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What changed in GRAFTECH INTERNATIONAL LTD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GRAFTECH INTERNATIONAL LTD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+387 added−361 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-14)

Top changes in GRAFTECH INTERNATIONAL LTD's 2023 10-K

387 paragraphs added · 361 removed · 249 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

63 edited+19 added−12 removed34 unchanged
Biggest changeWe believe a continuous focus on employee engagement will help us provide high quality products to our customers. In October 2022, we completed our first global employee engagement survey that requested feedback from our employees on important issues on a variety of topics, including safety, pay, communication, and training. The majority of our employees participated in the survey.
Biggest changeThe survey requested feedback from our employees on a variety of important topics, including safety, pay, communication and training. Employee Training and Development As committed stakeholders in the professional development of our employees, we look for opportunities to help employees grow, innovate, and impact our business and industry.
Graphite electrodes are also used in steel refining in ladle furnaces and in other processes, such as the production of titanium dioxide, stainless steel, silicon metals and other ferrous and non‑ferrous metals.
Graphite electrodes are also used in steel refining ladle furnaces and in other processes, such as the production of titanium dioxide, stainless steel, silicon metals and other ferrous and non‑ferrous metals.
In addition, we believe the quality of Seadrift’s petroleum needle coke is superior for graphite electrode production compared to most of the petroleum needle coke available to our peers on the open market, allowing us to produce high-quality electrodes in a cost‑efficient manner. Seadrift sources all its decant oil requirements from reputable U.S.-based suppliers.
In addition, we believe the quality of Seadrift’s petroleum needle coke is superior for graphite electrode production compared to most of the petroleum needle coke available to our peers on the open market, allowing us to produce high-quality electrodes in a cost‑efficient manner. Seadrift sources all of its decant oil requirements from reputable U.S.-based suppliers.
Products and Raw Materials Graphite Electrodes Graphite electrodes are an industrial consumable product used primarily in EAF steel production, one of the two primary methods of steel production and the steelmaking technology used by all “mini‑mills.” Electrodes act as conductors of electricity in the furnace, generating sufficient heat to melt scrap metal, iron ore or other raw materials used to produce steel or other metals.
Products and Raw Materials Graphite Electrodes Graphite electrodes are an industrial consumable product used primarily in EAF steel production, one of the two primary methods of steel production and the steelmaking technology used by all “mini‑mills.” Electrodes act as conductors of electricity in the furnace, generating sufficient heat to melt scrap metal, iron ore-derived products or other raw materials used to produce steel or other metals.
We are substantially vertically integrated into petroleum needle coke through our Seadrift facility ("Seadrift"), located in Port Lavaca, Texas, which provides the majority of our petroleum needle coke requirements used to produce our graphite electrodes and insulates us from rapid changes in the petroleum needle coke market.
We are substantially vertically integrated into petroleum needle coke through our Seadrift facility (“Seadrift”), located in Port Lavaca, Texas, which provides the majority of our petroleum needle coke requirements used to produce our graphite electrodes and insulates us from rapid changes in the petroleum needle coke market.
Estimates of future costs for compliance with U.S. and foreign environmental protection laws and regulations, and for environmental liabilities, are necessarily imprecise due to numerous uncertainties, including the impact of potential new laws and regulations, the availability and application of new and diverse technologies, the extent of insurance coverage, the potential discovery of contaminated properties, or the identification of new hazardous substance disposal sites at which we may be a potentially responsible party ("PRP") and, in the case of sites subject to the Comprehensive Environmental Response, Compensation and Liability Act and similar state and foreign laws, the final determination of remedial requirements and the ultimate allocation of costs among the PRPs.
Estimates of future costs for compliance with U.S. and foreign environmental protection laws and regulations, and for environmental liabilities, are necessarily imprecise due to numerous uncertainties, including the impact of potential new laws and regulations, the availability and application of new and diverse technologies, the extent of insurance coverage, the potential discovery of contaminated properties, or the identification of new hazardous substance disposal sites at which we may be a potentially responsible party (“PRP”) and, in the case of sites subject to the Comprehensive Environmental Response, Compensation and Liability Act and similar state and foreign laws, the final determination of remedial requirements and the ultimate allocation of costs among the PRPs.
Available Information We make available, free of charge, on or through our website, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after we electronically file them with, or furnish them to, the U.S.
Available Information We make available, free of charge, on or through our website, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after we electronically file them with, or furnish them to, the U.S.
We own, have the right to use or have obtained licenses for various trade names and trademarks used in our businesses. For example, the UCAR trademark is owned by Union Carbide Corporation ("Union Carbide") (which was acquired by Dow Chemical Company) and is licensed to us on a worldwide, exclusive and royalty-free basis until January 2035.
We own, have the right to use or have obtained licenses for various trade names and trademarks used in our businesses. For example, the UCAR trademark is owned by Union Carbide Corporation (“Union Carbide”) (which was acquired by Dow Chemical Company) and is licensed to us on a worldwide, exclusive and royalty-free basis until January 2035.
These include federal, state, local and foreign environmental laws and regulations, increasingly complex and changing laws and regulations enacted to protect business and personal data in the United States and other jurisdictions, including the EU's General Data Protection Regulation ("GDPR"), anti-corruption laws, import/export controls, anti-competition laws, U.S. securities laws and a variety of regulations including work-related and community safety laws.
These include federal, state, local and foreign environmental laws and regulations, increasingly complex and changing laws and regulations enacted to protect business and personal data in the United States and other jurisdictions, including the EU’s General Data Protection Regulation (“GDPR”), anti-corruption laws, import/export controls, anti-competition laws, U.S. securities laws and a variety of regulations including work-related and community safety laws.
This particular license automatically renews for successive 10-year periods. It permits non-renewal by Union Carbide at the end of any renewal period upon five years’ notice of non-renewal. We rely on patent, trademark, copyright and trade secret laws, as well as appropriate agreements to protect our intellectual property.
This particular license automatically renews for successive 10-year periods. It permits non-renewal by Union Carbide at the end of any renewal period upon five years notice of non-renewal. We rely on patent, trademark, copyright and trade secret laws, as well as appropriate agreements to protect our intellectual property.
Our global Health, Safety and Environmental Protection ("HS&EP") policy applies to all employees and governs our actions and decisions every day. We also have a Code of Conduct and Ethics for Suppliers and Contractors that includes HS&EP guidelines required for doing business with GrafTech. GrafTech’s focus on HS&EP is a top priority for all employees.
Our global Health, Safety and Environmental Protection (“HS&EP”) policy applies to all employees and governs our actions and decisions every day. We also have a Code of Conduct and Ethics for Suppliers and Contractors that includes HS&EP guidelines required for doing business with GrafTech. GrafTech’s focus on HS&EP is a top priority for all employees.
Petroleum Needle Coke Industry - Supply and Demand Trends Supply Trends We estimate that, as of the end of 2022, the petroleum needle coke industry globally (excluding China) had capacity to produce approximately 750 thousand MT of petroleum needle coke.
Petroleum Needle Coke Industry - Supply and Demand Trends Supply Trends We estimate that, as of the end of 2023, the petroleum needle coke industry globally (excluding China) had capacity to produce approximately 750 thousand MT of petroleum needle coke.
We have a large customer technical service organization, with supporting application engineering and scientific groups and approximately 40 engineers and specialists around the world serving in this area. We believe that we are one of the industry leaders in providing value-added technical services to our customers. Our direct sales force currently operates from 11 sales offices located around the world.
We have a large customer technical service organization, with supporting application engineering and scientific groups and approximately 30 engineers and specialists around the world serving in this area. We believe that we are one of the industry leaders in providing value-added technical services to our customers. Our direct sales force currently operates from 13 sales offices located around the world.
The global (excluding China) industry is highly concentrated as it is comprised of four producers, Phillips 66, GrafTech (via Seadrift), Petrocokes Japan Ltd. (a subsidiary of Sumitomo Corporation) and ENEOS Holdings, Inc. Our Seadrift facility, with production capacity of approximately 140 thousand MT, represents nearly one-fifth of the global (excluding China) petroleum needle coke production capacity.
The global (excluding China) industry is highly concentrated as it is comprised of four producers, Phillips 66, GrafTech (via Seadrift), Petrocokes Japan Ltd. (a subsidiary of Sumitomo Corporation) and ENEOS Holdings, Inc. Our Seadrift facility, with nameplate capacity to produce approximately 140 thousand MT of calcined petroleum needle coke, represents nearly one-fifth of the global (excluding China) production capacity.
Item 1. Business Introduction GrafTech International Ltd., founded in 1886 and incorporated in Delaware, is a leading manufacturer of high-quality graphite electrode products essential to the production of electric arc furnace ("EAF") steel and other ferrous and non-ferrous metals.
Item 1. Business Introduction GrafTech International Ltd., founded in 1886 and incorporated in Delaware, is a leading manufacturer of high-quality graphite electrode products essential to the production of EAF steel and other ferrous and non-ferrous metals.
However, we do not anticipate that multi-year agreements will make up the majority of our portfolio moving forward. 2022 Revenue and production by region Approximately 93% of our graphite electrodes were purchased by EAF steel producers in 2022. The remaining portion is primarily used in various other ferrous and non-ferrous melting applications, fused materials, chemical processing, and alloy metals.
However, we do not anticipate that multi-year agreements will make up the majority of our portfolio moving forward. 2023 Revenue and Production By Region Approximately 89% of our graphite electrodes were purchased by EAF steel producers in 2023. The remaining portion is primarily used in various other ferrous and non-ferrous melting applications, fused materials, chemical processing, and alloy 6 metals.
Health and Safety The health and safety of our global team is a top priority and is a core value of the Company. Our comprehensive programs strive to achieve zero injuries and no harm done. Our total recordable incident rate in 2022 was 0.94 per 200,000 work hours, compared to 0.49 per 200,000 work hours in 2021.
Health and Safety The health and safety of our global team is a top priority and is a core value of the Company. Our comprehensive programs strive to achieve zero injuries and no harm done. Our total recordable incident rate in 2023 was 0.61 per 200,000 work hours, compared to 0.94 per 200,000 work hours in 2022.
We believe that the above strengths and capabilities provide us with a competitive advantage. 7 Intellectual property We believe that our intellectual property, consisting primarily of patents and proprietary know-how, provides us with competitive advantages and is important to our growth opportunities. Our intellectual property portfolio is extensive, with over 127 U.S. and foreign patents and pending patent applications.
We believe that the above strengths and capabilities provide us with a competitive advantage. Intellectual Property We believe that our intellectual property, consisting primarily of patents and proprietary know-how, provides us with competitive advantages and is important to our growth opportunities. Our intellectual property portfolio is extensive, with approximately 100 U.S. and foreign patents and pending patent applications.
We adjust the accrual as new remedial actions or other commitments are made, as well as when new information becomes available that changes the prior estimates previously made and we believe our existing accruals are reasonable. Human Capital Resources Employment As of December 31, 2022, we had 1,347 employees (excluding contractors), 815 of which were hourly employees.
We adjust the accrual as 8 new remedial actions or other commitments are made, as well as when new information becomes available that changes the prior estimates previously made and we believe our existing accruals are reasonable. Human Capital Resources Employment As of December 31, 2023, we had 1,249 employees (excluding contractors), 758 of which were hourly employees.
Graphite Electrode Industry - Supply and Demand Trends Supply trends We estimate that as of the end of 2022, the graphite electrode industry globally (excluding China) had capacity to produce approximately 800 thousand MT of graphite electrodes.
Graphite Electrode Industry - Supply and Demand Trends Supply trends We estimate that as of the end of 2023, the graphite electrode industry globally (excluding China) had nameplate capacity to produce approximately 810 thousand MT of graphite electrodes.
We believe that we have the most competitive portfolio of low-cost ultra-high power (“UHP”) graphite electrode manufacturing facilities in the industry, including three of the highest capacity facilities in the world. We have graphite electrode manufacturing facilities in Calais, France, Pamplona, Spain, Monterrey, Mexico and St. Marys, Pennsylvania.
We believe that we have a competitive portfolio of low-cost ultra-high power (“UHP”) graphite electrode manufacturing facilities, with some of the highest capacity facilities in the world. We have graphite electrode manufacturing facilities in Calais, France, Pamplona, Spain, Monterrey, Mexico and St. Marys, Pennsylvania.
The industry is fairly consolidated, with the five largest global (excluding China) producers in the industry, GrafTech, Resonac Holdings Corporation (previously known as Showa Denko K.K.), Graphite India Limited, Tokai Carbon Co., Ltd. and HEG Limited, collectively, representing approximately 80% of global (excluding China) graphite electrode production capacity.
The industry is fairly consolidated, with the five largest global (excluding China) producers in the industry, GrafTech, Resonac Holdings Corporation, HEG Limited, Tokai Carbon Co., Ltd. and Graphite India Limited, collectively, representing over 80% of global (excluding China) graphite electrode production capacity.
Contracts and Customers Our customers include major steel producers and other ferrous and non-ferrous metal producers in Europe, the Middle East and Africa (collectively, “EMEA”), the Americas, and Asia-Pacific (“APAC”), which sell their products primarily into the automotive, construction, appliance, machinery, equipment and transportation industries. We sell our products under short-term purchase agreements, LTAs and spot purchase orders.
Contracts and Customers Our customers include major steel producers and other ferrous and non-ferrous metal producers in Europe, the Middle East and Africa (collectively, “EMEA”), the Americas, and Asia-Pacific (“APAC”), which sell their products primarily into the automotive, construction, appliance, machinery, equipment and transportation industries.
We believe that a significant portion of the electrodes produced in China do not meet the quality standards needed to be utilized in the most demanding EAF applications.
However, we believe that a significant portion of the UHP electrodes produced in China do not meet the quality standards needed to be exported for use in the most demanding EAF applications.
With demand for UHP graphite electrodes expected to increase at approximately 3% to 4% or more compound annual growth rate from 2022 to 2030 (see “Graphite Electrode” section above), we expect this to result in a similar increase in demand for needle coke used in graphite electrode production.
With demand for UHP graphite electrodes expected to increase at a compound annual growth rate of approximately 3% to 4% 5 through 2028 (see “Graphite Electrode” section above), we expect this to result in a similar increase in demand for needle coke used in graphite electrode production.
Actual production may vary. 3 addition of new electrodes), on average, every eight to ten operating hours. UHP graphite electrodes are consumed at a rate of approximately 1.7 kilograms per MT of steel production in EAF facilities. The actual rate of consumption and addition of electrodes for a particular furnace depends primarily on the efficiency and productivity of the furnace.
UHP graphite electrodes are consumed at a rate of approximately 1.7 kilograms per MT of steel production, on average, in EAF facilities. The actual rate of consumption and addition of electrodes for a particular furnace depends primarily on the efficiency and productivity of the furnace.
