GrafTech International(EAF) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and comprehensive notes on accounting policies, segment reporting, debt, and other financial details Item 1. Financial Statements This section details the unaudited condensed consolidated financial statements and related notes, covering financial position, performance, and cash flows Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific reporting dates | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $158,543 | $256,248 | | Total current assets | $566,451 | $636,797 | | Total assets | $1,112,026 | $1,224,274 | | LIABILITIES AND STOCKHOLDERS' DEFICIT (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------- | :------------ | :---------------- | | Total current liabilities | $114,426 | $139,929 | | Long-term debt | $1,090,811 | $1,086,915 | | Total stockholders' deficit | $(168,435) | $(78,902) | | Total liabilities and stockholders' deficit | $1,112,026 | $1,224,274 | - Total assets decreased by $112.2 million (9.2%) from $1,224.3 million at December 31, 2024, to $1,112.0 million at June 30, 2025. Cash and cash equivalents saw a significant decrease of $97.7 million (38.1%)[17] - Total stockholders' deficit increased by $89.5 million (113.5%) from $(78.9) million at December 31, 2024, to $(168.4) million at June 30, 2025, primarily due to net losses[17] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including net sales, gross profit, operating loss, net loss, and comprehensive loss over specified periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $131,840 | $137,327 | $243,679 | $273,911 | | Gross profit (loss) | $62 | $3,976 | $(1,647) | $2,664 | | Operating loss | $(14,553) | $(2,679) | $(32,763) | $(24,040) | | Net loss | $(86,886) | $(14,752) | $(126,237) | $(45,621) | | Basic loss per share | $(0.34) | $(0.06) | $(0.49) | $(0.18) | | Comprehensive loss | $(64,937) | $(22,940) | $(91,742) | $(64,534) | - Net sales decreased by 4% for Q2 2025 and 11% for 6M 2025 compared to the respective prior-year periods[20] - Net loss significantly widened, increasing by 489% to $(86.9) million for Q2 2025 and by 177% to $(126.2) million for 6M 2025, primarily driven by higher interest expense and income tax expense[20] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(85,422) | $(37,385) | | Net cash used in investing activities | $(14,157) | $(17,410) | | Net cash used in financing activities | $(264) | $(117) | | Net change in cash and cash equivalents | $(99,843) | $(54,912) | | Cash and cash equivalents at end of period | $158,543 | $120,726 | - Net cash used in operating activities increased by $48.0 million in the first six months of 2025 compared to the same period in 2024, primarily due to a $32.0 million increase in cash used for working capital, particularly inventories[185] - Capital expenditures decreased to $14.2 million for the first six months of 2025 from $17.5 million in the prior year period[23][186] Condensed Consolidated Statements of Stockholders' (Deficit) Equity This section details changes in stockholders' (deficit) equity, including net loss, foreign currency adjustments, and stock-based compensation impacts | Equity Component (in thousands) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :------------------------------ | :---------------- | :------------- | :------------ | | Total Stockholders' (Deficit) Equity | $(78,902) | $(105,340) | $(168,435) |\n| Net loss (Q1 2025) | | $(39,351) | | | Net loss (Q2 2025) | | | $(86,886) | | Foreign currency translation adjustments | | $12,596 | $21,981 | | Stock-based compensation | | $580 | $1,842 | - The total stockholders' deficit significantly increased from $(78.9) million at December 31, 2024, to $(168.4) million at June 30, 2025, primarily due to net losses incurred during the period[26] - Accumulated other comprehensive loss improved from $(43.4) million at December 31, 2024, to $(8.9) million at June 30, 2025, largely driven by positive foreign currency translation adjustments[26][80] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies and specific financial items (1) Organization and Summary of Significant Accounting Policies This section describes the company's business, its reportable segment, and the impact of recently adopted and pending accounting pronouncements - GrafTech International Ltd. is a leading manufacturer of high-quality graphite electrode products, essential for electric arc furnace (EAF) steel production, and is substantially vertically integrated into petroleum needle coke[29] - The company's only reportable segment is Industrial Materials, comprising graphite electrodes