GrafTech Reports Second Quarter 2009 Results

PARMA, Ohio--(Business Wire)--
GrafTech International Ltd. (NYSE:GTI) today announced financial results for the
second quarter ended June 30, 2009.

2009 Second Quarter Highlights (Quarter-over-quarter)

* Net sales increased 18 percent to $158 million over the first quarter 2009.
* Gross profit improved $14 million to $46 million, or 29.0 percent of sales, a
margin expansion of more than five percentage points versus the first quarter
2009.
* Operating income more than doubled to $19 million as compared to the prior
quarter.
* Net debt was $48 million, an improvement of $29 million versus the first
quarter 2009.

2009 Second Quarter Highlights (Year-over-year)

* Net sales were $158 million, versus $320 million in the second quarter of
2008, primarily the result of lower volumes associated with significantly
reduced demand driven by the global economic recession.
* Gross profit declined to $46 million or 29.0 percent of sales, as compared to
$114 million or 35.8 percent of sales in the second quarter of 2008. The
reduction in gross profit percentage was largely the result of unfavorable fixed
cost absorption associated with lower sales volumes.
* Operating income was $19 million, versus $89 million in the second quarter of
2008. Operating income margin decreased to 12.3 percent of sales, from 27.7
percent in the same period in 2008.
* Unfavorable business conditions at our non-consolidated affiliate, Seadrift
Coke L.P. (Seadrift), resulted in a $45 million, net of tax, non-cash impairment
in the value of our investment in the company. Including this impact, net loss
was $37 million, or $0.31 per diluted share, versus net income of $46 million,
or $0.41 per diluted share, in the second quarter of 2008.
* On an operating basis, net income before special items* was $15 million, or
$0.12 per diluted share, as compared to $57 million, or $0.51 per diluted share,
in the second quarter of 2008.
* Net cash provided by operating activities improved $11 million to $46 million,
versus $35 million in the second quarter of 2008.
* Net debt* was reduced by $115 million or 71 percent year-over-year to $48
million in the second quarter 2009.

Craig Shular, Chief Executive Officer of GrafTech, commented, "Previously
announced initiatives on salary and cost reductions, productivity improvements
and effective working capital management continue to gain traction and have
allowed us to remain cash flow positive in the first and second quarters of
2009. As a result, net debt has been reduced by $30 million since year end
2008."

Industrial Materials Segment

The Industrial Materials segment`s net sales were $130 million in the 2009
second quarter, as compared to $275 million in the 2008 second quarter. Net
sales in the quarter increased $25 million from $105 million in the 2009 first
quarter, largely as a result of increased graphite electrode sales volume.

Operating income for the Industrial Materials segment was $16 million, versus
$80 million in the same period in 2008. The decline was primarily due to lower
sales volume for graphite electrodes related to the sharp reduction in global
steel operating rates and inventory destocking.

Engineered Solutions Segment

Net sales for the Engineered Solutions segment were $28 million in the 2009
second quarter, as compared to $44 million in the 2008 second quarter. Net sales
for the quarter declined $2 million as compared to $30 million in the first
quarter 2009.

Operating income for the Engineered Solutions segment was $3 million, as
compared to $9 million in the 2008 second quarter. The decrease was largely the
result of lower sales volume across multiple product lines and an unfavorable
product mix.

Corporate

Selling and administrative expenses declined $1 million to $23 million in the
2009 second quarter versus the same period last year as our team continues to
execute on previously announced cost savings initiatives.

Research and development expenses were $3 million in the second quarter 2009 as
we continue to support organic growth opportunities and new product development.
On July 20, 2009, GrafTech was awarded the prestigious R&D 100 Award for our new
product line, GRAFIHX Flexible Heat Exchangers, a graphite solution uniquely
suited for radiant floor heating systems. The R&D 100 Award honors the 100 most
technologically significant products introduced into the marketplace over the
past year. This award marks GrafTech`s sixth R&D 100 Award in the past seven
years.

Interest expense in the quarter was $1 million, versus $6 million in the second
quarter 2008. The reduction was driven primarily by the Company`s successful
deleveraging initiatives.

Other expense, net, was $3 million in the 2009 second quarter, flat as compared
to the second quarter 2008.