Overall, in 2022, we generated 91% of our net sales from EMEA and the Americas. 6 The charts below show our revenue by region for 2022 and 2021: Sales and customer service We differentiate and sell the value of our graphite electrodes primarily based on price, product quality and performance, delivery reliability and customer technical service.
The charts below show our revenue by region for 2023 and 2022: Sales and Customer Service We differentiate and sell the value of our graphite electrodes primarily based on price, product quality and performance, delivery reliability and customer technical service.
By focusing our management’s attention and R&D spending on the graphite electrode business, we have been able to improve the quality of our graphite electrodes, maintain our position as an industry leader and improve our relationships with strategic customers.
Research and Development We have over 135 years of experience in the research and development (“R&D”) of graphite- and carbon-based solutions. By focusing our management’s attention and R&D spending on the graphite electrode business, we have been able to improve the quality of our graphite electrodes, maintain our position as an industry leader and improve our relationships with strategic customers.
In addition, the imposition of customs duties and other tariffs in key EAF steelmaking regions, including the United States and the European Union ("EU"), have further limited the quantities of graphite electrodes exported from China. We primarily compete in the UHP segment of the graphite electrode market.
In addition, the imposition of customs duties and other tariffs in key EAF steelmaking regions, including the United States and the European Union (“EU”), have further limited the quantity of graphite electrodes exported from China.
We sell our products in every major geographic region globally. Sales of our products to buyers outside the United States accounted for approximately 73% of net sales in 2022 compared to 79% in both 2021 and 2020.
We sell our products in every major geographic region globally. Sales of our products to buyers outside the United States accounted for approximately 67%, 73% and 79% of net sales in 2023, 2022 and 2021, respectively. Overall, in 2023, we generated 89% of our net sales from EMEA and the Americas.
In addition to these advantages, EAF steel producers benefit from their flexibility in sourcing iron units, being able to make steel from either scrap or alternative sources of iron, such as direct reduced iron and hot briquetted iron, both made directly from iron ore. 4 Reflecting these and other competitive advantages, we believe EAF steel production will continue to grow at a faster rate than BOF steel production.
In addition to these advantages, EAF steel producers benefit from their flexibility in sourcing iron units, being able to make steel from either scrap or alternative sources of iron, such as direct reduced iron and hot briquetted iron, both made directly from iron ore.
Although this may provide sufficient capacity to meet global petroleum needle coke needs for the next several years, as demand from emerging non-Chinese EV battery producers continues to increase, we believe that regional supply-demand imbalances will occur, particularly in North America and Europe. 5 Demand Trends We estimate that global (excluding China) needle coke demand for use in UHP graphite electrode production was approximately 584 thousand MT in 2022, with the majority being petroleum needle coke.
Although this may provide sufficient capacity to meet global petroleum needle coke needs for the next several years, as demand from emerging non-Chinese EV battery producers continues to increase, we believe that regional supply-demand imbalances will occur, particularly in North America and Europe, in the coming years.
Compensation and Total Rewards We provide competitive compensation programs to help meet the needs of our employees. Our programs are designed to support the profitable growth of our business; attract, reward, and retain the talent we need to succeed; support the health and overall well-being of our employees; and reinforce a performance-based culture.
Our programs are designed to support the profitable growth of our business; attract, reward, and retain the talent we need to succeed; support the health and overall well-being of our employees; and reinforce a performance-based culture. In addition to base compensation, we offer individual and group-based performance bonuses.
According to the Steel Manufacturers Association (“SMA”), EAF steelmaking produces 75% fewer carbon dioxide emissions compared to BOF steelmaking. Further, SMA notes that the EAF process is a sustainable model for recycling scrap-based raw materials into new steel, which is 100% (and infinitely) recyclable at the end of its useful life.
Further, SMA notes that the EAF process is a sustainable model for recycling scrap-based raw materials into new steel, which is 100% (and 4 infinitely) recyclable at the end of its useful life.
Our short-term agreements are either annual, semi-annual or quarterly. Because of the long production time, the book building process is largely concentrated in the fourth quarter of each year for the annual short-term agreements as well as for the semi-annual agreements related to the first half of the upcoming year.
Because of the long production time, the book building process is largely concentrated in the fourth quarter of each year for the annual short-term agreements as well as for the semi-annual agreements related to the first half of the upcoming year. Spot purchase orders are entered into with deliveries usually starting three or more months later.
Information on, or accessible through, our website is not part of this Annual Report. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
According to the World Steel Association (“WSA”), global (excluding China) EAF steel production grew at a 4% compound annual growth rate from 2015 to 2021, the most recent year for which WSA has published such figures. This compares to a 2% compound annual growth rate for overall global (excluding China) steel production during this same period.
EAF steelmaking has historically been the fastest-growing segment of the global steel market. According to the World Steel Association (“WSA”), global (excluding China) EAF steel production grew at a 2%-3% compound annual growth rate from 2015 to 2022, the most recent year for which WSA has published such figures.
We estimate that, as of the end of 2022, global (excluding China) UHP graphite electrode capacity was approximately 680 thousand MT, or approximately 84% of the global (excluding China) graphite electrode capacity.
We primarily compete in the UHP segment of the graphite electrode market. We estimate that, as of the end of 2023, global (excluding China) UHP graphite electrode capacity was approximately 690 thousand MT, or approximately 85% of the global (excluding China) graphite electrode capacity.
We will continue to offer multi-year agreements as an important part of our commercialization strategy and value proposition. Our substantial vertical integration into petroleum needle coke supports our ability to offer contracts with varying durations, providing our customers with flexibility and surety of supply.
Our substantial vertical integration into petroleum needle coke supports our ability to offer contracts with varying durations, providing our customers with flexibility and surety of supply.
We can experience significant variation in our customers’ delivery requirements as their specific needs vary and change throughout the year. We generally seek to maintain appropriate inventory levels, taking into account these factors as well as the significant differences in manufacturing cycle times for graphite electrode products and our customers’ products. Finished products are usually stored at our manufacturing facilities.
We generally seek to maintain appropriate inventory levels, taking into account these factors as well as the significant differences in manufacturing cycle times for graphite electrode products and our customers’ products. 7 Finished products are usually stored at our manufacturing facilities. Limited quantities of some finished products are also stored at local warehouses around the world to meet customer needs.
Based on the International Energy Agency’s estimates for growth in EV sales and battery pack sizes, we estimate this could result in global needle coke demand for use in EV applications increasing at a 20% or more compound annual growth rate from 2022 to 2030.
Based on Benchmark Mineral Intelligence estimates for growth in battery anodes, we estimate this could result in global needle coke demand for use in EV applications increasing at a 20% or more compound annual growth rate through 2028.
Our affirmative action plans, recruitment policies, and hiring practices support our diversity and inclusion objectives and we assign responsibilities for upholding policies, procedures, and practices for diverse and inclusive hiring and talent management at both the corporate and site levels.
Diversity and Inclusion Diversity and inclusion are foundational to our culture, and all employees are expected to uphold these values in their day-to-day work. Our recruitment policies and hiring practices support our diversity and inclusion objectives. At both the corporate and site levels, we assign responsibilities for upholding policies, procedures, and practices for diverse and inclusive hiring and talent management.
Based on industry announcements of planned incremental EAF capacity additions, we estimate this could result in global (excluding China) EAF production capacity increasing at approximately 3% compound annual growth rate from 2022 to 2030.
Based on industry announcements of planned incremental EAF capacity additions and factoring in further production increases at existing EAF steel plants, we estimate this could result in global (excluding China) UHP graphite electrode demand growing at a compound annual growth rate of approximately 3% to 4% through 2028.
Pitch needle coke, used principally by Chinese graphite electrode manufacturers, is made from coal tar pitch, a byproduct of coking metallurgical coal used in BOF steelmaking. For the production of our graphite electrodes, we prefer petroleum needle coke because of the meaningfully shorter bake and graphitizing time required, compared to graphite electrodes produced using pitch needle coke.
For the production of our graphite electrodes, we prefer petroleum needle coke because of the meaningfully shorter bake and graphitizing time required, compared to graphite electrodes produced using pitch needle coke.
The tuition reimbursement program, in particular, helps employees who want to continue their education or seek specialized job training, and illustrates our commitment to continued learning and focus on professional development.
The tuition reimbursement program, in particular, helps employees who want to continue their education or seek specialized job training, and illustrates our commitment to continued learning and focus on professional development. 9 Employee Engagement Employee engagement is a priority at GrafTech because we believe that engaged employees help us provide high-quality products and services to our customers.
In addition to base compensation, we offer individual and group-based performance bonuses. Benefits packages include medical, dental, prescription, vision, group life insurance, short- and long-term disability, paid vacation and holidays, and tuition reimbursement.
Benefits packages include, depending on the country, medical, dental, prescription, vision, group life insurance, short- and long-term disability, paid vacation and holidays, and tuition reimbursement.
In a typical furnace using alternating electric current and operating at a typical number of production cycles per day, three UHP graphite electrodes are fully consumed (requiring the 1 Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage.
In a typical furnace using alternating electric current and operating at a typical number of production cycles per day, three UHP graphite electrodes are fully consumed (requiring the addition of new electrodes), on average, every eight to ten operating hours.
It is also a primary raw material utilized in the production of synthetic graphite used in anodes for lithium-ion batteries that power electric vehicles ("EV"). Petroleum needle coke is produced through a manufacturing process very similar to a refinery. The production process converts decant oil, a byproduct of the gasoline refining process, into petroleum needle coke.
Petroleum Needle Coke Petroleum needle coke, a crystalline form of carbon derived from decant oil, is the key raw material we use in the production of graphite electrodes. It is also a primary raw material utilized in the production of synthetic graphite used in anodes for lithium-ion batteries that power electric vehicles (“EV”).
In annual performance reviews specifically, we discuss progress towards personal career goals, refine career aspirations, and connect employees with specific pathways to achievement.
During annual performance reviews, we discuss progress towards personal career goals, refine career aspirations, and connect employees with specific pathways to achievement. Employees are encouraged to work with their manager or human resources to further refine their career and growth paths at each annual review.
The arc furnace monitoring system team is continuously listening to our customers' needs and develops new functionalities for the ArchiTech environment. Distribution We deploy various demand management and inventory management techniques to seek to ensure that we can meet our customers’ delivery requirements while still maximizing the utilization of our production capacity.
Distribution We deploy various demand management and inventory management techniques to seek to ensure that we can meet our customers’ delivery requirements while still maximizing the utilization of our production capacity. We can experience significant variation in our customers’ delivery requirements as their specific needs vary and change throughout the year.
As graphite electrodes are an essential consumable in the EAF steel production process, the LTAs provided certainty of supply of reliable, high-quality graphite electrodes in an at-times volatile market. These LTAs have fixed prices. Within the contract, our customers are contractually bound to purchase the specified volume of product at the price under the contract.
Our LTAs were entered into between the end of 2017 and early 2019, which coincided with a period of elevated market prices for graphite electrodes. As graphite electrodes are an essential consumable in the EAF steel production process, the LTAs provided certainty of supply of reliable, high-quality graphite electrodes in an at-times volatile market. These LTAs have fixed prices.
We believe we have a competitive advantage in offering customers ArchiTech Furnace Productivity System ("ArchiTech"), which is an advanced support and technical service platform in the graphite electrode industry. ArchiTech, which has been installed in customer furnaces worldwide, enables our engineers to work with our customers seamlessly to maximize the performance of their furnaces and provide real-time diagnostics and troubleshooting.
ArchiTech, which has been installed in customer furnaces worldwide, enables our engineers to work with our customers seamlessly to maximize the performance of their furnaces and provide real-time diagnostics and troubleshooting. The arc furnace monitoring system team is continuously listening to our customers’ needs and develops new functionalities for the ArchiTech environment.
UHP graphite electrodes are primarily used in the EAF steelmaking process, and long-term global growth of EAF steel production has driven increased demand for graphite electrodes. EAF steelmaking has historically been the fastest-growing segment of the global steel market.
Demand trends We estimate that annual global (excluding China) UHP graphite electrode demand has been approximately 660 thousand MT, on average, over the past three years. UHP graphite electrodes are primarily used in the EAF steelmaking process, and long-term global growth of EAF steel production has driven increased demand for graphite electrodes over time.
Our production capacity is approximately 200 thousand metric tons ("MT") 1 through our primary manufacturing facilities in Calais, Pamplona and Monterrey. Our principal executive offices are located at 982 Keynote Circle, Brooklyn Heights, Ohio 44131 and our telephone number is (216) 676‑2000. Our website address is www.graftech.com.
Our principal executive offices are located at 982 Keynote Circle, Brooklyn Heights, Ohio 44131 and our telephone number is (216) 676‑2000. Our website address is www.graftech.com. Information on, or accessible through, our website is not part of this Annual Report.
A total of 519 employees were in Mexico, 455 were in Europe, 329 were in the United States, 37 were in Brazil, five were in the Asia Pacific region and two were in South Africa. 8 As of December 31, 2022, approximately 524 employees, or 39% of our worldwide employees, were covered by collective bargaining or similar agreements that expire, or are subject to renegotiation, at various times through December 31, 2023.
As of December 31, 2023, approximately 440 employees, or 35% of our worldwide employees, were covered by collective bargaining or similar agreements that expire, or are subject to renegotiation, at various times through December 31, 2024.
The size of the electrodes used in EAF steel production varies depending on the size of the furnace, the size of the furnace’s electric transformer and the planned productivity of the furnace.
The total manufacturing time of a UHP graphite electrode and its associated connecting pin is, on average and except for special requests, approximately six months. The size of the electrodes used in EAF steel production varies depending on the size of the furnace, the size of the furnace’s electric transformer and the planned productivity of the furnace.
As a result, the EAF method of steelmaking accounted for 49% of the global (excluding China) steel production in 2021, compared to 44% in 2015, with share growth in nearly every region. EAF steelmaking is more energy efficient and is advantaged in terms of its environmental footprint, compared to steel produced through the blast oxygen furnace (“BOF”) steelmaking model.
This compares to a 1% compound annual growth rate for overall global (excluding China) steel production during this same period. As a result, the EAF method of steelmaking accounted for 49% of the global (excluding China) steel production in 2022, compared to 44% in 2015, with share growth in nearly every region.
In recent years, additional production capacity has been generated by optimization and debottlenecking of existing assets and limited brownfield expansion. Although graphite electrode production capacity within China exceeds that of the rest of the world combined, the production landscape in China is fragmented, and the quality of Chinese graphite electrodes varies greatly.
Although graphite electrode production capacity within China exceeds that of the rest of the world combined, the production landscape in China is fragmented, and the quality of Chinese graphite electrodes varies greatly. We estimate that as of the end of 2023, total production capacity within China for the UHP segment of graphite electrodes was approximately 825 thousand MT.