and petroleum needle coke products[29] - The adoption of ASU 2023-07 (Segment Reporting) did not materially impact consolidated financial statements. ASU 2023-09 (Income Taxes) will result in additional disclosures for FY2025 but no impact on financial position, results, or cash flows. ASU 2024-03 (Expense Disaggregation) is being assessed for impact[34][35][36] (2) Revenue from Contracts with Customers This section disaggregates revenue by product type and notes changes in revenue presentation, reflecting the company's sales performance | Product Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Graphite Electrodes | $119,440 | $124,807 | $220,702 | $248,794 | | By-products and other | $12,400 | $12,520 | $22,977 | $25,117 | | Total Revenues | $131,840 | $137,327 | $243,679 | $273,911 | - Graphite electrode revenue decreased by 4.3% for Q2 2025 and 11.3% for 6M 2025 compared to the prior year periods[37] - The company updated its disaggregated revenue presentation, no longer showing long-term agreement (LTA) revenues separately due to their immaterial amount[37] (3) Segment Reporting This section confirms the company operates as a single Industrial Materials segment, with graphite electrodes as the primary revenue source, and outlines performance evaluation criteria - GrafTech operates as a single reportable segment, Industrial Materials, which manufactures graphite electrodes and utilizes internally produced petroleum needle coke[41] - Over 90% of external revenues are derived from graphite electrode sales[41] - The chief operating decision maker evaluates segment performance based on net income or losses[42] (4) Intangible Assets This section details the company's finite-lived intangible assets, including trade names, technology, and customer relationships, and their associated amortization expense | Intangible Asset Category (in thousands) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :--------------------------------------- | :-------------------------------- | :------------------------------------ | | Trade names | $3,872 | $4,274 | | Technology | $5,414 | $6,687 | | Customer relationships | $21,316 | $23,437 | | Total finite-lived intangible assets | $30,602 | $34,398 | - Total finite-lived intangible assets decreased by $3.8 million from December 31, 2024, to June 30, 2025[44] - Amortization expense for intangible assets was $1.9 million for Q2 2025 and $3.8 million for 6M 2025[44] (5) Debt and Liquidity This section outlines the company's long-term debt structure and available liquidity, including credit facilities, as of the reporting period | Long-Term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Initial First Lien Term Loans due 2029 | $175,000 | $175,000 | | New 4.625% Second Lien Notes due 2029 | $498,245 | $498,245 | | New 9.875% Second Lien Notes due 2029 | $446,167 | $446,167 | | Total long-term debt | $1,090,811 | $1,086,915 | - Total long-term debt remained relatively stable at approximately $1.09 billion as of June 30, 2025[45] - The company had $100 million available under its Delayed Draw First Lien Term Loan Facility and $108 million availability under its 2018 Revolving Credit Facility as of June 30, 2025[46][47] (6) Inventories This section provides a breakdown of inventories by component, highlights changes, and discusses lower of cost or market valuation adjustments | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Raw materials and supplies | $89,721 | $78,386 | | Work in process | $136,039 | $122,590 | | Finished goods | $30,166 | $30,265 | | Total Inventories | $255,926 | $231,241 | - Total inventories increased by $24.7 million (10.7%) from December 31, 2024, to June 30, 2025, driven by increases in raw materials and work in process[50] - The company recorded lower of cost or market (LCM) inventory valuation adjustments of $1.9 million for Q2 2025 and $4.7 million for 6M 2025[50] (7) Interest Expense This section details the components of interest expense, including debt interest and modification costs, and explains the period-over-period changes | Interest Expense Component (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest incurred on debt | $22,539 | $17,110 | $45,071 | $34,205 | | Debt modification costs | $931 | $0 | $6,292 | $0 | | Total interest expense | $25,418 | $15,609 | $55,259 | $31,235 | - Total interest expense increased significantly by 63% for Q2 2025 and 77% for 6M 2025, primarily due to interest on the Initial First Lien Term Loan Facility and debt modification costs[51][52] - Debt modification costs of $0.9 million for Q2 2025 and $6.3 million for 6M 2025 were expensed as incurred[52] (8) Commitments