In the second quarter, we recorded a $53 million non-cash impairment charge,
against the valuation of our investment in Seadrift. On an after tax basis, the
charge equates to $45 million, or approximately $0.38 per diluted share. The
global economic recession has lead to historic declines in steel demand and
record low capacity utilization rates. The reassessment of the valuation of our
investment in Seadrift arose from its very low 2009 operating rates and the
uncertainty regarding the timing of a global market recovery.

On July 2, 2009, we entered into an agreement with Seadrift to lend up to $8.5
million. Seadrift currently has borrowed $6 million under this agreement, which
will be used to reduce its existing revolving credit facility balance. The
senior subordinated notes bear interest at 10 percent which is payable quarterly
in arrears.

Aggressive working capital management, successful productivity initiatives and
cost reductions have enabled Seadrift to generate $13 million of free cash flow1
in the five months ended May 31, 2009. Seadrift has effectively leveraged its
cash position, reducing total liabilities by $17 million from year end 2008 to
$25 million at the end of May 2009, of which $20 million was outstanding debt.

"The dramatic destocking that has occurred throughout the steel supply chain has
led to an extremely challenging operating environment for many companies,
including Seadrift," commented Mr. Shular. "Seadrift is a strategic long-term
investment as the world`s second largest producer of petroleum needle coke and
we remain confident in the company`s long-term profitability."

The effective income tax rate in the second quarter 2009, excluding other
special charges, was 19 percent, approximately twelve percentage points better
year-over-year due to favorable jurisdictional profitability mix and effective
tax planning initiatives. The lower tax rate in the second quarter 2009 resulted
in a benefit to the quarter of approximately $0.02 per diluted share, relative
to the prior year tax rate. For the full year 2009, we currently expect the
effective tax rate to be in the range of 22 percent to 25 percent.

1Free cash flow is defined as operating cash flow less capital expenditures.

Outlook

Based on International Monetary Fund (IMF) projections and other economic
forecasts, the global recession is beginning the bottoming process. Weak end
market demand is expected to persist and the pace of recovery is anticipated to
be slow. As a result, steel producers continue to operate at very low rates in
order to reduce inventory levels to match current market demand.

We continue to expect 2009 to be very challenging for both of our business
segments. Second quarter results came in better than expected due to the timing
of shipments and a lower tax rate. Given the favorable timing of shipments
experienced in the second quarter and the third quarter demand seasonality, we
believe third quarter results will be below the second quarter and closer to
those in the first quarter of the year. As anticipated, third quarter graphite
electrode sales volume will be adversely impacted by low European steel
operating rates due to the normal European August holiday season.

While a high degree of uncertainty around forward looking projections remains,
we expect an improvement in fourth quarter results as customers should have
largely completed inventory destocking initiatives. The fourth quarter should
represent the strongest quarter of the year.

Based on the first half of the year results and anticipation of a moderate
improvement in the second half 2009, GrafTech expects the following full year
2009 results:

* Operating income targeted to be in the range of $60 million to $70 million;
* Capital expenditures to be approximately $50 million to $55 million;
* Depreciation expense to be approximately $35 million;
* The effective tax rate to be in the range of 22 percent to 25 percent
(previous guidance was 28 percent to 32 percent).

In conjunction with this earnings release, you are invited to listen to our
earnings call being held today at 11:00 a.m. Eastern Time.The call will be
webcast and available at www.graftech.com, in the investor relations section.A
conference call will also be available.The dial-in number is 888-857-6931 for
domestic and 719-457-2640for international. The rebroadcast webcast will be
available following the call, and for 30 days thereafter, at www.graftech.com,
in the investor relations section.GrafTech also makes its complete financial
reports that have been filed with the Securities and Exchange Commission
available at www.graftech.com. This includes its quarterly report on Form 10-Q
for the period reported. Upon request, GrafTech will provide its stockholders
with a hard copy of its complete financial statements free of charge.