There is a lag between the time we negotiate prices for our short-term agreements and when our electrodes are delivered and recognized in revenue. Our LTAs were entered into between the end of 2017 and early 2019.
There is a lag between the time we negotiate prices for our short-term agreements and when our electrodes are delivered and recognized in revenue. There is no widely accepted graphite electrode reference price. Pricing has historically been cyclical, reflecting the demand trends of the global EAF steelmaking industry and supply of graphite electrodes.
Our global footprint lends itself to organic diversity, and our employee base has varied educational backgrounds and life experiences. However, we strive to go beyond this organic diversity and be more intentional through our talent acquisition, retention, and development practices. As of December 31, 2022, 33% of our senior leadership team and 27% of our Board members were female.
Our global footprint lends itself to organic diversity, and our employee base has varied educational backgrounds and life experiences. However, we strive to go beyond this organic diversity and we are currently developing a strategy to better measure our ability to do so.
Sales from our LTAs represented 68%, 77% and 87% of our net sales in 2022, 2021 and 2020, respectively. As our LTAs are nearing the end of their terms, our mix of business has begun to shift towards short-term purchase agreements and spot purchase orders.
As our LTAs are nearing the end of their terms, our mix of business has shifted towards short-term purchase agreements and spot purchase orders (“non-LTAs”). We will continue to offer multi-year agreements, also known as electrode supply agreements, as an important part of our commercialization strategy and value proposition.
Our graphite electrode production facilities, with production capacity of approximately 200 thousand MT (excluding St. Marys), represents one-quarter of the global (excluding China) graphite electrode production capacity. We believe that no new graphite electrode production facilities have been built outside of China for approximately ten years.
As a result, beginning in 2024, our stated production capacity will be approximately 178 thousand MT. We believe that no new graphite electrode production facilities have been built outside of China for several years. In recent years, additional production capacity has been generated by optimization and debottlenecking of existing assets and limited brownfield expansion.
Our 9 performance management system allows employees to work with their supervisor or the human resources department to create a GrafTech career and growth path using these profiles and to direct them to job-specific professional development training and continuing education opportunities.
The performance management system connects employees with job-specific professional development training and continuing education opportunities to help them progress along their career and growth path. We conduct mid-year and annual performance reviews for all salaried employees to assess both job competencies and performance relative to GrafTech’s core competencies.
Removed
However, we are pursuing alternatives with respect to the production and sourcing of connecting pins to reduce our reliance on one production location for this critical component. The total manufacturing time of a UHP graphite electrode and its associated connecting pin is, on average and except for special requests, approximately six months.
Added
As of December 31, 2023, our stated production capacity was approximately 202 thousand metric tons (“MT”) 1 through our primary manufacturing facilities in Calais, Pamplona and Monterrey. On February 14, 2024, the Company announced a cost rationalization and footprint optimization plan, in response to persistent softness in the commercial environment.
Removed
After factoring in practical utilization rates (e.g., accounting for product mix and expected maintenance outage), this capacity is insufficient to meet the global (excluding China) demand for UHP graphite electrodes (see “Demand Trends” section below).
Added
This includes an indefinite suspension of production activities at our St. Marys facility, with the exception of graphite electrode and pin machining. We are also indefinitely idling certain assets within our remaining graphite electrode manufacturing footprint. As a result of these initiatives, beginning in 2024, our stated production capacity will be approximately 178 thousand MT 1 .
Removed
As a result, exports from Chinese electrode producers that meet the technical performance standards required by EAF steel manufacturers typically provide the balance of UHP graphite electrode needs. Demand trends We estimate that global (excluding China) UHP graphite electrode demand was approximately 680 thousand MT in 2022.
Added
In 2024, we anticipate expanding our product offerings to include the addition of an 800-millimeter super-sized electrode to our portfolio to serve a small but growing segment of the UHP electrode market.
Removed
We expect this to result in a similar increase in demand for UHP graphite electrodes over this same period to support EAF capacity expansion, before factoring in further potential UHP graphite electrode demand from production increases at existing EAF steel plants to support overall expected growth in steel demand.
Added
However, we recently added pin production capabilities at our Pamplona, Spain 1 Production capacity reflects expected maximum production volume during the period through our Calais, Pamplona and Monterrey facilities depending on product mix and expected maintenance outage. Actual production may vary. 3 facility to provide alternative sources, if needed, for this critical component.
Removed
Combined, we believe these factors could result in global (excluding China) UHP graphite electrode demand growing at approximately 3% to 4% compound annual growth rate through 2030. Petroleum Needle Coke Petroleum needle coke, a crystalline form of carbon derived from decant oil, is the key raw material we use in the production of graphite electrodes.
Added
As of December 31, 2023, our stated production capacity was approximately 202 thousand MT through our Calais, Pamplona and Monterrey facilities and represented approximately one-quarter of the global (excluding China) graphite electrode production capacity. On February 14, 2024, the Company announced a cost rationalization and footprint optimization plan, in response to persistent softness in the commercial environment.
Removed
Furthermore, we believe that brownfield expansion opportunities are generally limited as petroleum needle coke manufacturing is a continuous process with significant costs associated with shutting down and restarting facilities for maintenance or capital investment.
Added
EAF steelmaking is more energy efficient and is advantaged in terms of its environmental footprint, compared to steel produced through the basic oxygen furnace (“BOF”) steelmaking model. According to the Steel Manufacturers Association (“SMA”), EAF steelmaking produces 75% fewer carbon dioxide emissions compared to BOF steelmaking.
Removed
Spot purchase orders are entered into with deliveries usually starting three or more months later. Pricing has historically been cyclical, reflecting the demand trends of the global EAF steelmaking industry and supply of graphite electrodes.
Added
Reflecting these and other competitive advantages, we believe EAF steel production will continue to grow at a faster rate than BOF steel production.
Removed
Limited quantities of some finished products are also stored at local warehouses around the world to meet customer needs. Research and development We have over 135 years of experience in the research and development ("R&D") of graphite- and carbon-based solutions.
Added
Petroleum needle coke is produced through a manufacturing process very similar to a refinery. The production process converts decant oil, a byproduct of the gasoline refining process, into petroleum needle coke. Pitch needle coke, used principally by Chinese graphite electrode manufacturers, is made from coal tar pitch, a byproduct of coking metallurgical coal used in BOF steelmaking.
Removed
Diversity and Inclusion As a global enterprise, we believe diversity is foundational to maintaining a competitive workforce in our industry. Unique perspectives promote business innovation and excellence. Therefore, we seek out individuals with different backgrounds and experiences, and we aim to foster an inclusive community that celebrates these differences.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

57 edited+13 added−33 removed89 unchanged
Biggest changeOur credit agreement (as amended, the “2018 Credit Agreement”) provides for (i) an aggregate $2,250 million senior secured term loan facility (the “2018 Term Loan Facility”) after giving effect to the June 2018 amendment (the "First Amendment") that increased the aggregate principal amount of the 2018 Term Loan Facility from $1,500 million to $2,250 million and (ii) a $330 million senior secured revolving credit facility after giving effect to the May 2022 amendment that increased the revolving commitments under the 2018 Credit Agreement by $80 million from $250 million (the “2018 Revolving Credit Facility” and, together with the 2018 Term Loan Facility, as amended, the “Senior Secured Credit Facilities”).
Biggest changeOur credit agreement (as amended, the “2018 Credit Agreement”) currently provides for a $330 million senior secured revolving credit facility after giving effect to the May 2022 amendment (the “Third Amendment”) that increased the revolving commitments under the 2018 Credit Agreement by $80 million from $250 million (the “2018 Revolving Credit Facility”).
Further, alleged noncompliance with or stricter enforcement of, or changes in interpretations of, existing laws and regulations, adoption of more stringent new laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities or reputational harm that have a material adverse impact on our operations, costs or results of operations.
Further, noncompliance or alleged noncompliance with or stricter enforcement of, or changes in interpretations of, existing laws and regulations, adoption of more stringent new laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities or reputational harm that have a material adverse impact on our operations, costs or results of operations.
Our manufacturing operations are subject to disruption due to equipment failure, extreme weather conditions, floods, hurricanes and tropical storms and similar events, major industrial accidents, including fires or explosions, cybersecurity attacks, strikes and lockouts, adoption of new laws or regulations, changes in interpretations of existing laws or regulations or changes in governmental enforcement policies, civil disruption, riots, terrorist attacks, war, public health crises, such as the COVID-19 pandemic, and other events.
Our manufacturing operations are subject to disruption due to equipment failure, extreme weather conditions, floods, hurricanes and tropical storms and similar events, major industrial accidents, including fires or explosions, cybersecurity attacks, strikes and lockouts, adoption of new laws or regulations, changes in interpretations of existing laws or regulations or 13 changes in governmental enforcement policies, civil disruption, riots, terrorist attacks, war, public health crises, such as the COVID-19 pandemic, and other events.
The 2018 Credit Agreement also contains certain affirmative covenants and contains a financial covenant that requires us to maintain a senior secured first lien net leverage ratio not greater than 4.00:1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility.
The 2018 Revolving Credit Facility also contains certain affirmative covenants and contains a financial covenant that requires us to maintain a senior secured first lien net leverage ratio not greater than 4.00:1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility.
While we believe our insurance policies are in accordance with customary industry practices, such insurance may not cover all risks associated with the hazards of our 12 business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies.
While we believe our insurance policies are in accordance with customary industry practices, such insurance may not cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies.
We may also be obligated to indemnify affiliates or other partners who are accused of violating third parties’ intellectual property rights by virtue of those affiliates or partners’ agreements with us, and this could increase our costs in defending such claims and our damages.
We may also be obligated to indemnify affiliates or other 15 partners who are accused of violating third parties’ intellectual property rights by virtue of those affiliates or partners’ agreements with us, and this could increase our costs in defending such claims and our damages.
Violations of these laws and regulations, or of the terms and conditions of permits 18 required for our operations, can result in damage claims, reputational harm, the imposition of substantial fines and sanctions and require the installation of costly pollution control or safety equipment or costly changes in operations to limit pollution or decrease the likelihood of injuries.
Violations of these laws and regulations, or of the terms and conditions of permits required for our operations, can result in damage claims, reputational harm, the imposition of substantial fines and sanctions and require the installation of costly pollution control or safety equipment or costly changes in operations to limit pollution or decrease the likelihood of injuries.
Further measures, in the United States, EU and many other countries, may be enacted in the future. In particular, in December 2015, more than 190 countries participating in the United Nations Framework Convention on Climate Change reached an international agreement related to curbing GHG emissions (the “Paris Agreement”).
Further measures, in the United States, EU and many other countries, may be enacted in the future. In particular, in December 2015, more than 190 countries participating in the United Nations Framework Convention on Climate Change reached an international agreement related to curbing GHG 18 emissions (the “Paris Agreement”).
Significant customers for the steel industry include companies in the automotive, construction, appliance, machinery, equipment and transportation industries, which are industries that were negatively affected by the general economic downturn and the deterioration in financial markets, including severely restricted liquidity and credit availability, in the recent past.
Significant customers for the steel industry include companies in the automotive, construction, appliance, machinery, equipment and transportation industries, which are industries that were negatively affected by the general economic downturn and the deterioration in financial markets, including severely restricted liquidity and credit availability, in the past.
Our indebtedness could: • require us to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing the funds available for operations and future business opportunities; • make it more difficult for us to satisfy our obligations; • limit our ability to borrow additional money if needed for other purposes, including working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes, on satisfactory terms or at all; • limit our ability to adjust to changing economic, business and competitive conditions; • place us at a competitive disadvantage with competitors who may have less indebtedness or greater access to financing; • require us to reduce or delay capital expenditures or sell assets or operations to meet our scheduled debt service obligations; • make us more vulnerable to an increase in interest rates, a downturn in our operating performance or a decline in general economic conditions; and • make us more susceptible to changes in credit ratings, which could impact our ability to obtain financing in the future and increase the cost of such financing.
Our indebtedness could: • require us to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing the funds available for operations and future business opportunities; • make it more difficult for us to satisfy our obligations; 16 • limit our ability to borrow additional money if needed for other purposes, including working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes, on satisfactory terms or at all; • limit our ability to adjust to changing economic, business and competitive conditions; • place us at a competitive disadvantage with competitors who may have less indebtedness or greater access to financing; • require us to reduce or delay capital expenditures or sell assets or operations to meet our scheduled debt service obligations; • make us more vulnerable to a downturn in our operating performance or a decline in general economic conditions; and • make us more susceptible to changes in credit ratings, which could impact our ability to obtain financing in the future and increase the cost of such financing.
In addition, attempts to enforce our own intellectual property claims may subject us to counterclaims that our 15 intellectual property rights are invalid, unenforceable or are licensed to the party against whom we are asserting the claim or that we are infringing that party’s alleged intellectual property rights.
In addition, attempts to enforce our own intellectual property claims may subject us to counterclaims that our intellectual property rights are invalid, unenforceable or are licensed to the party against whom we are asserting the claim or that we are infringing that party’s alleged intellectual property rights.
Our customers, including major steel producers, have in the past experienced and may again experience downturns or financial distress that could adversely impact our ability to collect our accounts receivable on a timely basis or at all. Pricing for graphite electrodes has historically been cyclical and the price of graphite electrodes may decline in the future.
Our customers, including major steel producers, have in the past experienced and may again experience downturns or financial distress that could adversely impact our ability to collect our accounts receivable on a timely basis or at all. 10 Pricing for graphite electrodes has historically been cyclical and the price of graphite electrodes may continue to decline in the future.
As a result, we are subject to risks associated with operating in multiple countries, including: • currency fluctuations and devaluations in currency exchange rates, including impacts of transactions in various currencies, translation of various currencies into dollars for U.S. reporting and financial covenant compliance purposes, and impacts on results of operations due to the fact that the costs of our non‑U.S. operations are primarily incurred in local currencies while their products are primarily sold in dollars and euros; • imposition of or increase in customs duties and other tariffs; • imposition of or increases in currency exchange controls, including imposition of or increases in limitations on conversion of various currencies into dollars, euros, or other currencies, making of intercompany loans by subsidiaries or remittance of dividends, interest or principal payments or other payments by subsidiaries; • imposition of or increases in revenue, income or earnings taxes and withholding and other taxes on remittances and other payments by subsidiaries; • inflation, deflation and stagflation in any country in which we have a manufacturing facility; • imposition of or increases in investment or trade restrictions by the United States or other jurisdictions or trade sanctions adopted by the United States; • compliance with laws on anti-corruption, export controls, customs, sanctions and other laws governing our operations, including in challenging jurisdictions; • inability to determine or satisfy legal requirements, effectively enforce contract or legal rights, including our rights under our LTAs and intellectual property rights, and obtain complete financial or other information under local legal, judicial, regulatory, disclosure and other systems; and • nationalization or expropriation of assets, and other risks that could result from a change in government or government policy, or from other political, social or economic instability.