and Contingencies This section addresses ongoing legal proceedings, the write-off of the Tax Receivable Agreement liability, and a significant Brazilian income tax assessment - The company is involved in ongoing legal proceedings, including Brazil Clause IV litigation and securities and derivative class action lawsuits, but does not believe their ultimate disposition will have a material adverse effect on financial position, results of operations, or cash flows at this stage[54][55][56][57][58] - The Tax Receivable Agreement liability of $3.8 million was written off in Q2 2025 due to the recording of a full valuation allowance against U.S. deferred tax assets, as related foreign tax credits are unlikely to be utilized[59][60] - GrafTech Brasil Participações Ltda. received a $32.6 million income tax assessment notice from the Brazilian IRS for 2019-2020, which the company intends to vigorously defend[61] (9) Income Taxes This section details income tax expense, effective tax rates, the impact of valuation allowances on deferred tax assets, and the evaluation of new tax legislation | Income Tax Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense (benefit) | $51,207 | $(592) | $43,995 | $(4,793) | | Loss before income taxes | $(35,679) | $(15,344) | $(82,242) | $(50,414) | | Effective tax rate | (143.5)% | 3.9% | (53.5)% | 9.5% | - The effective tax rate for Q2 2025 and 6M 2025 was significantly impacted by the recording of a full valuation allowance of $34.2 million against U.S. deferred tax assets and $8.4 million against Switzerland deferred tax assets[63][66] - The company is evaluating the potential future impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements[67] (10) Fair Value Measurements and Derivative Instruments This section describes the company's use of foreign currency, commodity, and interest rate derivatives to manage market risks, including notional amounts and sensitivity analysis - GrafTech uses foreign currency derivatives, commodity derivative contracts, and interest rate swaps to manage exposure to fluctuations in currency exchange rates, commodity prices, and interest rates[68] | Derivative Type (in thousands) | Notional Amount June 30, 2025 | Notional Amount December 31, 2024 | | :----------------------------- | :---------------------------- | :-------------------------------- | | Designated as hedges: Foreign currency derivatives | $5,740 | $0 | | Not designated as hedges: Foreign currency derivatives | $24,059 | $11,918 | - A 10% appreciation or depreciation in the U.S. dollar against foreign currencies would result in a $1.2 million decrease or increase, respectively, in the fair value of the foreign currency hedge portfolio as of June 30, 2025[223] (11) Accumulated Other Comprehensive Loss This section details the components of accumulated other comprehensive loss, primarily foreign currency translation adjustments, and their impact on the overall balance | Component (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Foreign currency translation adjustments, net of tax | $(8,996) | $(43,573) | | Foreign currency derivatives, net of tax | $132 | $214 | | Total accumulated other comprehensive loss | $(8,864) | $(43,359) | - Total accumulated other comprehensive loss improved from $(43.4) million at December 31, 2024, to $(8.9) million at June 30, 2025, primarily due to positive foreign currency translation adjustments[80] (12) Loss per Share This section presents basic and diluted loss per share, explaining the impact of net losses and the exclusion of anti-dilutive securities from calculations | Loss per Share Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss (in thousands) | $(86,886) | $(14,752) | $(126,237) | $(45,621) | | Basic loss per share | $(0.34) | $(0.06) | $(0.49) | $(0.18) | | Diluted loss per share | $(0.34) | $(0.06) | $(0.49) | $(0.18) | - Basic and diluted loss per share increased significantly to $(0.34) for Q2 2025 and $(0.49) for 6M 2025, compared to $(0.06) and $(0.18) respectively in the prior year periods[81] - Potentially dilutive securities were excluded from diluted loss per share calculations due to the company's net loss, making their inclusion anti-dilutive[82][83] (13) Stock-Based Compensation This section details equity awards granted, the recognition of stock-based compensation expense, and the remaining unrecognized compensation cost for unvested awards - The company granted 3,680,476 RSUs and 1,702,363 performance-based restricted stock units (PSUs) to employees, and 297,901 deferred share units (DSUs) and 953,332 deferred RSUs (DRSUs) to non-employee directors in the first six months