GrafTech International Ltd. is one of the world`s largest manufacturers and
providers of high quality synthetic and natural graphite and carbon based
products and technical and research and development services, with customers in
70 countries engaged in the manufacture of steel, automotive products and
electronics.We manufacture graphite electrodes, products essential to the
production of electric arc furnace steel.We also manufacture thermal management,
fuel cell and other specialty graphite and carbon products for, and provide
services to, the electronics, power generation, solar, oil and gas,
transportation, petrochemical and other metals markets.We operate 11
manufacturing facilities strategically located on four continents. For
additional information on GrafTech International Ltd., call 216-676-2000, or
visit our website at www.graftech.com.

NOTE ON FORWARD-LOOKING STATEMENTS:This news release and related discussions may
contain forward-looking statements about such matters as: our preliminary
unaudited results for the second quarter ended June 30, 2009 and outlook for
2009; regional and global economic and industry market conditions, including our
expectations concerning their impact on the markets we serve and, our
profitability, cash flow, and liquidity; conditions and changes in the global
financial and credit markets and their impact on us and our customers and
suppliers; the impact of actions being taken to improve our cost competitiveness
and liquidity; estimated future capital expenditures and their impact on product
quality and efficiencies; changes in production capacity in our operations and
our customers' operations or possible suspensions thereof; growth rates for,
future prices and sales of, and demand for our products and our customers
products; costs of materials and production, including anticipated changes
therein; our position in markets we serve; investments and acquisitions that we
have made or may make in the future; tax rates and the effects of jurisdictional
mix and nonrecurring and other items; future operational and financial
performance; strategic plans; currency exchange and interest rates; financing
(including factoring and supply chain financing) activities; stock repurchase
plans; raw material and supply chain management; future sales, costs, working
capital, revenues, business opportunities; operational and financial
performance; and debt levels.We have no duty to update these statements.Our
expectations and targets are not predictions of actual performance and
historically our performance has deviated, often significantly, from our
expectations and targets. Actual future events, circumstances, performance and
trends could differ materially, positively or negatively, from those set forth
in these statements due to various factors, including: the extent of any
adjustments to our preliminary 2009 second quarter results; the actual timing of
the filing of our Form 10-Q with the SEC and potential effects of delays in such
filing; the adoption of government fiscal and monetary stimulus and
stabilization plans that could significantly impact us and our industry; further
downturns, production suspensions, or changes in steel and other markets we
serve or that our customersserve that could result in additional loss of
revenue, profitability, and cash flow; a protracted regional or global financial
or economic crisis that could cause us not to achieve our growth and
diversification plans or meet market expectations, or to lose market share;
challenging economic conditions may lead to more intensified price competition
and price or margin decreases; reductions in capacity or production by us and
our customers; delays in customer destocking activities or failure of demand to
increase thereafter; graphite electrode manufacturing capacity increases;
differences between actual graphite electrode prices and spot or announced
prices; changes in inventory management and utilization or in supply chain
management; consolidation of steel producers; limitations on the amounts of or
delays in the timing of our capital expenditures; absence of successful
development and commercialization of new or improved products or subsequent
displacement thereof by other products or technologies; failure to expand
manufacturing capacity to meet growth in demand, if any; investments and
acquisitions that we make or may make in the future, failure to successfully
integrate into our business or the failure of such investments and acquisitions
to provide the performance or returns expected; inability to protect our
intellectual property rights or infringement of intellectual property rights of
others; unanticipated developments in legal proceedings or litigation;
non-realization of anticipated benefits from organizational changes and
restructurings; significant changes in our provision for income taxes and
effective income tax rate; unanticipated developments relating to health, safety
or environmental compliance or remediation obligations or liabilities to third
parties, changes in labor relations; significant changes in the availability or
cost of key and other raw materials, including petroleum based coke, or energy;
changes in market prices of our securities, or other events that affect our
financing and capital structure plans or limit our ability to obtain financing
for working capital, growth, or other initiatives on acceptable terms; changes
in interest or currency exchange rates or competitive conditions, including
growth by producers in developing countries and the mix, distribution, and
pricing of their products; inflation or deflation; changes in appropriation of
or failure to satisfy conditions to government grants; failure to achieve
earnings or other estimates; business interruptions adversely affecting our
ability to supply our products; and other risks and uncertainties, including
those detailed in our SEC filings, as well as future decisions by us. This news
release does not constitute an offer or solicitation as to any securities.
References to street or analyst earnings estimates mean those published by First
Call.