As a result, we are subject to risks associated with operating in multiple countries, including: • currency fluctuations and devaluations in currency exchange rates, including impacts of transactions in various currencies, translation of various currencies into dollars for U.S. reporting and financial covenant compliance purposes, and impacts on results of operations due to the fact that the costs of our non‑U.S. operations are primarily incurred in local currencies while their products are primarily sold in dollars and euros; • imposition of or increase in customs duties and other tariffs or the loss of the protection thereof; • imposition of or increases in currency exchange controls, including imposition of or increases in limitations on conversion of various currencies into dollars, euros, or other currencies, making of intercompany loans by subsidiaries or remittance of dividends, interest or principal payments or other payments by subsidiaries; • imposition of or increases in revenue, income or earnings taxes and withholdings and other taxes on remittances and other payments by subsidiaries; • inflation, deflation and stagflation in any country in which we have a manufacturing facility; • imposition of or increases in investment or trade restrictions by the United States or other jurisdictions or trade sanctions adopted by the United States; • compliance with laws on anti-corruption, export controls, customs, sanctions, environmental and other laws governing our operations, including in challenging jurisdictions; • inability to determine or satisfy legal requirements, effectively enforce contract or legal rights, including our rights under our LTAs and intellectual property rights, and obtain complete financial or other information under local legal, judicial, regulatory, disclosure and other systems; and • nationalization or expropriation of assets, and other risks that could result from a change in government or government policy, or from other political, social or economic instability.
Our results of operations could deteriorate if this facility would become unable to provide us with connecting pins and required volume. We manufacture graphite connecting pins, which are used by customers to connect and fasten graphite electrodes together in a column for use in an EAF.
Our results of operations could deteriorate if this facility would become unable to provide us with the required volume of connecting pins. 11 We manufacture graphite connecting pins, which are used by customers to connect and fasten graphite electrodes together in a column for use in an EAF.
While growth in the Chinese EAF steel market may support some of these capacity additions, the additional graphite electrode capacity may exceed local Chinese requirements. Excess production capacity may result in manufacturers producing and exporting electrodes at prices that are lower than prevailing domestic prices, and sometimes at or below their cost of production.
While growth in the EAF steel market may support some of these capacity additions, the additional graphite electrode capacity may exceed demand. Excess production capacity may result in manufacturers producing and exporting electrodes at prices that are lower than prevailing domestic prices, and sometimes at or below their cost of production.
Excessive imports into the Americas and EMEA, which markets collectively made up 91% of our net sales for the year ended December 31, 2022, can also exert downward pressure on graphite electrode prices, which negatively affects our sales, margins and profitability. The graphite industry is highly competitive.
Excessive imports into the Americas and EMEA, which markets collectively made up 89% of our net sales for the year ended December 31, 2023, can also exert downward pressure on graphite electrode prices, which negatively affects our sales, margins and profitability. The graphite industry is highly competitive.
In the event manufacturing operations are substantially disrupted at one of our primary operating facilities, such as the recent temporary suspension of our operations located in Monterrey, Mexico, we may not have the ability to increase production at our remaining operating facilities in order 13 to compensate without considerable time and expense.
In the event manufacturing operations are substantially disrupted at one of our primary operating facilities, such as the September 2022 temporary suspension of our operations located in Monterrey, Mexico, we may not have the ability to increase production at our remaining operating facilities in order to compensate without considerable time and expense.
Between 2016 and 2022, our weighted-average realized price of graphite electrodes for non-LTAs was approximately $6,500 per MT (on an inflation‑adjusted basis using constant 2022 dollars). During the last demand trough in 2016, our weighted-average realized price of graphite electrodes for non-LTAs fell to approximately $3,000 per MT, on an inflation‑adjusted basis using constant 2022 dollars.
Between 2004 and 2023, our weighted-average realized price of graphite electrodes for non-LTAs was approximately $6,000 per MT (on an inflation‑adjusted basis using constant 2023 dollars). During the last demand trough in 2016, our weighted-average realized price of graphite electrodes for non-LTAs fell to approximately $3,000 per MT, on an inflation‑adjusted basis using constant 2023 dollars.
Certain provisions, including in our Amended Certificate of Incorporation and our Amended By-Laws, could hinder, delay or prevent a change in control, which could adversely affect the price of our common stock.
Risks related to our common stock Certain provisions, including in our Amended Certificate of Incorporation and our Amended By-Laws, could hinder, delay or prevent a change in control, which could adversely affect the price of our common stock.
The 2018 Credit Agreement and the indenture governing the 2020 Senior Secured Notes contain a number of restrictive covenants that, subject to certain exceptions and qualifications, restrict or limit our ability and the ability of our subsidiaries to, among other things: • incur, repay or refinance indebtedness; • create liens on or sell our assets; • engage in certain fundamental corporate changes or changes to our business activities; • make investments or engage in mergers or acquisitions; 17 • pay dividends or repurchase stock; • engage in certain affiliate transactions; • enter into agreements or otherwise restrict our subsidiaries from making distributions or paying dividends to the borrowers under the Senior Secured Credit Facilities or to us or certain of our subsidiaries, as applicable; and • repay intercompany indebtedness or make intercompany distributions or pay intercompany dividends.
The 2018 Revolving Credit Facility and the indentures governing the 2020 Senior Secured Notes and the 2023 Senior Secured Notes contain a number of restrictive covenants that, subject to certain exceptions and qualifications, restrict or limit our ability and the ability of our subsidiaries to, among other things: • incur, repay or refinance indebtedness; • create liens on or sell our assets; • engage in certain fundamental corporate changes or changes to our business activities; • make investments or engage in mergers or acquisitions; • pay dividends or repurchase stock; • engage in certain affiliate transactions; • enter into agreements or otherwise restrict our subsidiaries from making distributions or paying dividends to the borrowers under the 2018 Revolving Credit Facility or to us or certain of our subsidiaries, as applicable; and • repay intercompany indebtedness or make intercompany distributions or pay intercompany dividends.
If we fail to comply with the covenants in the 2018 Credit Agreement and the indenture governing the 2020 Senior Secured Notes, and are unable to obtain a waiver or amendment, an event of default would result, and the lenders and noteholders could, among other things, declare outstanding amounts due and payable or, with respect to the 2018 Credit Agreement, refuse to lend additional amounts to us or require deposit of cash collateral in respect of outstanding letters of credit.
If we fail to comply with the covenants in the 2018 Revolving Credit Facility and the indentures governing the 2020 Senior Secured Notes and the 2023 Senior Secured Notes, and are unable to obtain a waiver or amendment, an event of default would result, and the lenders and noteholders could, among other things, declare outstanding amounts due and payable or, with respect to the 2018 Revolving Credit Facility, refuse to lend additional amounts to us or require deposit of cash collateral in respect of outstanding letters of credit.
In connection with the completion of our initial public offering ("IPO"), we entered into a tax receivable agreement (the “Tax Receivable Agreement”) that provides Brookfield the right to receive future payments from us of 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses (“NOLs”), previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in GrafTech Switzerland S.A.
In connection with the completion of our initial public offering (“IPO”), we entered into a tax receivable agreement (as amended and restated, the “Tax Receivable Agreement”) that provides Brookfield Corporation and its affiliates (together, “Brookfield”) the right to receive future payments from us of 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal net operating losses (“NOLs”), previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in GrafTech Switzerland S.A.
We expect that, based on current tax laws, future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets will be approximately $15.6 million in the aggregate. The maximum amount over the term of the agreement is approximately $70.0 million.
We expect that, based on current tax laws, future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets will be approximately $11.2 million in the aggregate. The maximum amount over the term of the agreement is approximately $70.0 million.
Our market share, net sales or net income could decline due to vigorous price and other competition. Competition in the graphite industry (other than, generally, with respect to new products) is based primarily on price, product differentiation and quality, delivery reliability and customer service. Graphite electrodes, in particular, are subject to rigorous price competition.
Our market share, net sales or net income could decline due to vigorous price and other competition. Competition in the graphite industry (other than, generally, with respect to new products) is based primarily on price, quality/performance, local presence, product portfolio, delivery reliability and customer service. Graphite electrodes, in particular, are subject to rigorous price competition.
The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments. We have made payments of approximately $53.6 million related to the Tax Receivable Agreement.
The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments. We have made payments of approximately $58.1 million related to the Tax Receivable Agreement.
Our Amended Certificate of Incorporation and Amended By-Laws contain provisions that could make it more difficult for a third-party to acquire us without the consent of our Board of Directors or Brookfield, including: • provisions in our Amended Certificate of Incorporation and Amended By-Laws that prevent stockholders from calling special meetings of our stockholders, except where the Delaware General Corporation Law (“DGCL”) confers the right to fix the date of such meetings upon stockholders; • advance notice requirements by stockholders with respect to director nominations and actions to be taken at annual meetings; • provisions in our Amended Certificate of Incorporation provide for a classified Board of Directors such that only one of three classes of directors is elected each year, which prevents our stockholders from replacing the majority our directors at once; • no provision in our Amended Certificate of Incorporation or Amended By-Laws provides for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election; • under our Amended Certificate of Incorporation, our Board of Directors have authority to cause the issuance of preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders; and • nothing in our Amended Certificate of Incorporation precludes future issuances without stockholder approval of the authorized but unissued shares of our common stock. 20 These provisions may make it difficult and expensive for a third-party to pursue a tender offer, change in control or takeover attempt that is opposed by Brookfield, our management or our Board of Directors.
Our Amended Certificate of Incorporation and Amended By-Laws contain provisions that could make it more difficult for a third-party to acquire us without the consent of our Board of Directors, including: 19 • provisions in our Amended Certificate of Incorporation and Amended By-Laws that prevent stockholders from calling special meetings of our stockholders, except where the Delaware General Corporation Law (“DGCL”) confers the right to fix the date of such meetings upon stockholders; • advance notice requirements by stockholders with respect to director nominations and actions to be taken at annual meetings; • provisions in our Amended Certificate of Incorporation provide for a classified Board of Directors such that only one of three classes of directors is elected each year, which prevents our stockholders from replacing the majority our directors at once; • no provision in our Amended Certificate of Incorporation or Amended By-Laws provides for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election; • under our Amended Certificate of Incorporation, our Board of Directors have authority to cause the issuance of preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders; and • nothing in our Amended Certificate of Incorporation precludes future issuances without stockholder approval of the authorized but unissued shares of our common stock.
These market conditions often are affected by factors beyond our control and we may be unable to raise the price of our products to mitigate the effects of increased energy costs in our manufacturing processes.
These market conditions often are affected by factors beyond our control and we may be unable to raise the price of our products to mitigate the effects of increased energy costs in our manufacturing processes. In addition, our customers are subject to these same market conditions.
If our Monterrey, Mexico facility were to become unable to continue to provide us with connecting pins in required volumes, at suitable quality levels, or in a cost-effective manner, we would be required to identify and obtain replacement manufacturing sources.
If our Monterrey, Mexico facility were to become unable to continue to provide us with connecting pins in required volumes, at suitable quality levels, or in a cost-effective manner, we would be required to shift production to our Pamplona, Spain facility or identify and obtain additional replacement manufacturing sources.
If we were unable to repay or pay the amounts due, the lenders under the 2018 Credit Agreement and the noteholders could, among other things, proceed against the collateral granted to them to secure the indebtedness, which includes substantially all of our and our U.S. subsidiaries’ assets and certain assets of certain of our non‑U.S. subsidiaries.
If we were unable to repay or pay the amounts due, the lenders under the 2018 Revolving Credit Facility and the noteholders could, among other things, proceed against the collateral granted to them to 17 secure the indebtedness, which includes substantially all of our and our U.S. subsidiaries’ assets and, with respect to the 2018 Revolving Credit Facility, certain assets of certain of our non-U.S. subsidiaries.
Our intellectual property portfolio is extensive, with over 135 U.S. and foreign patents and published patent applications, which we believe is more than any of our major competitors in the businesses in which we operate. Failure to protect our intellectual property may result in the loss of the exclusive right to use our technologies.
Our intellectual property portfolio is extensive, with approximately 100 U.S. and foreign patents and pending patent applications, which we believe is more than any of our major competitors in the businesses in which we operate. Failure to protect our intellectual property may result in the loss of the exclusive right to use our technologies.
Risks related to government regulation Stringent health, safety and environmental regulations applicable to our manufacturing operations and facilities could result in substantial costs related to compliance, sanctions or material liabilities and may affect the availability of raw materials.
Risks related to our legal and regulatory environment Stringent health, safety and environmental laws and regulations applicable to our manufacturing operations and facilities could result in substantial costs related to compliance, sanctions or material liabilities and may affect the availability of raw materials.
Compliance with our debt obligations under the Senior Secured Credit Facilities and 2020 Senior Secured Notes could materially limit our financial or operating activities, or hinder our ability to adapt to changing industry conditions, which could result in our losing market share, a decline in our revenue or a negative impact on our operating results.
Compliance with our debt obligations under the 2018 Revolving Credit Facility, 2020 Senior Secured Notes, and 2023 Senior Secured Notes, and any future indebtedness could materially limit our financial or operating activities, or hinder our ability to adapt to changing industry conditions, which could result in our losing market share, a decline in our revenue or a negative impact on our operating results.
In addition, these operational improvements may not achieve the expected benefits as a result of changes in market conditions, raw material shortages or other unforeseen contingencies. We depend on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services.
Moreover, the costs of these activities could have a negative impact on our results of operations. In addition, these operational improvements may not achieve the expected benefits as a result of changes in market conditions, raw material shortages or other unforeseen contingencies. We depend on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services.
As of December 31, 2022, we had $327.0 million available for borrowing under the 2018 Revolving Credit Facility (taking into account approximately $3.0 million of outstanding letters of credit issued thereunder). Interest expense for the years ended December 31, 2022 and December 31, 2021 was $36.6 million and $68.8 million, respectively.
As of December 31, 2023, we had $112.4 million available for borrowing under the 2018 Revolving Credit Facility (taking into account approximately $3.1 million of outstanding letters of credit issued thereunder). Interest expense for the years ended December 31, 2023 and December 31, 2022 was $58.1 million and $36.6 million, respectively.
Security and/or privacy breaches, acts of vandalism or terror, computer viruses, misplaced or lost data, programming, and/or human error or other similar events with respect to our information technology systems or processes or the information technology systems or processes of third-parties that have been entrusted with our information expose us to a risk of loss or misuse of this information, litigation and potential liability, which could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Security and/or privacy breaches, acts of vandalism or terror, computer viruses, misplaced or lost data, programming, and/or human error or other similar events with respect to our information technology systems or processes or the information technology systems or processes of third-parties that have been entrusted with our information expose us to a risk of loss or misuse of this information, litigation and potential liability, which could have a material adverse effect on our business, financial condition, results of operations or cash flows. 14 If we are unable to successfully negotiate with the representatives of our employees, including labor unions, we may experience strikes and work stoppages.