of 2025[84] - Stock-based compensation expense was $1.8 million for Q2 2025 and $2.4 million for 6M 2025, with the majority recorded in selling and administrative expense[87][88] - Unrecognized compensation cost related to unvested awards was approximately $10.8 million as of June 30, 2025[89] (14) Supplementary Balance Sheet Detail This section provides additional balance sheet details, specifically regarding obligations under the Supplier Finance Program - GrafTech Mexico participates in a Supplier Finance Program (SFP), with $4.8 million in SFP obligations included in accounts payable as of June 30, 2025[90][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and operational results, covering key performance indicators, market outlook, capital structure, liquidity, and non-GAAP financial measures Company Overview and Operational Update This section provides an overview of the company's business as a graphite electrode manufacturer and details key operational metrics like sales volume and realized prices - GrafTech is a leading manufacturer of high-quality graphite electrodes for EAF steel production, vertically integrated into petroleum needle coke[93] | Metric | Q2 2025 | Q2 2024 | Change YoY | | :----- | :------ | :------ | :--------- | | Sales volume (MT) | 28.6k | 25.5k | +12% | | Production volume (MT) | 29.4k | 26.8k | +10% | | Weighted-average realized price (per MT) | ~$4,200 | ~$4,773 | -12% | - The weighted-average realized price decreased by 12% YoY in Q2 2025 but increased 2% sequentially from Q1 2025, with efforts to shift sales to the U.S. to mitigate competitive pressures[96] Outlook This section outlines the company's expectations for graphite electrode demand, sales volume, cost of goods sold, and long-term market trends - The company expects demand for graphite electrodes to remain relatively flat in most regions, with modest growth in the U.S. steel production driven by EAF[98] - GrafTech anticipates an approximate 10% year-over-year increase in sales volume for 2025, aiming to regain market share[99] - The company expects a 7-9% year-over-year decline in cash cost of goods sold per MT for 2025, exceeding previous guidance, and anticipates second-half 2025 adjusted EBITDA to be near breakeven[101] - Longer term, the company is confident in increased EAF steelmaking adoption due to decarbonization efforts and accelerating demand for petroleum needle coke for lithium-ion batteries[104] Capital Structure and Liquidity This section details the company's capital structure, including total debt, and its liquidity position, comprising cash and available credit facilities | Metric (in thousands) | June 30, 2025 | | :-------------------- | :------------ | | Cash and cash equivalents | $158,543 | | 2018 Revolving Credit Facility availability | $108,000 | | Initial First Lien Term Loan Facility availability | $100,000 | | Total liquidity | $366,543 | | Total debt | ~$1,100,000 | - The company had $366.5 million in liquidity as of June 30, 2025, consisting of cash and available credit facilities[105] Key Financial Measures This section presents key financial performance indicators, including net sales, net loss, loss per share, and adjusted EBITDA for the reported periods | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $131,840 | $137,327 | $243,679 | $273,911 | | Net loss | $(86,886) | $(14,752) | $(126,237) | $(45,621) | | Loss per share | $(0.34) | $(0.06) | $(0.49) | $(0.18) | | Adjusted EBITDA | $3,471 | $14,493 | $(201) | $14,687 | - Adjusted EBITDA decreased significantly to $3.5 million for Q2 2025 (from $14.5 million in Q2 2024) and turned negative to $(0.2) million for 6M 2025 (from $14.7 million in 6M 2024)[108] Key Operating Measures This section highlights key operational metrics, including sales volume, production volume, production capacity, and capacity utilization rates | Metric (in thousands, except utilization) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales volume (MT) | 28.6 | 25.5 | 53.3 | 49.6 | | Production volume (MT) | 29.4 | 26.8 | 57.9 | 52.8 | | Production capacity (MT) | 45.0 | 45.0 | 90.0 | 90.0 | | Capacity utilization | 65% | 60% | 64% | 59% | - Sales volume increased by 12% for Q2 2025 and 7.5% for 6M 2025 compared to the prior year periods[114] - Capacity utilization improved to 65% for Q2 2025 (from 60%) and 64% for 6M 2025 (from 59%)[114] Results of Operations - Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 This section provides a detailed comparative analysis of the company's financial performance for the three months ended June 30, 2025, versus the prior year | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :--------- | | Net