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

At December 31, At June 30,
2008 2009
ASSETS (as adjusted)
Current Assets:
Cash and cash equivalents $ 11,664 $ 17,629
Accounts and notes receivable, net of allowance for doubtful accounts of $4,110 at December 31, 2008 and $5,042 at June 30, 2009 146,986 92,208
Inventories 290,397 275,773
Prepaid expenses and other current assets 14,376 6,199
Total current assets 463,423 391,809

Property, plant and equipment 873,932 927,115
Less: accumulated depreciation 536,562 572,061
Net property, plant and equipment 337,370 355,054
Deferred income taxes 1,907 8,366
Goodwill 7,166 8,573
Other assets 12,887 13,486
Investment in non-consolidated affiliate 118,925 65,413
Restricted cash 1,451 1,470
Total assets $ 943,129 $ 844,171
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable $ 55,132 $ 38,980
Interest payable 953 967
Short-term debt 9,347 12,019
Accrued income and other taxes 34,861 22,964
Other accrued liabilities 140,330 55,052
Total current liabilities 240,623 129,982

Long-term debt:
Principal value 50,328 53,514
Fair value adjustments for hedge instruments 191 165
Unamortized bond premium 38 33
Total long-term debt 50,557 53,712
Other long-term obligations 118,272 121,251
Deferred income taxes 29,087 28,727

Stockholders` equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued - -
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 1,226 1,239
Additional paid-in capital 1,290,381 1,296,494
Accumulated other comprehensive loss (355,960) (327,500)
Accumulated deficit (317,752) (346,373)
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 (794) (850)
Total stockholders` equity 504,590 510,499
Total liabilities and stockholders` equity $ 943,129 $ 844,171

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands, except share and per share data)

(Unaudited)

For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2008 2009 2008 2009
(as adjusted) (as adjusted)

Net sales $ 319,538 $ 157,774 $ 609,540 $ 291,800
Cost of sales 205,188 112,086 387,089 214,018
Gross profit 114,350 45,688 222,451 77,782

Research and development 1,835 3,109 4,100 5,177
Selling and administrative 23,688 23,095 46,279 44,730
Restructuring charges 190 - 342 (32 )
Operating income 88,637 19,484 171,730 27,907

Equity in losses 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 )
Provision for (benefit from) income taxes 34,285 (2,534 ) 52,383 2,636
Net income (loss) $ 45,857 $ (37,091 ) $ 82,539 $ (28,622 )

Basic income (loss) per common share:
Net income (loss) per share $ 0.43 $ (0.31 ) $ 0.79 $ (0.24 )
Weighted average common shares outstanding 106,050 119,893 104,161 119,402

Diluted earnings (loss) per common share:
Net income (loss) per share $ 0.41 $ (0.31 ) $ 0.75 $ (0.24 )
Weighted average common shares outstanding 119,521 119,893 118,581 119,402

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2008 2009 2008 2009
(as adjusted) (as adjusted)
Cash flow from operating activities:
Net income (loss) $ 45,857 $ (37,091 ) $ 82,539 $ (28,622 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 8,858 8,174 17,416 16,202
Deferred income taxes 10,205 (838 ) 11,092 848
Equity in losses and write-down of investment in non-consolidated affiliate - 54,602 - 53,390
Gain on redemption of Debentures (4,060 ) - (4,060 ) -
Currency (gains) losses (1,922 ) 5,479 14,313 (3,682 )
Post retirement and pension plan changes 1,128 3,983 1,581 5,398
Stock based compensation, including incentive compensation paid in company stock 1,212 4,441 2,373 4,958
Interest expense 3,935 331 6,969 660
Other (credits) charges, net (1,051 ) 7,085 2,617 12,599
Dividends from non-consolidated affiliate - - - 122
(Increase) decrease in working capital1 (29,248 ) 1,795 (35,002 ) 3,403
Decrease (increase) in long-term assets and liabilities 300 (1,854 ) 2,523 (4,845 )
Net cash provided by operating activities 35,214 46,107 102,361 60,431