The 2018 Credit Agreement and the indenture governing the 2020 Senior Secured Notes include covenants that could restrict or limit our financial and business operations.
The 2018 Revolving Credit Facility and the indentures governing the 2020 Senior Secured Notes and 2023 Senior Secured Notes include covenants that could restrict or limit our financial and business operations.
To the extent any of these events occur, our business, financial condition and operating results could be materially and adversely affected. Plant operational improvements may be delayed or may not achieve the expected benefits. Our ability to complete future operational improvements, including the reactivation of the remaining production activities in St.
To the extent any of these events occur, our business, financial condition and operating results could be materially and adversely affected. Plant operational improvements may be delayed or may not achieve the expected benefits.
As of December 31, 2022, approximately 524 employees, or 39% of our worldwide employees, were covered by collective bargaining or similar agreements, all of which were covered by agreements that expire, or are subject to renegotiation, at various times through December 31, 2023.
We are party to collective bargaining agreements and similar agreements with our employees. As of December 31, 2023, approximately 440 employees, or 35% of our worldwide employees, were covered by collective bargaining or similar agreements, all of which were covered by agreements that expire, or are subject to renegotiation, at various times through December 31, 2024.
Although we believe that, in general, our relationships with our employees are good, we cannot predict the outcome of current and future negotiations and consultations with employee representatives, which could have a material adverse effect on our business.
Although we believe that, in general, our relationships with our employees are good, we cannot predict the outcome of current and future negotiations and consultations with employee representatives, which could have a material adverse effect on our business. We may not succeed in renewing or extending these agreements on terms satisfactory to us.
As of December 31, 2022, we had approximately $921.8 million of secured indebtedness outstanding including borrowings under the Senior Secured Credit Facilities and our 4.625% Senior Secured Notes due 2028 (the “2020 Senior Secured Notes”).
As of December 31, 2023, we had approximately $925.5 million of secured indebtedness outstanding including borrowings under our 4.625% Senior Secured Notes due 2028 (the “2020 Senior Secured Notes”) and our 9.875% Senior Secured Notes due 2028 (the “2023 Senior Secured Notes”).
Following the significant rationalization of graphite electrode production globally, the resumption of growth in EAF steel production, falling scrap prices, reductions in Chinese steel exports and constrained supply of needle coke, graphite electrode prices reached record highs in 2018. 10 Prices as of December 31, 2022 have receded from the highs of 2018, and the price of graphite electrodes may decline in the future.
Following the significant rationalization of graphite electrode production globally, the resumption of growth in EAF steel production, falling scrap prices, reductions in Chinese steel exports and constrained supply of needle coke, graphite electrode prices reached record highs in 2018.
For the past several years, all of our connecting pin production was performed at our Monterrey, Mexico facility. As a result, we are currently reliant on one production location for this critical component.
For the past several years, all of our connecting pin production was performed at our Monterrey, Mexico facility. While we have added capability at our Pamplona, Spain facility, we primarily rely on one production location for this critical component.
Marys (forming, extrusion and impregnation), may be delayed, interrupted or otherwise limited by the need to obtain environmental and other regulatory approvals, unexpected cost increases, availability of labor and materials, unforeseen hazards such as weather conditions, and other risks customarily associated with construction projects. Moreover, the costs of these activities could have a negative impact on our results of operations.
Our ability to complete future operational improvements may be delayed, interrupted or otherwise limited by the need to obtain environmental and other regulatory approvals, unexpected cost increases, financial constraints, availability of labor and materials, unforeseen hazards such as weather conditions, and other risks customarily associated with construction projects.
As a result, a disruption in Seadrift’s production of petroleum needle coke could adversely affect our results of operations if we are forced to purchase petroleum needle coke from external sources at a higher cost.
A disruption in Seadrift’s production of petroleum needle coke could adversely affect our results of operations if we are forced to purchase petroleum needle coke from external sources at a higher cost. We rely primarily on one facility in Monterrey, Mexico for the manufacturing of connecting pins, a necessary component of our graphite electrodes.
Global graphite electrode overcapacity has adversely affected graphite electrode prices in the past, and may adversely affect them again, which could negatively impact our sales, margins and profitability. Overcapacity in the graphite electrode industry has adversely affected pricing in the past and may do so again.
Our business, financial condition and operating results could be materially and adversely affected to the extent prices for graphite electrodes continue to decline in the future. Global graphite electrode overcapacity has adversely affected graphite electrode prices in the past, and may adversely affect them again, which could negatively impact our sales, margins and profitability.
Our results of operations could deteriorate if disruptions in the supply of petroleum needle coke occur for an extended period. Petroleum needle coke is our key raw material used in the production of graphite electrodes. Seadrift currently provides the majority of our current petroleum needle coke requirements, and we purchase the remainder from external sources, as necessary.
Our results of operations could deteriorate if disruptions in the supply of petroleum needle coke occur for an extended period. Petroleum needle coke is our key raw material used in the production of graphite electrodes. At full operating levels, Seadrift provides a substantial portion of our petroleum needle coke requirements, with third party purchases making up the balance.
We continue to take steps to mitigate these costs increases, however, we may not be able to fully offset these costs increases, which could lead to further adverse impacts on our business, financial condition and results of operations. The COVID-19 pandemic has had, and could have, an adverse impact on our business, results of operations, financial position and cash flows.
We may not be able to offset or pass on these costs, which could lead to further adverse impacts on our business, financial condition and results of operations.
(collectively, the “Pre‑IPO Tax Assets”). In addition, we pay interest on the payments we make to Brookfield with respect to the amount of this cash savings from the due date (without extensions) of our tax return where we realize this savings to the payment date at a rate equal to London Interbank Offered Rate ("LIBOR") plus 1.00% per annum.
In addition, we pay interest on the payments we make to Brookfield with respect to the amount of this cash savings from the due date (without extensions) of our tax return where we realize this savings to the payment date at a rate equal to the forward looking term rate based on the secured overnight financing rate administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) for a one-month period plus 1.10%.
Stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is favorable to such stockholders.
These provisions may make it difficult and expensive for a third-party to pursue a tender offer, change in control or takeover attempt that is opposed by our Board of Directors. Stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is favorable to such stockholders.
Our business, financial condition and results of operations continue to be adversely impacted by increased costs. We continue to experience higher costs driven by recent global inflationary pressures, particularly for third-party needle coke, energy, and freight.
Our business, financial condition and results of operations could be adversely impacted by increased costs. Our business may be negatively impacted by increased costs for manufacturing inputs, including needle coke, energy, and freight.
The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Annual Report, any of which could have a material effect on us. 16 Risks related to our indebtedness Our indebtedness could limit our financial and operating activities and adversely affect our ability to incur additional debt to fund future needs and our ability to fulfill our obligations under our existing and future indebtedness.
Risks related to our indebtedness Our indebtedness could limit our financial and operating activities and adversely affect our ability to incur additional debt to fund future needs and our ability to fulfill our obligations under our existing and future indebtedness.
Stock repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.
We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term stockholder value. Stock repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.
We may not succeed in renewing or extending these agreements on terms satisfactory to us. 14 Although we have not had any material work stoppages or strikes during the past decade initiated by our employees, they may occur in the future during renewal or extension negotiations or otherwise.
Although we have not had any material work stoppages or strikes initiated by our employees during the past decade, they may occur in the future during renewal or extension negotiations or otherwise. A material work stoppage, strike or other union dispute could adversely affect our business, financial condition, results of operations and cash flows.
Supply and demand normalized in 2019, tipping towards overcapacity that exerts downward pressure on graphite electrode prices, and spot prices fell 25% during 2019. Spot prices decreased further in 2020, bottoming out in the spring of 2021 before beginning to increase.
Prices as of December 31, 2023 have receded from the highs of 2018, and the price of graphite electrodes may continue to decline in the future. Supply and demand normalized in 2019, tipping towards overcapacity that exerts downward pressure on graphite electrode prices, and spot prices fell 25% during 2019.
An increase in global graphite electrode production capacity that outpaces an increase in demand for graphite electrodes could adversely affect the price of graphite electrodes. We believe worldwide graphite electrode supply will increase in 2023 as a result of Chinese capacity additions.
Overcapacity in the graphite electrode industry has adversely affected pricing in the past and may do so again. An increase in global graphite electrode production capacity that outpaces an increase in demand for graphite electrodes could adversely affect the price of graphite electrodes.
We will need to continue dedicating financial resources and management time to compliance efforts with respect to global data protection and privacy laws, including the GDPR. 19 Risks related to our common stock If the ownership of our common stock continues to be highly concentrated, it may prevent minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.
We will need to continue dedicating financial resources and management time to compliance efforts with respect to global data protection and privacy laws, including the GDPR.
Despite this increase, spot prices as of December 31, 2022 were below our weighted-average contract price for LTA contracted volume. Our business, financial condition and operating results could be materially and adversely affected to the extent prices for graphite electrodes decline in the future.
Spot prices decreased further in 2020, bottoming out in the spring of 2021 before beginning to increase. However, beginning in 2023, spot prices began decreasing given the softer commercial environment. Spot prices as of December 31, 2023 were below our weighted-average contract price for LTA contracted volume.
Removed
If a market shortage of petroleum needle coke occurs, we may be unable to acquire sufficient amounts of petroleum needle coke from external sources to support our needle coke requirements currently used in the production of graphite electrodes for sale in the spot market.
Added
Failure to retain our existing senior management team or the inability to attract and retain qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.
Removed
As a result, a disruption in the supply of petroleum needle coke could have a material adverse effect on our business, financial condition, results of operations and cash flows. We are relying on one facility in Monterrey, Mexico for the manufacturing of connecting pins, a necessary component of our graphite electrodes.
Added
Our success will continue to depend to a significant extent on the continued service of our executive management team and the ability to recruit, hire and retain other key management and plant operating personnel, including factory and production workers and other staff to support our growth and operational initiatives and replace those who retire or resign.
Removed
On September 15, 2022, inspectors from the State Attorney's Office for the Environment of the State of Nuevo León, Mexico visited GrafTech Mexico, S.A. de C.V.'s ("GrafTech Mexico," a subsidiary of the Company) graphite electrode manufacturing facility located in Monterrey, Mexico to inspect GrafTech Mexico's facility and certain of the facility's environmental and operating permits.
Added
Failure to retain our leadership team and workforce and to attract and retain other important management and technical personnel could place a constraint on our global growth and operational initiatives, possibly resulting in inefficient and ineffective management and operations, which would likely harm our revenues, operations and product development efforts and eventually result in a decrease in profitability. 12 Our operations are subject to hazards which could result in significant liability to us.
Removed
At the conclusion of the inspection, the inspectors issued a Record of Inspection providing for the results of the inspection, their observations, and the imposition of a temporary suspension of GrafTech Mexico's facilities within seven days.
Added
We currently benefit from U.S. and EU anti-dumping duties and tariffs against certain Chinese and Indian imports that if reduced or not extended could have a material adverse effect on our results of operations, cash flow, liquidity and financial condition.
Removed
As a result of the temporary suspension of our operations, our production volume was adversely affected in 2022 and our sales volume will be adversely affected in the first half of 2023. 11 Although the temporary suspension of operations was conditionally lifted on November 17, 2022, subject to the completion of certain agreed-upon activities, including the submission of an environmental impact study with respect to the facility's operations, we are pursuing alternatives with respect to the production and sourcing of connecting pins to reduce our reliance on one production location.
Added
These anti-dumping duties and tariffs are generally subject to periodic reviews and challenges, which can result in their revocation or reduction. There can be no assurance that these anti-dumping duties and tariffs will be continued in the future or that such anti-dumping duties and tariffs will adequately combat unfairly traded imports.
Removed
In addition, our customers are subject to these same market conditions and some, particularly those located in Europe, have chosen to idle their operations due to the costs of electricity in Europe.
Added
If these anti-dumping duties and tariffs were to be revoked or reduced in the future, our business, financial condition and results would be adversely impacted.
Removed
The idling of operations by our customers will decrease the demand for our graphite electrodes and could materially adversely affect our business, results of operations, financial condition and cash flows. Our operations are subject to hazards which could result in significant liability to us.
Added
As any borrowings under the 2018 Revolving Credit Facility remain subject to compliance with the financial covenant in our 2018 Revolving Credit Facility, our operating performance resulted in a reduction of the availability under our 2018 Revolving Credit Facility.
Removed
If we are unable to successfully negotiate with the representatives of our employees, including labor unions, we may experience strikes and work stoppages. We are party to collective bargaining agreements and similar agreements with our employees.
Added
We are involved in certain arbitrations as respondents/counterclaimants with a few customers who, among other things, have failed to perform under their LTAs and in certain instances are seeking to modify or frustrate their contractual commitments to us, and the outcome of these arbitrations could have a material adverse effect on our results of operations, cash flow, liquidity and financial condition.
Removed
A material work stoppage, strike or other union dispute could adversely affect our business, financial condition, results of operations and cash flows. We have significant goodwill on our balance sheet that is sensitive to changes in the market, which could result in impairment charges. We had approximately $171.1 million of goodwill on our balance sheet as of December 31, 2022.
Added
In particular, Aperam South America LTDA, Aperam Sourcing S.C.A., ArcelorMittal Sourcing S.C.A., and ArcelorMittal Brasil S.A. initiated a single arbitration proceeding against two of the Company’s subsidiaries in the International Chamber of Commerce in June 2020.
Removed
Goodwill is tested for impairment annually in the fourth quarter or more often if events or changes in circumstances indicate a potential impairment may exist.
Added
The claimants argue, among other things, that they should no longer be required to comply with the terms of the LTAs that they signed due to an alleged drop in market prices for graphite electrodes in January 2020.
Removed
Factors that could indicate that our goodwill is impaired or that could increase the risk of future impairment include a decline in our stock price and market capitalization, lower than projected operating results and cash flows, and slower growth rates in our industry.
Added
Alternatively, the claimants argue that they should not be required to comply with the LTAs that they signed due to alleged market circumstances at the time of execution. The claimants are alleging damages in the amount of approximately $188.2 million, including interest, for the period covering the first quarter of 2020 through the first quarter of 2023.
Removed
Impairment testing incorporates our estimates of future operating results and cash flows, estimates of future growth rates, and our judgment regarding the applicable discount rates used on estimated operating results and cash flows. If we determine at a future time that impairment exists, it may result in a significant non-cash charge to earnings and lower stockholders’ equity.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProduction capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage. Actual production may vary. The properties that we own are encumbered by our 2018 Credit Agreement and our 2020 Senior Secured Notes.