sales | $131,840 | $137,327 | $(5,487) | (4)% | | Gross profit | $62 | $3,976 | $(3,914) | (98)% | | Operating loss | $(14,553) | $(2,679) | $(11,874) | 443% | | Selling and administrative expenses | $13,267 | $5,098 | $8,169 | 160% | | Interest expense | $25,418 | $15,609 | $9,809 | 63% | | Net loss | $(86,886) | $(14,752) | $(72,134) | 489% | - Net sales decreased by $5.5 million (4%) due to lower weighted-average realized prices, partially offset by increased sales volume[116] - Selling and administrative expenses increased by $8.2 million (160%), primarily due to a $9.2 million legal fee reimbursement in Q2 2024, making the underlying expenses lower in Q2 2025[119] Results of Operations - Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 This section provides a detailed comparative analysis of the company's financial performance for the six months ended June 30, 2025, versus the prior year | Metric (in thousands) | 6M 2025 | 6M 2024 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :--------- | | Net sales | $243,679 | $273,911 | $(30,232) | (11)% | | Gross (loss) profit | $(1,647) | $2,664 | $(4,311) | (162)% | | Operating loss | $(32,763) | $(24,040) | $(8,723) | 36% | | Selling and administrative expenses | $27,889 | $20,375 | $7,514 | 37% | | Interest expense | $55,259 | $31,235 | $24,024 | 77% | | Net loss | $(126,237) | $(45,621) | $(80,616) | 177% | - Net sales decreased by $30.2 million (11%) primarily due to a decrease in weighted-average realized price, partially offset by increased sales volume[126] - Cost of goods sold decreased by $26.5 million (10%), benefiting from cost reduction initiatives and a $5.5 million favorable impact from prior period LCM inventory write-downs[127] Effects of Changes in Currency Exchange Rates This section analyzes the impact of fluctuations in currency exchange rates on the company's net sales and cost of goods sold - Changes in currency exchange rates resulted in increases of $2.2 million in net sales for Q2 2025 and $1.3 million for 6M 2025[133] - The impact on cost of goods sold was an increase of $3.0 million for Q2 2025 and $0.6 million for 6M 2025[133] Liquidity and Capital Resources This section discusses the company's liquidity position, total debt, capital allocation strategies, and capital expenditure plans - As of June 30, 2025, liquidity was $366.5 million, comprising $158.5 million in cash and cash equivalents, $108.0 million from the 2018 Revolving Credit Facility, and $100.0 million from the Initial First Lien Term Loan Facility (Delayed Draw Commitments)[136] - The company's total debt was approximately $1.1 billion as of June 30, 2025[138] - The Board of Directors suspended the quarterly cash dividend of $0.01 per share on August 2, 2023, and no shares were repurchased in Q2 or 6M 2025, with $99.0 million remaining under the stock repurchase authorization[177][178] - Capital expenditures totaled $14.2 million in the first six months of 2025, with a full-year expectation of approximately $40.0 million[181] Cash Flow This section analyzes the company's cash flows from operating, investing, and financing activities, highlighting changes in operating cash usage | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(85,422) | $(37,385) | | Net cash used in investing activities | $(14,157) | $(17,410) | | Net cash used in financing activities | $(264) | $(117) | | Net change in cash and cash equivalents | $(99,843) | $(54,912) | - Net cash used in operating activities increased by $48.0 million in the first six months of 2025, primarily due to a $32.0 million increase in cash used for working capital, driven by higher inventories[185] Non-GAAP financial measures This section defines and reconciles non-GAAP financial measures, including adjusted EBITDA, adjusted net loss, free cash flow, and cash cost of goods sold per MT - The company uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted net loss, adjusted loss per share, free cash flow, adjusted free cash flow, and cash cost of goods sold per MT to evaluate performance and facilitate period-to-period comparisons[188][189][193][194][195] | Non-GAAP Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted net loss | $(42,247) | $(13,564) | $(76,402) | $(38,725) | | Adjusted loss per share | $(0.16) | $(0.05) | $(0.30) | $(0.15) | | Adjusted EBITDA | $3,471 | $14,493 | $(201) | $14,687 | | Free cash flow | $(57,145) | $(43,834) | $(99,612) | $(54,875) | | Adjusted free cash flow | $(53,337) | $(43,834) | $(93,611) | $(54,875) | | Cash cost of goods sold per MT | $3,754 | $4,315 | $3,707 | $4,451 | - Cash cost of goods sold