Cash flow from investing activities:
Capital expenditures (18,165 ) (17,327 ) (27,554 ) (29,964 )
Proceeds from derivative instruments - 682 224 263
Investment in non-consolidated affiliate, net of $388 cash received (134,611 ) - (134,611 ) -
Proceeds from sale of assets (33 ) 52 18 69
Change in restricted cash 10 (79 ) (166 ) (19 )
Net cash used in investing activities (152,799 ) (16,672 ) (162,089 ) (29,651 )

Cash flow from financing activities:
Short-term debt borrowings, net (894 ) (1,068 ) 14,993 2,529
Revolving Facility borrowings 85,000 51,754 155,625 114,715
Revolving Facility reductions (4,133 ) (64,000 ) (70,810 ) (112,000 )
Long-term debt reductions 155 - (124,508 ) (129 )
Excess tax benefit from stock-based compensation 12,083 - 12,136 10
Supply chain financing - (5,419 ) - (30,115 )
Long-term financing obligations - (261 ) - (536 )
Purchase of treasury shares (4,320 ) - (5,323 ) -
Proceeds from exercise of stock options 36,148 3 36,315 57
Net cash provided by (used in) financing activities 124,039 (18,991 ) 18,428 (25,469 )

Net increase (decrease) in cash and cash equivalents 6,454 10,444 (41,300 ) 5,311
Effect of exchange rate changes on cash and cash equivalents 135 1,072 122 654
Cash and cash equivalents at beginning of period 6,974 6,113 54,741 11,664
Cash and cash equivalents at end of period $ 13,563 $ 17,629 $ 13,563 $ 17,629

1Net change in working capital due to the following components:
(Increase) decrease in current assets:
Accounts and notes receivable $ (22,233 ) $ 4,601 $ (48,186 ) $ 73,693
Effect of factoring on accounts receivable (6,845 ) 51 23,773 (15,818 )
Inventories (9,052 ) 26,418 (5,559 ) 30,467
Prepaid expenses and other current assets (1,860 ) (1,250 ) (976 ) (841 )
Restructuring payments (683 ) (5 ) (816 ) (11 )
Decrease (increase) in accounts payable and accruals 10,289 (28,517 ) 3,276 (84,101 )
Decrease (increase) in interest payable 1,136 497 (6,514 ) 14
(Increase) decrease in working capital $ (29,248 ) $ 1,795 $ (35,002 ) $ 3,403

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

SEGMENT DATA SUMMARY

(Dollars in thousands)

(Unaudited)

For the For the
Three Months Ended Six Months Ended
June 30, June 30,
2008 2009 2008 2009

Net sales:
Industrial Materials $ 275,121 $ 129,834 $ 523,410 $ 234,355
Engineered Solutions 44,417 27,940 86,130 57,445
Net sales $ 319,538 $ 157,774 $ 609,540 $ 291,800

Operating income:
Industrial Materials $ 79,646 $ 16,369 $ 154,311 $ 23,158
Engineered Solutions 8,991 3,115 17,419 4,749
Operating income $ 88,637 $ 19,484 $ 171,730 $ 27,907

Operating income margin:
Industrial Materials 28.9% 12.6% 29.5% 9.9%
Engineered Solutions 20.2% 11.1% 20.2% 8.3%
Operating income margin 27.7% 12.3% 28.2% 9.6%

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

SELECTED FIRST QUARTER 2009 DATA

(Dollars in thousands)

(Unaudited)

For the
Three Months Ended
March 31,
2009
Net sales $ 134,026
Industrial Material Net Sales $ 104,521
Engineered Solutions Net Sales $ 29,505
Gross Profit $ 32,094
Gross Margin 23.9%
Operating Income $ 8,423
Net Debt $ 76,451

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Dollars in thousands, except per share data)

(Unaudited)

Net Income and Earnings per Share Reconciliation
For the For the
Three Months Ended Three Months Ended
June 30, 2008 June 30, 2009
Income EPS Impact Income EPS Impact
Net Income $ 45,857 $ 0.41 $ (37,091 ) $ (0.31 )
Adjustments, net of tax, per diluted share
- Equity in losses of and write-down of investment in non-consolidated affiliate - - 47,035 0.39
- Valuation allowance - - 4,814 0.04
- Adjustment to reserves for uncertain tax positions (959 ) (0.01 ) (1,080 ) (0.01 )
- Accounting pronouncement 14-1 impact 5,841 0.05 - -
- Restructuring and Other (income) expense, net 6,851 0.06 1,100 0.01
Net Income before special items $ 57,590 $ 0.51 $ 14,778 $ 0.12