Biggest changeProduction capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage. Actual production may vary. Our properties located in St. Marys, Pennsylvania and Port Lavaca, Texas are encumbered by our 2018 Credit Agreement, 2020 Senior Secured Notes and our 2023 Senior Secured Notes.
Marys, Pennsylvania Graphite Electrode Manufacturing Facility Owned Port Lavaca, Texas Petroleum Needle Coke Manufacturing Facility (Seadrift) Owned Salvador, Bahia, Brazil Graphite Electrode Machine Shop and Sales Office Owned Europe Calais, France Graphite Electrode Manufacturing Facility and Sales Office Owned Pamplona, Spain Graphite Electrode Manufacturing Facility and Sales Office Owned Bussigny, Switzerland Global Sales and Production Planning Office Leased
Marys, Pennsylvania Graphite Electrode Manufacturing Facility, Sales and Service Office Owned Port Lavaca, Texas Petroleum Needle Coke Manufacturing Facility (Seadrift) Owned Salvador, Bahia, Brazil Graphite Electrode Machine Shop, Sales and Service Office Owned Europe Calais, France Graphite Electrode Manufacturing Facility, Sales and Service Office Owned Pamplona, Spain Graphite Electrode Manufacturing Facility, Sales and Service Office Owned Bussigny, Switzerland Global Sales and Production Planning Office Leased
Location of Facility Primary Use Owned or Leased Americas Brooklyn Heights, Ohio Corporate Headquarters, Innovation and Technology Center and Sales Office Leased Monterrey, Mexico Graphite Electrode and Pin Manufacturing Facility and Sales Office Owned St.
Location of Facility Primary Use Owned or Leased Americas Brooklyn Heights, Ohio Corporate Headquarters, Innovation and Technology Center and Sales Office Leased Monterrey, Mexico Graphite Electrode and Pin Manufacturing Facility, Sales and Service Office Owned St.
Item 2. Properties The Company uses the following principal physical properties in connection with the manufacturing and sales of graphite electrodes and corporate administrative operations, all of which serve its onl y reportable segment, Industrial Materials .
Item 2. Properties The Company uses the following principal physical properties in connection with the manufacturing, sales and services of graphite electrodes, pins and corporate administrative operations, all of which serve its onl y reportable segment, Industrial Materials .
The total capacity utilization, reflecting production volume as a percentage of production capacity, of our graphite electrode manufacturing facilities in Calais, France, Monterrey, Mexico, Pamplona, Spain and St. Marys, Pennsylvania, was 68% and 72% for the years ended December 31, 2022 and December 31, 2021, respectively.
The total capacity utilization, reflecting production volume as a percentage of production capacity, of our graphite electrode manufacturing facilities in Calais, France, Monterrey, Mexico and Pamplona, Spain, was 44% and 78% for the years ended December 31, 2023 and December 31, 2022, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeA final resolution is expected to be issued within 23 fifteen business days from submission of the summary arguments, but can be extended up to an additional three months and is subject to appeal.
Biggest changeOnce the State Attorney’s Office for the Secretary of Environment initiates the summary argument period, GrafTech Mexico will have three business days to provide its summary arguments. A final resolution is expected to be issued within fifteen business days from submission of the summary arguments, but can be extended up to an additional three months and is subject to appeal.
On December 16, 2022, the Claimants revised their calculation of damages to approximately $178.9 million including interest, with damages covering the period from the first quarter of 2020 through the end of the third quarter of 2022 and interest covering the period from June 2020 through December 16, 2022.
On December 16, 2022, the Claimants revised their calculation of alleged damages to approximately $178.9 million including interest, with damages covering the period from the first quarter of 2020 through the end of the third quarter of 2022 and interest covering the period from June 2020 through December 16, 2022.
As of December 31, 2022, we are unable to assess the potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
As of December 31, 2023, we are unable to assess the potential loss associated with these proceedings as the claims do not currently specify the number of employees seeking damages or the amount of damages being sought.
Notwithstanding that the suspension notice has been conditionally lifted and that the Monterrey facility has resumed operations, GrafTech Mexico believes it is prudent to continue to pursue the related legal proceedings set forth below, particularly the amparo proceeding and the nullity proceeding.
Notwithstanding that the suspension notice has been conditionally lifted and that the Monterrey facility has resumed operations, GrafTech Mexico believes it is prudent to continue to pursue the related legal proceeding set forth below.
Alternatively, the Claimants argue that they should not be required to comply with the LTAs that they signed due to alleged market circumstances at the time of execution. We believe we have valid defenses to these claims.
Alternatively, the Claimants argue that they should not be required to comply with the LTAs that they signed due to alleged market circumstances at the time of execution.
We intend to vigorously defend them and enforce our rights under the LTAs. 22 Monterrey, Mexico Operations Shutdown Background On September 15, 2022, inspectors from the State Attorney’s Office for the Secretary of Environment of the State of Nuevo León, Mexico visited GrafTech México graphite electrode manufacturing facility located in Monterrey, Mexico to inspect GrafTech Mexico’s facility and certain of the facility’s environmental and operating permits.
We intend to vigorously defend them and enforce our rights under the LTAs. 22 Monterrey, Mexico Suspension of Operations Background On September 15, 2022, inspectors from the State Attorney’s Office for the Secretary of Environment of the State of Nuevo León, Mexico visited GrafTech Mexico S.A.
Removed
Amparo Proceeding On September 20, 2022, GrafTech Mexico filed an amparo proceeding before the First District Court for Administrative Matters of the State of Nuevo León arguing that the measure imposed by the Ministry of the Environment of the State of Nuevo León ordering a complete temporary suspension of operations violated GrafTech Mexico’s constitutional rights and requested a provisional injunction and a definitive injunction that would last through the decision on the merits.
Added
In March 2023, an International Chamber of Commerce hearing was held before the party-appointed sole arbitrator with the Claimants, the Company, and witnesses in attendance. On March 31, 2023, the Claimants further revised their calculation of alleged damages to approximately $171.7 million, including interest, for the period covering the first quarter of 2020 through 2022.
Removed
The provisional injunction was denied by the court on September 26, 2022. On October 3, 2022, GrafTech Mexico appealed this decision before the Third Collegiate Court in Administrative Matters of the Fourth Circuit (Nuevo León), which appeal was also denied on October 24, 2022.
Added
In June of 2023, the Claimants again revised their calculation of alleged damages to approximately $188.2 million, including interest, for the period covering the first quarter of 2020 through the first quarter of 2023. We believe we have valid defenses to these claims.
Removed
On November 8, 2022, the judge denied the definitive injunction, and on November 23, 2022 GrafTech Mexico appealed this decision. With respect to the decision on the merits, on December 20, 2022, the judge reviewed all filings submitted during the proceeding.
Added
De C.V.’s (“GrafTech Mexico”) graphite electrode manufacturing facility located in Monterrey, Mexico to inspect GrafTech Mexico’s facility and certain of the facility’s environmental and operating permits.
Removed
We expect a decision on the merits no later than March 2023, which will be subject to appeal by the parties.
Added
Mexico Value-Added Tax (“VAT”) In July 2019, the Mexican Tax Authority (“MTA”) opened an audit of the VAT filings of GrafTech Comercial de Mexico S. de R.L. de C.V. (“GrafTech Commercial Mexico”) for the period of January 1 to April 30, 2019.
Removed
Nullity Proceeding Separately, on September 28, 2022, GrafTech Mexico filed a nullity proceeding with the Court of Administrative Justice of the State of Nuevo León requesting the court to set aside the determination of the Ministry of the Environment of the State of Nuevo León that the previously requested modification to the operating license was denied because GrafTech Mexico no longer had a valid operating license.
Added
In September 2021, the MTA issued a tax assessment, claiming improper use of a certain VAT exemption rule for purchases from a foreign 23 affiliate. As of December 31, 2023, the tax assessment for the four month period under audit amounted to approximately $28.8 million, including penalties, inflation and interest.
Removed
On October 13, 2022, the court admitted the nullity proceeding and granted GrafTech Mexico’s request for a preliminary injunction effectively deeming GrafTech Mexico’s operating license valid pending the conclusion of the nullity proceeding. On October 27, 2022, the Ministry of the Environment of the State of Nuevo León challenged the court's decision granting GrafTech Mexico a preliminary injunction.
Added
Interest will continue to accrue up to five years from the date the corresponding VAT returns were filed and inflation will continue to accrue with the passage of time. GrafTech Commercial Mexico filed an administrative appeal against the tax assessment with the MTA’s appeals office. In November 2022, the MTA’s appeals office concluded its review and confirmed the tax assessment.
Removed
GrafTech Mexico received notice of such challenge on October 28, 2022 and filed its response on November 17, 2022. On December 2, 2022, the Ministry of the Environment of the State of Nuevo León responded to GrafTech's petition, arguing that the Ministry's actions were legally permissible. GrafTech Mexico filed final pleadings on January 17, 2023.
Added
GrafTech Commercial Mexico believes that the purchases from a foreign affiliate are exempt from VAT back-up withholding, and in December 2022 GrafTech Commercial Mexico filed a Claim for Nullity with the Chamber Specialized in exclusive resolution of substance of the Federal Court of Administrative Justice. On February 17, 2023, the MTA filed the response to the nullity petition.
Removed
We expect the court to issue a ruling no later than April 2023, which will be subject to appeal by the parties.
Added
On May 31, 2023, the court held a hearing to determine the scope of the issues to be decided in the proceedings. At the court’s request, GrafTech Commercial Mexico submitted formal pleadings on August 1, 2023. On January 8, 2024, the court ruled in GrafTech Commercial Mexico’s favor and annulled the tax assessment.
Removed
Once the State Attorney's Office for the Secretary of Environment initiates the summary argument period, GrafTech Mexico will have three business days to provide its summary arguments.
Added
On January 31, 2024, the MTA filed an appeal for review. In March 2022, the MTA opened another audit of the VAT filings of GrafTech Commercial Mexico for the period January 1 to December 31, 2018.
Added
In the proposed assessment received in January 2023, the MTA is alleging the same improper use of certain VAT exemption rules on purchases from a foreign affiliate and has provided notice of its intent to assess approximately $51.0 million, including penalties, inflation and interest. In Mexico, each tax assessment requires a separate claim.
Added
In the first quarter of 2023, GrafTech Commercial Mexico requested a conclusive agreement with the Mexican ombudsman (“PRODECON”) to reach a settlement with the MTA. The MTA responded to GrafTech Commercial Mexico’s request on May 30, 2023. On August 2, 2023, GrafTech Commercial Mexico filed a motion exhibiting additional information and reaffirming its position.
Added
On September 22, 2023, the MTA responded to GrafTech Commercial Mexico’s motion. On October 2, 2023, GrafTech Commercial Mexico filed a motion requesting a formal meeting with the MTA and PRODECON, which occurred on November 14, 2023.
Added
During the meeting, the parties agreed that GrafTech Commercial Mexico will provide additional documentation and information to be evaluated by the MTA, and, on November 29, 2023, GrafTech Commercial Mexico filed the information requested. On January 24, 2024, the MTA filed its response.
Added
On that same day, GrafTech Commerical Mexico submitted before PRODECON the favorable ruling it obtained on January 8, 2024 in connection with the 2019 preceding for the MTA’s consideration. On February 1, 2024, the MTA confirmed its position, holding that GrafTech Commercial Mexico was required to withhold the VAT. GrafTech Commercial Mexico plans to challenge the assessment.
Added
The $51.0 million includes interest and inflation. Interest will continue to accrue up to five years from the date the corresponding VAT returns were filed and inflation will continue to accrue with the passage of time.
Added
As evidenced by the favorable court decision issued on January 8, 2024, GrafTech Commercial Mexico’s application of the VAT exemption rules is appropriate and, accordingly, GrafTech Commercial Mexico does not believe that it is probable that it will incur a loss related to this matter for either of the two periods under the MTA's audit.
Added
The Company intends to vigorously defend its position in these proceedings. Stockholder Class Action On January 25, 2024, a stockholder of the Company filed a class action complaint on behalf of all purchasers of GrafTech common stock between February 8, 2019 and August 3, 2023 in the United States District Court of the Northern District of Ohio.
Added
The complaint names the Company, certain past and present executive officers, and two entities associated with Brookfield as defendants.
Added
The complaint alleges that certain public filings and statements made by the Company contained material misrepresentations or omissions relating to the circumstances before and after the prior temporary suspension of the Company’s graphite electrode facility located in Monterrey, Mexico, in September 2022.
Added
The plaintiff seeks compensatory damages, which are unquantified at this time, costs and expenses, and unspecified equitable or injunctive relief. We believe we have valid defenses to these claims and we intend to vigorously defend them.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

6 edited+3 added−3 removed9 unchanged
Biggest changeHalford 50 Executive Vice President, Chief Operating Officer Gina K. Gunning 56 Chief Legal Officer and Corporate Secretary Iñigo Perez Ortiz 51 Senior Vice President, Commercial Marcel Kessler became Chief Executive Officer and President and was elected to our Board of Directors in July 2022. Prior to joining the Company, Mr.
Biggest changeHalford 51 Executive Vice President, Chief Operating Officer Gina K. Gunning 57 Chief Legal Officer and Corporate Secretary Iñigo Perez Ortiz 52 Senior Vice President, Commercial and CTS Timothy K. Flanagan became Interim Chief Executive Officer and President in November 2023. Mr. Flanagan joined the Company as Chief Financial Officer, Senior Vice President of Finance and Treasurer in November 2021.
Gunning holds a Juris Doctor from Notre Dame Law School and a Bachelor of Arts in English from the University of Notre Dame. Iñigo Perez Ortiz joined the Company as Senior Vice President, Commercial in February 2020. Mr.
Gunning holds a Juris Doctor from Notre Dame Law School and a Bachelor of Arts in English from the University of Notre Dame. Iñigo Perez Ortiz joined the Company as Senior Vice President, Commercial and CTS in February 2020. Mr.
Halford joined the Company in May 2019 as Senior Vice President, Operations and Development. Mr. Halford previously served as the President of Arconic Engineered Structures, a producer of highly engineered titanium and aluminum components for the aerospace, defense and oil and gas markets, a position he held since January 2017. Mr.
Halford previously served as the President of Arconic Engineered Structures, a producer of highly engineered titanium and aluminum components for the aerospace, defense and oil and gas markets, a position he held since January 2017. Mr.
Item 4. Mine Safety Disclosures Not applicable. Supplemental Item. Information about our Executive Officers The following table sets forth information with respect to our current executive officers, including their ages. Name Age Position Marcel Kessler 56 Chief Executive Officer and President Timothy K. Flanagan 45 Chief Financial Officer, Vice President of Finance and Treasurer Jeremy S.