per MT decreased by 13% for Q2 2025 and 16.8% for 6M 2025, reflecting ongoing cost structure enhancement initiatives[214] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily from changes in interest rates, currency exchange rates, and energy commodity prices, and describes the use of derivative financial instruments to manage these risks. It also includes a sensitivity analysis for potential impacts of market rate changes - GrafTech is exposed to market risks from fluctuations in interest rates, currency exchange rates, energy commodity prices, and commercial energy rates[217][219] - The company uses foreign currency derivatives (forward exchange contracts and purchased currency options) to manage currency exchange rate exposures[220] - A hypothetical 10% appreciation or depreciation in the U.S. dollar against foreign currencies would result in a $1.2 million decrease or increase, respectively, in the fair value of the foreign currency hedge portfolio as of June 30, 2025[223] - A hypothetical 100 basis point increase in interest rates would have increased interest expense by $0.4 million in Q2 2025[223] Item 4. Controls and Procedures This section confirms that management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective. It also states that there were no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[227] - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[228] PART II. OTHER INFORMATION This section covers legal proceedings, updated risk factors, other information, a list of exhibits, and the official signature for the report Item 1. Legal Proceedings This section details the company's involvement in various legal proceedings, including ongoing litigation in Brazil related to wage increase provisions and securities and derivative class action lawsuits in the U.S. District Court for the Northern District of Ohio. The company asserts that the ultimate disposition of these matters is not expected to have a material adverse effect on its financial condition - The company is involved in ongoing Brazil Clause IV litigation regarding wage increase provisions from 1989-1990, with the Brazilian Supreme Court ruling in favor of the employees' union in 2019. GrafTech Brazil has successfully appealed related state court rulings, and intends to vigorously defend its position[232] - A securities class action complaint was filed on January 25, 2024, alleging material misrepresentations related to the temporary suspension of the Monterrey, Mexico facility. Derivative actions were also filed on June 9, 2025, alleging breaches of fiduciary duty based on similar facts[233][234] - At this stage, the company cannot determine if these legal matters would reasonably be expected to have a material adverse effect on its financial condition[235] Item 1A. Risk Factors This section updates and refers to the risk factors disclosed in the Annual Report on Form 10-K, specifically highlighting the risk associated with the company's non-compliance with NYSE continued listing requirements regarding minimum share price. It discusses the proposed reverse stock split as a measure to address this and the potential impacts of delisting - The company's common stock does not currently comply with the NYSE's minimum share price standard for continued listing[240] - GrafTech is seeking stockholder approval for a reverse stock split to address the NYSE $1.00 minimum bid price requirement, with a Special Meeting of Stockholders expected on August 14, 2025[241] - A delisting from the NYSE, for this or any other reason, could materially affect the company's ability to raise capital, its business, and the price of its common stock[241] Item 5. Other Information This section states that no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[243] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, By-Laws, certifications from the CEO and CFO (pursuant to Rule 13a-14(a) and Section 906 of Sarbanes-Oxley Act), and the Inline XBRL financial information - The exhibits include corporate governance documents (Certificate of Incorporation, By-Laws), certifications from the CEO and CFO (Rule 13a-14(a) and Section 906), and financial information formatted in Inline XBRL[246][247] SIGNATURE This section contains the signature of Rory O'Donnell, Chief Financial Officer and Senior Vice President (Principal Financial Officer and Principal Accounting Officer), certifying the filing of the report on behalf of GrafTech International Ltd. on July 25, 2025 - The report was signed by Rory O'Donnell, Chief Financial Officer and Senior Vice President, on behalf of GrafTech International Ltd. on July 25, 2025[251]