For the For the
Six Months Ended Six Months Ended
June 30, 2008 June 30, 2009
Income EPS Impact Income EPS Impact
Net Income $ 82,539 $ 0.75 $ (28,622 ) $ (0.24 )
Adjustments, net of tax, per diluted share
- Equity in losses of and write-down of investment in non-consolidated affiliate - - 46,187 0.39
- Valuation allowance - - 4,877 0.04
- Adjustment to reserves for uncertain tax positions 628 - (962 ) (0.01 )
- Accounting pronouncement 14-1 impact 5,841 0.05 - -
- Restructuring and Other (income) expense, net 28,290 0.24 (1,878 ) (0.02 )
Net Income before special items $ 117,298 $ 1.04 $ 19,602 $ 0.16

For 2008, the non-GAAP earnings per diluted share includes 13.6 million shares
underlying our previously outstanding contingently convertible debentures and
excludes approximately $3 million (before and after tax) in the second quarter
of 2008 and $6 million (before and after tax) through June 19, 2008 of
contingently convertible debenture interest expense.

NOTE ON RECONCILIATION OF EARNINGS DATA: Income (loss) excluding the items
mentioned above is a non-GAAP financial measure that GrafTech calculates
according to the schedule above, using GAAP amounts from the Consolidated
Financial Statements. GrafTech believes that the excluded items are not
primarily related to core operational activities. GrafTech believes that income
(loss) excluding items that are not primarily related to core operational
activities is generally viewed as providing useful information regarding a
company`s operating profitability. Management uses income (loss) excluding these
items as well as other financial measures in connection with its decision-making
activities. Income (loss) excluding these items should not be considered in
isolation or as a substitute for net income (loss), income (loss) from
continuing operations or other consolidated income data prepared in accordance
with GAAP. GrafTech`s method for calculating income (loss) excluding these items
may not be comparable to methods used by other companies.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Dollars in thousands)

(Unaudited)

Net Debt Reconciliation
At June 30, At December 31, At March 31, At June 30,
2008 2008 2009 2009
Long-term debt $ 161,352 $ 50,557 $ 65,375 $ 53,712
Short-term debt 16,358 9,347 11,985 12,019
Supply chain financing - 30,115 5,418 -
Total debt $ 177,710 $ 90,019 $ 82,778 $ 65,731

Less:
Fair value adjustments for hedge instruments 814 191 178 165
Unamortized bond premium 162 38 36 33
Cash and cash equivalents 13,563 11,664 6,113 17,629
Net Debt $ 163,171 $ 78,126 $ 76,451 $ 47,904

NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP financial measure that
GrafTech calculates according to the schedule above, using GAAP amounts from the
Consolidated Financial Statements. GrafTech excludes the unamortized bond
premium from its sale of $150 million aggregate principal amount of additional
senior notes in May 2002 at a price of 104.5% of principal amount. The premium
received in excess of principal amount is amortized to reduce interest expense
over the term of the senior notes. GrafTech also excludes the fair value
adjustments for hedge instruments, which includes interest rate swaps that have
been marked-to-market and realized gains or (losses) on interest rate swaps.
GrafTech believes that net debt is generally accepted as providing useful
information regarding a company`s indebtedness and that net debt provides
meaningful information to investors to assist them to analyze leverage.
Management uses net debt as well as other financial measures in connection with
its decision-making activities. Net debt should not be considered in isolation
or as a substitute for total debt or total debt and other long-term obligations
calculated in accordance with GAAP. GrafTech`s method for calculating net debt
may not be comparable to methods used by other companies and is not the same as
the method for calculating net debt under its senior secured revolving credit
facility. GrafTech does not forecast the fair value adjustment for hedging
instruments.

*Non-GAAP financial measures. See attached reconciliations.

GTI-G

GrafTech International Ltd.
Kelly Taylor, 216-676-2000
Manager, Investor Relations

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