revolving credit facility (Facility) that was due to expire on July 15, 2010. Borrowers under the Facility are GrafTech Finance Inc. (Graftech Finance) and GrafTech Switzerland S.A. (Swissco), both wholly-owned subsidiaries. As amended and restated, the Credit Agreement provides for, among other things, an extension until April 29, 2013 of the maturity of the senior secured revolving credit facility in the initial amount of $260 million (the Revolving Facility), additional flexibility for investments and acquisitions and, subject to certain conditions, an accordion feature that permits GrafTech Finance and Swissco to establish additional credit facilities thereunder in an aggregate amount, together with the Revolving Facility, of up to $390 million. The Revolving Facility provides for revolving loans (and for swingline loans in aggregate principal amount at any time not to exceed $25 million) to GrafTech Finance and Swissco in an aggregate principal and stated amount not to exceed $260 million at any time. The Revolving Facility also provides capacity for issuance of letters of credit for the accounts of GrafTech Finance, Swissco and other designated subsidiaries for an amount not exceeding $35 million. Revolving and swingline loans and letters of credit may be denominated in dollars, euros and certain other currencies and are available for working capital and other general corporate purposes. The Credit Agreement provides for the lenders to terminate their commitments in the event of a default (as defined in the Agreement) or if there has been a material adverse change in our consolidated assets, liabilities (including contingent liabilities), business, properties, financial condition, or results of operations. The interest rate applicable to the Revolving Facility is, at GrafTechs option, either LIBOR plus a margin ranging from 2.50% to 3.50% (depending on our total net leverage ratio and/or senior unsecured rating) or, in the case of dollar denominated loans, the alternate base rate plus a margin ranging from 1.50% to 2.50% (depending upon such ratio or rating). The alternate base rate is the highest of (i) the prime rate announced by JP Morgan Chase Bank, N.A., (ii) the federal fund effective rate plus 0.50% and (iii) the London interbank offering rate (as adjusted) for a one-month interest period plus 1.00%. GrafTech Finance and Swissco pay a per annum fee ranging from 0.375% to 0.750% (depending on such ratio or rating) on the undrawn portion of the commitments under the Revolving Facility. The financial covenants require us to maintain a minimum interest coverage ratio of 1.75 to 1.00 and a maximum net senior secured leverage ratio of 2.25 to 1.00, subject to adjustment for certain events. The Revolving Facility also contains a number of covenants that restrict certain corporate activities including annual capital expenditures and the payment of dividends and repurchases of our common stock. Acquisitions and Reorganization On April 29, 2010, we, and certain of