Item 4. Mine Safety Disclosures Not applicable. Supplemental Item. Information about our Executive Officers The following table sets forth information with respect to our current executive officers, including their ages. 24 Name Age Position Timothy K. Flanagan 46 Interim Chief Executive Officer and President Catherine Hedoux-Delgado 59 Interim Chief Financial Officer and Treasurer Jeremy S.
Before joining the Company, Mr. Flanagan served as Chief Financial Officer of Benesch, Friedlander, Coplan & Aronoff, LLP, an AmLaw 200 law firm, from June 2019 to November 2021. He has a B.S. in Accounting from the University of Dayton. 24 Jeremy S. Halford became Executive Vice President, Chief Operating Officer in October 2021. Mr.
Before joining the Company, Mr. Flanagan served as Chief Financial Officer of Benesch, Friedlander, Coplan & Aronoff LLP, an AmLaw 200 law firm, from June 2019 to November 2021. He has a B.S. in Accounting from the University of Dayton. Catherine Hedoux-Delgado became Interim Chief Financial Officer and Treasurer in November 2023. Ms.
(NYSE: CLF), a flat-rolled steel producer and supplier of iron ore pellets, from January 2017 to February 2019.
Mr. Flanagan previously served as Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc. (NYSE: CLF), a flat-rolled steel producer and supplier of iron ore pellets, from January 2017 to February 2019.
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Kessler previously served as the President and Chief Executive Officer of Pason Systems Inc. (TSX: PSI) (“Pason”), a global provider of specialized data management systems for oil and gas drilling, from 2011 to 2020, and has been a director of Pason since 2012 and is currently serving as the Chairman of the Board of Directors of Pason.
Added
Hedoux-Delgado joined the Company as Vice President, Corporate Controller in April 2012 where she was responsible for the accounting and financial reporting of the Company. Prior to joining the Company, she spent 20 years at Lexmark International Inc., a multinational printing product and services company, where she most recently served as Director of SEC Reporting and Corporate Consolidation.
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Before joining Pason in 2011, Mr. Kessler was President, North America, of Exploration Logistics Group, an assistance, medical, safety and security solutions provider, President and Chief Executive Officer of CCR Technologies, a provider of solvent reclaiming services, and was a Partner at McKinsey & Company, a management consulting firm. Mr.
Added
Prior to that, she held numerous finance and accounting leadership roles at Lexmark, including Corporate Director of Internal Controls, Finance Director of the Consumer Printing Division for EMEA (Europe, Middle East and Africa) and Finance Director of Lexmark Canada. Ms. Hedoux-Delgado holds a B.S. in Management from the ESCP Business School in France. Jeremy S.
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Kessler holds a master’s degree in Engineering with Distinction from the Swiss Federal Institute of Technology and a master’s degree in Finance from the London Business School. Timothy K. Flanagan joined the Company as Chief Financial Officer, Vice President of Finance and Treasurer in November 2021. Mr. Flanagan previously served as Executive Vice President, Chief Financial Officer of Cleveland-Cliffs Inc.
Added
Halford became Executive Vice President, Chief Operating Officer in October 2021. Mr. Halford joined the Company in May 2019 as Senior Vice President, Operations and Development. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor further discussion of the factors that may affect our business and our ability to pay dividends, see “Risk Factors-Risks related to our business and industry” and “Risk Factors-Risks related to our common stock-We may not pay cash dividends on our common stock.” Equity Compensation Plan Information The information about our common stock that may be issued under our Omnibus Equity Incentive Plan as of December 31, 2022 is set forth in Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Report under the caption “Equity Compensation Plan Information." Issuer Purchases of Equity Securities On July 31, 2019, we announced that our Board of Directors approved the repurchase of up to $100.0 million of our common stock in open market purchases, including under Rule 10b5-1 and/or Rule 10b-18 plans.
Biggest changeEquity Compensation Plan Information The information about our common stock that may be issued under our Omnibus Equity Incentive Plan as of December 31, 2023 is set forth in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Report under the caption “Equity Compensation Plan Information.” Issuer Purchases of Equity Securities On July 31, 2019, we announced that our Board of Directors approved the repurchase of up to $100.0 million of our common stock in open market purchases, including under Rule 10b5-1 and/or Rule 10b-18 plans.
On November 4, 2021, we announced that our Board of Directors approved the repurchase of an additional $150.0 million of our common stock under this program . Approximately $99.0 million of the total $250.0 million authorized remained available for stock repurchases as of December 31, 2022. The stock repurchase program has no expiration date.
On November 4, 2021, we announced that our Board of Directors approved the repurchase of an additional $150.0 million of our common stock under this program . Approximately $99.0 million of the total $250.0 million authorized remained available for stock repurchases as of December 31, 2023. The stock repurchase program has no expiration date.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the trading symbol “EAF.” Holders As of December 31, 2022, there were seven registered holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE under the trading symbol “EAF.” Holders As of December 31, 2023, there were seven registered holders of record of our common stock.
Our Board of Directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.
Our Board of Directors may change the timing and amount of any future dividend payments, if reinstated, or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.
During the quarter ended December 31, 2022, there was no share repurchase activity. Item 6. [Reserved] 26
During the quarter ended December 31, 2023, there was no share repurchase activity. Item 6. [Reserved] 26
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. Dividend Policies and Restrictions We currently pay a quarterly cash dividend of $0.01 per share, or an aggregate of $0.04 per share on an annualized basis.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. Dividend Policies and Restrictions Through the second quarter of 2023, we paid a quarterly cash dividend of $0.01 per common share.
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We expect to continue to pay this dividend out of cash generated from operations; we do not intend to incur indebtedness to fund regular, quarterly dividend payments. We cannot assure you, however, that we will pay dividends in the future in these amounts or at all.
Added
On August 2, 2023, our Board of Directors elected to suspend the quarterly cash dividend of $0.01 per common share. There can be no assurance that we will resume paying dividends in the future in these amounts or at all.
Added
For further discussion of the factors that may affect our business and our ability to pay dividends, see “Risk Factors—Risks related to our business and industry” in Part 1, Item 1A, Risk Factors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWhen evaluating our performance, you should consider EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS, alongside other measures of financial performance and liquidity, including our net income (loss), EPS, respectively, and other GAAP measures. 30 The following tables reconcile our non-GAAP key financial measures to the most directly comparable GAAP measures: Reconciliation of Net Income to Adjusted Net Income Year Ended December 31, 2022 2021 Net income $ 382,962 $ 388,330 Diluted income per common share: Net income per share $ 1.48 $ 1.46 Weighted average common shares outstanding 258,791,228 266,317,194 Net income $ 382,962 $ 388,330 Adjustments, pre-tax: Pension and OPEB plan benefits (1) (7,355) (2,545) Public offerings and related expenses (2) 100 663 Non‑cash losses (gains) on foreign currency remeasurement (3) 521 (119) Stock-based compensation expense (4) 2,311 1,917 Non‑cash fixed asset write‑off (5) 1,068 3,197 Related party Tax Receivable Agreement adjustment (6) (83) 231 Change in Control LTIP award (7) — 73,384 Change in Control stock-based compensation acceleration (7) — 14,713 Brazil value-added tax credit (8) — (11,511) Total non-GAAP adjustments pre-tax $ (3,438) $ 79,930 Income tax impact on non-GAAP adjustments (9) (142) 3,675 Adjusted net income $ 379,666 $ 464,585 (1) Net periodic benefit credit for our pension and OPEB plans, including a mark-to-market (gain) loss, representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
Biggest changeThe following tables reconcile our non-GAAP key financial measures to the most directly comparable GAAP measures: Reconciliation of Net (Loss) Income to Adjusted Net (Loss) Income Year Ended December 31, 2023 2022 (Dollars in thousands, except per share data) Net (loss) income $ (255,250) $ 382,962 Diluted (loss) income per common share: Net (loss) income per share $ (0.99) $ 1.48 Weighted average common shares outstanding 257,042,843 258,791,228 Net (loss) income $ (255,250) $ 382,962 Adjustments, pre-tax: Pension and OPEB plan expenses (benefits) (1) 6,309 (7,355) Public offerings and related expenses (2) — 100 Non‑cash losses on foreign currency remeasurement (3) 603 521 Stock-based compensation expense (4) 4,433 2,311 Non‑cash fixed asset write‑off (5) — 1,068 Related party Tax Receivable Agreement adjustment (6) 249 (83) Goodwill impairment charges (7) 171,117 — Total non-GAAP adjustments pre-tax $ 182,711 $ (3,438) Income tax impact on non-GAAP adjustments (8) 28,213 (142) Adjusted net (loss) income $ (100,752) $ 379,666 (1) Net periodic benefit cost (credit) for our pension and OPEB plans, including a mark-to-market loss (gain), representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
We recognize the actuarial gains and losses in connection with the annual remeasurement in earnings in the fourth quarter of each year. (2) Legal, accounting, printing and registration fees associated with the public offerings and related expenses.
We recognize the actuarial gains and losses in connection with the annual remeasurement in earnings in the fourth quarter of each year. (2) Legal, accounting, printing and registration fees associated with the public offerings and related expenses.
These loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency gains or losses in other (income) expense, net on the Consolidated Statements of Operations.
These loans are deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency gains or losses in other expense (income), net on the Consolidated Statements of Operations.
The 2020 Senior Secured Notes will mature on December 15, 2028, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the Indenture. GrafTech Finance may redeem some or all of the 2020 Senior Secured Notes at the redemption prices and on the terms specified in the Indenture.
The 2020 Senior Secured Notes will mature on December 15, 2028, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the 2020 Indenture. GrafTech Finance may redeem some or all of the 2020 Senior Secured Notes at the redemption prices and on the terms specified in the 2020 Indenture.
If the Company or GrafTech Finance experiences specific kinds of changes in control or the Company or any of its restricted subsidiaries sells certain of its assets, then GrafTech Finance must offer to repurchase the 2020 Senior Secured Notes on the terms set forth in the Indenture.
If the Company or GrafTech Finance experiences specific kinds of changes in control or the Company or any of its restricted subsidiaries sells certain of its assets, then GrafTech Finance must offer to repurchase the 2020 Senior Secured Notes on the terms set forth in the 2020 Indenture.
The Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or GrafTech Finance, all outstanding 2020 Senior Secured Notes will become due and payable immediately without further action or notice.
The 2020 Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default arising from certain events of bankruptcy or insolvency with respect to the Company or GrafTech Finance, all outstanding 2020 Senior Secured Notes will become due and payable immediately without further action or notice.
The Indenture contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain asset sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets.
The 2020 Indenture contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of its subsidiaries, to incur or guarantee additional indebtedness or issue preferred stock, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, incur or suffer to exist liens securing indebtedness, make certain investments, engage in certain transactions with affiliates, consummate certain asset sales and effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets.
We have in the past and may in the future use various financial instruments to manage certain exposures to risks caused by currency exchange rate changes, as described under “Quantitative and Qualitative Disclosures about Market Risk." 35 Liquidity and Capital Resources Our sources of funds have consisted principally of cash flow from oper ations and debt, including our credit facilities (subject to continued compliance with the financial covenants and representations).
We have in the past and may in the future use various financial instruments to manage certain exposures to risks caused by currency exchange rate changes, as described under “Quantitative and Qualitative Disclosures about Market Risk." Liquidity and Capital Resources Our sources of funds have consisted principally of cash flow from oper ations and debt, including our credit facilities (subject to continued compliance with the financial covenants and representations).
The 2018 Credit Agreement contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00:1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility.
The 2018 Revolving Credit Facility contains a financial covenant that requires GrafTech to maintain a senior secured first lien net leverage ratio not greater than 4.00:1.00 when the aggregate principal amount of borrowings under the 2018 Revolving Credit Facility and outstanding letters of credit issued under the 2018 Revolving Credit Facility (except for undrawn letters of credit in an aggregate amount equal to or less than $35 million), taken together, exceed 35% of the total amount of commitments under the 2018 Revolving Credit Facility.
Costs Relating to Protection of the Environment We have been and are subject to increasingly stringent environmental protection laws and regulations. In addition, we have an on‑going commitment to rigorous internal environmental protection standards. Environmental considerations are part of all significant operating and capital expenditure decisions. The following table sets forth certain information regarding environmental expenses and capital expenditures.
Costs Relating to Protection of the Environment We have been and are subject to stringent environmental protection laws and regulations. In addition, we have an on‑going commitment to rigorous internal environmental protection standards. Environmental considerations are part of all significant operating and capital expenditure decisions. The following table sets forth certain information regarding environmental expenses and capital expenditures.
This requires us to use significant judgment including estimation of future cash flows, which is based upon relevant market data, internal forecasts, estimation of the long‑term growth for our business and determination of the weighted average cost of capital for purposes of establishing a discount rate.
This requires us to use significant judgment including estimation of future cash flows, which is based 41 upon relevant market data, internal forecasts, estimation of the long‑term growth for our business and determination of the weighted average cost of capital for purposes of establishing a discount rate.
(3) Non-cash losses (gains) from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
(3) Non-cash losses from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
(3) Non-cash losses (gains) from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
(3) Non-cash losses from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
In certain countries in which we have manufacturing facilities, and in certain export markets, we sell in currencies other than the U.S. dollar. Accordingly, when these currencies increase (or decline) in value relative to the U.S. dollar, this has the effect of increasing (or reducing) net sales.
In certain countries in which we have manufacturing facilities, and in certain export 35 markets, we sell in currencies other than the U.S. dollar. Accordingly, when these currencies increase (or decline) in value relative to the U.S. dollar, this has the effect of increasing (or reducing) net sales.
The “non‑GAAP” financial measures consist of EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, which help us evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance.
The “non‑GAAP” financial measures consist of EBITDA, adjusted EBITDA, adjusted net (loss) income and adjusted (loss) earnings per share, which help us evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance.
Adjusted earnings per share represents adjusted diluted earnings per share. (2) Non-GAAP financial measure; see below for information and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Adjusted (loss) earnings per share represents adjusted diluted (loss) earnings per share. (2) Non-GAAP financial measure; see below for information and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP.
The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the 2018 Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.
The obligations of each foreign subsidiary of GrafTech that is a Controlled Foreign Corporation under the 2018 Revolving Credit Facility are secured by (i) a pledge of all of the equity securities of each Guarantor that is a Controlled Foreign Corporation and of each direct, wholly owned subsidiary of any Guarantor that is a Controlled Foreign 38 Corporation, and (ii) security interests in certain receivables and personal property of each Guarantor that is a Controlled Foreign Corporation, subject to permitted liens and certain exceptions specified in the 2018 Revolving Credit Facility.
All obligations under the 2018 Credit Agreement are secured, subject to certain exceptions, by: (i) a pledge of all of the equity securities of each domestic Guarantor and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65% of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Credit Agreement.
All obligations under the 2018 Revolving Credit Facility are secured, subject to certain exceptions, by: (i) a pledge of all of the equity securities of each domestic Guarantor and of each other direct, wholly owned domestic subsidiary of GrafTech and any Guarantor, (ii) a pledge on no more than 65% of the equity interests of each subsidiary that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Code), and (iii) security interests in, and mortgages on, personal property and material real property of each domestic Guarantor, subject to permitted liens and certain exceptions specified in the 2018 Revolving Credit Facility.
Related Party Transactions We have engaged in transactions with affiliates or related parties during 2022 and 2021, and we expect to continue to do so in the future. These transactions include ongoing obligations under the Tax Receivable Agreement, stockholders rights agreement, as amended, and registration rights agreement, each with Brookfield.
Related Party Transactions We have engaged in transactions with affiliates or related parties during 2023 and 2022 and we expect to continue to do so in the future. These transactions include ongoing obligations under the Tax Receivable Agreement, stockholders rights agreement, as amended, and registration rights agreement, each with Brookfield.
GrafTech Finance, the Company and the other guarantors granted a security interest in such collateral, consisting of substantially all of their respective assets, as security for the obligations of GrafTech Finance, the Company and the other guarantors under the 2020 Senior Secured Notes and the Indenture pursuant to a collateral agreement, dated as of December 22, 2020 (the “Collateral Agreement”), among GrafTech Finance, the Company, the other subsidiaries of the Company named therein as grantors and U.S.
GrafTech Finance, the Company and the other guarantors granted a security interest in such collateral, consisting of substantially all of their respective assets, as security for the obligations of GrafTech Finance, the Company and the other guarantors under the 2020 Senior Secured Notes and the indenture governing the 2020 Senior Secured Notes (the “2020 Indenture”) pursuant to a collateral agreement, dated as of December 22, 2020 (the “Collateral Agreement”), among GrafTech Finance, the Company, the other subsidiaries of the Company named therein as grantors and U.S.
The estimate of stand-alone selling price on the various classes of contracts is the basis for the allocation of revenue amongst periods for new and modified contracts. Historically the amount of contract assets and liabilities resulting from these estimates have been immaterial. See Note 2, "Revenue from Contracts with Customers," to the Consolidated Financial Statements for additional information.
The estimate of stand-alone selling price on the various classes of contracts is the basis for the allocation of revenue amongst periods for new and modified contracts. Historically the amount of contract assets and liabilities resulting from these estimates has been immaterial. See Note 2, "Revenue from Contracts with Customers," to the Consolidated Financial Statements for additional information. 43
We were in compliance with all of our debt covenants as of December 31, 2022 and 2021. 2020 Senior Secured Notes On December 22, 2020, GrafTech Finance issued $500.0 million aggregate principal amount of the 2020 Senior Secured Notes at an issue price of 100% of the principal amount thereof in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act") and to non-U.S. persons outside the United States under Regulation S under the Securities Act.
We were in compliance with all of our debt covenants as of December 31, 2023 and 2022. 2020 Senior Secured Notes In December 2020, GrafTech Finance issued $500.0 million aggregate principal amount of the 2020 Senior Secured Notes at an issue price of 100% of the principal amount thereof in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933 (the "Securities Act") and to non-U.S. persons outside the United States under Regulation S under the Securities Act.
In July 2019, our Board of Directors authorized a program to repurchase up to $100.0 million of our outstanding common stock. In November 2021, our Board of Directors authorized the repurchase of an additional $150.0 million of stock repurchases under this program.
Uses of Liquidity In July 2019, our Board of Directors authorized a program to repurchase up to $100.0 million of our outstanding common stock. In November 2021, our Board of Directors authorized the repurchase of an additional $150.0 million of stock repurchases under this program.
Effects of Changes in Currency Exchange Rates When the currencies of non‑U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. dollar equivalent cost of sales and other expenses with respect to those facilities.
Effects of Changes in Currency Exchange Rates When the currencies of non‑U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. dollar equivalent cost of goods sold and other expenses with respect to those facilities.
Our uses of those funds (other than for operations) have consisted principally of dividends, capital expenditures, scheduled debt repayments, optional debt repayments, stock repurchases and other obligations. Disruptions in the U.S. and international financial markets could adversely affect our liquidity and the cost and availability of financing to us in the future.
Our uses of those funds (other than for operations) have consisted principally of dividends, capital expenditures, scheduled debt repayments, optional debt repayments, stock repurchases and general purposes. Disruptions in the U.S. and international financial markets could adversely affect our liquidity and the cost and availability of financing to us in the future.
Throughout our Management Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
Throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), insignificant changes may be deemed not meaningful and are generally excluded from the discussion.
In the event that operating cash flows fail to provide sufficient liquidity to meet our business needs, including capital expenditures, any such shortfall would need to be made up by increased borrowings under our 2018 Revolving Credit Facility, to the extent available.
In the event that operating cash flows fail to provide sufficient liquidity to meet our business needs, including capital expenditures, any such shortfall would be expected to be made up by borrowings under our 2018 Revolving Credit Facility, to the extent available.
We believe that we have adequate liquidity to meet our needs for at least the next 12 months and for the foreseeable future thereafter.
We believe that we have adequate liquidity to meet our needs for at least the next twelve months and for the foreseeable future thereafter.
Some of these limitations are: • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments, including any capital expenditure requirements to augment or replace our capital assets; • adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • adjusted EBITDA does not reflect expenses relating to our pension and OPEB plans; • adjusted EBITDA does not reflect public offerings and related expenses; • adjusted EBITDA does not reflect the non‑cash gains or losses from foreign currency remeasurement of non‑operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar; • adjusted EBITDA does not reflect stock-based compensation expense; • adjusted EBITDA does not reflect the non‑cash write‑off of fixed assets; • adjusted EBITDA does not reflect related party payable - Tax Receivable Agreement adjustments; • adjusted EBITDA does not reflect Change in Control charges; • adjusted EBITDA does not reflect gains from the settlement of a value-added tax matter in Brazil; and • other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Some of these limitations are: • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments, including any capital expenditure requirements to augment or replace our capital assets; • adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • adjusted EBITDA does not reflect expenses or benefits relating to our pension and OPEB plans; • adjusted EBITDA does not reflect public offerings and related expenses; • adjusted EBITDA does not reflect the non‑cash gains or losses from foreign currency remeasurement of non‑operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar; • adjusted EBITDA does not reflect stock-based compensation expense; • adjusted EBITDA does not reflect the non‑cash write‑off of fixed assets; • adjusted EBITDA does not reflect related party payable - Tax Receivable Agreement adjustments; • adjusted EBITDA does not reflect goodwill impairment charges; and • other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
For purposes of this section, a "Change in Control" occurred when Brookfield and any affiliates thereof ceased to own stock of the Company that constitutes at least thirty percent (30%) or thirty-five percent (35%), as applicable, of the total fair market value or total voting power of the stock of the Company.
For the purpose of this measure, a Change in Control occurred when Brookfield and any affiliates thereof ceased to own stock of the Company that constitutes at least thirty percent (30%) or thirty-five percent (35%), as applicable, of the total fair market value or total voting power of the stock of the Company (the "Change in Control").
We also record foreign currency transaction gains and losses from non‑permanent intercompany balances as part of cost of sales and other income, net. Significant changes in currency exchange rates impacting us are described under “—Effects of Changes in Currency Exchange Rates” and “—Results of Operations” in this section.
We also record foreign currency transaction gains and losses from non‑permanent intercompany balances as part of cost of goods sold and other expense (income), net. Significant changes in currency exchange rates impacting us are described under “—Effects of Changes in Currency Exchange Rates” and “—Results of Operations” in this section.
Estimates require us to use our judgment. While we believe that our estimates for these matters are reasonable, if the actual amount is significantly different than the estimated amount, our assets, liabilities or results of operations may be overstated or understated. The following accounting policies are deemed to be critical. Goodwill.
While we believe that our estimates for these matters are reasonable, if the actual amount is significantly different than the estimated amount, our assets, liabilities or results of operations may be overstated or understated. The following accounting policies are deemed to be critical. Goodwill.
(d) Represents Brookfield's right to receive future payments from us for 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal NOLs, previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in Swissco.
(d) Represents committed purchases of raw materials. 40 (e) Represents Brookfield's right to receive future payments from us for 85% of the amount of cash savings, if any, in U.S. federal income tax and Swiss tax that we and our subsidiaries realize as a result of the utilization of certain tax assets attributable to periods prior to our IPO, including certain federal NOLs, previously taxed income under Section 959 of the Code, foreign tax credits, and certain NOLs in Swissco.
We use and rely on estimates in determining the economic useful lives of our assets, obligations under our employee 40 benefit plans, provisions for doubtful accounts, provisions for restructuring charges and contingencies, tax valuation allowances, evaluation of goodwill, other intangible assets, pension and OPEB and various other recorded or disclosed amounts, including inventory valuations.
We use and rely on estimates in determining the economic useful lives of our assets, obligations under our employee benefit plans, provisions for doubtful accounts, provisions for restructuring charges and contingencies, tax valuation allowances, evaluation of goodwill, other intangible assets, pension and OPEB and various other recorded or disclosed amounts, including inventory valuations. Estimates require us to use our judgment.
The Senior Secured Credit Facilities are guaranteed by each of our domestic subsidiaries, subject to certain customary exceptions, and by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech, Luxembourg HoldCo, and Swissco (collectively, the “Guarantors”) with respect to all obligations under the 2018 Credit Agreement of each of our foreign subsidiaries that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)).
The 2018 Revolving Credit Facility is guaranteed by each of our domestic subsidiaries, subject to certain customary exceptions, and by GrafTech Luxembourg I S.à.r.l., a Luxembourg société à responsabilité limitée and an indirect wholly owned subsidiary of GrafTech, Luxembourg HoldCo, and Swissco (collectively, the “Guarantors”) with respect to all obligations under the 2018 Revolving Credit Facility of each of our foreign subsidiaries that is a Controlled Foreign Corporation (within the meaning of Section 956 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)).
Discussion and analysis regarding our financial condition and results of operations for 2021 as compared to 2020 is included in Item 7 of our Annual Report for the year-ended December 31, 2021, filed with the SEC on February 22, 2022.
Discussion and analysis regarding our financial condition and results of operations for 2022 as compared to 2021 is included in Item 7 of our Annual Report for the year-ended December 31, 2022, filed with the SEC on February 14, 2023.
This process requires us to make the following assessments: • estimate our actual current tax liability in each jurisdiction; • estimate our temporary differences resulting from differing treatment of items for tax and accounting purposes (which result in deferred tax assets and liabilities that we include within the Consolidated Balance Sheets); and • assess the likelihood that our deferred tax assets will be recovered from future taxable income and, if we believe that recovery is not more likely than not, a valuation allowance is established. 41 If our estimates are incorrect, our deferred tax assets or liabilities may be overstated or understated.
This process requires us to make the following assessments: • estimate our actual current tax liability in each jurisdiction; • estimate our temporary differences resulting from differing treatment of items for tax and accounting purposes (which result in deferred tax assets and liabilities that we include within the Consolidated Balance Sheets); and • assess the likelihood that our deferred tax assets will be recovered from future taxable income and, if we believe that recovery is not more likely than not, a valuation allowance is established.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. From 2018 to 2022, our revenue streams primarily consisted of LTAs and short‑term purchase orders (deliveries within the year) directly with steel manufacturers.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Our revenue streams primarily consist of LTAs and short‑term purchase orders (deliveries within the year) directly with steel manufacturers.
Year Ended December 31, 2022 2021 2020 (Dollars in thousands) Expenses relating to environmental protection $ 22,395 $ 16,914 $ 11,075 Capital expenditures related to environmental protection 6,012 7,014 9,018 Critical accounting policies Critical accounting policies are those that require difficult, subjective or complex judgments by management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
Year Ended December 31, 2023 2022 2021 (Dollars in thousands) Expenses relating to environmental protection $ 12,085 $ 22,395 $ 16,914 Capital expenditures related to environmental protection 7,588 6,012 7,014 Critical accounting policies Critical accounting policies are those that require difficult, subjective or complex judgments by management, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments. (e) In addition, letters of credit of $3.0 million were issued under the 2018 Revolving Credit Facility as of December 31, 2022.
The term of the Tax Receivable Agreement commenced on April 23, 2018 and will continue until there is no potential for any future tax benefit payments. (f) In addition, letters of credit of $3.1 million were issued under the 2018 Revolving Credit Facility as of December 31, 2023.
The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our cost of sales was a decrease of $20.6 million for 2022, an increase of $10.1 million for 2021 and a decrease of $4.9 million for 2020. As part of our cash management, we also have intercompany loans between our subsidiaries.
The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our cost of goods sold was an increase of $12.4 million in 2023, a decrease of $20.6 million in 2022 and an increase of $10.1 million in 2021. As part of our cash management, we also have intercompany loans between our subsidiaries.
In 2022, our weighted-average realized price from LTAs was approximately $9,500 per MT and our weighted-average realized price for non-LTA business sales of graphite electrodes was approximately $6,000 per MT. Our weighted-average realized non-LTA price increased 34% compared to 2021.
In 2022, our weighted-average realized price from LTAs was approximately $9,500 per MT and our weighted-average realized price for non-LTA business sales of graphite electrodes was approximately $6,000 per MT.
The table of estimated shipments of graphite electrodes under existing LTAs has been updated as follows to reflect our current expectations: 2023 2024 Estimated LTA volume (1) 27-32 13-16 Estimated LTA revenue (2) $235-$275 $100-$135 (3) (1) In thousands of MT (2) In millions (3) Includes expected termination fees from a few customers that have failed to meet certain obligations under their LTAs The majority of the LTAs are defined as pre-determined fixed annual volume contracts while a small portion are defined with a specified volume range.
The table of estimated shipments of graphite electrodes under existing LTAs is as follows, reflecting our current expectations for 2024: 2024 Estimated LTA volume (1) 13-16 Estimated LTA revenue (2) $100-$135 (3) (1) In thousands of MT (2) In millions (3) Includes expected termination fees from a few customers that have failed to meet certain obligations under their LTAs The majority of the LTAs are defined as pre-determined fixed annual volume contracts while a small portion are defined with a specified volume range.
We may purchase shares from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans. The amount and timing of repurchases are subject to a variety of factors including liquidity, stock price, applicable legal requirements, other business objectives and market conditions.
We may purchase shares from time to time on the open market, including under Rule 10b5-1 and/or Rule 10b-18 plans. The amount and timing of repurchases are subject to a variety of factors including liquidity, stock 36 price, applicable legal requirements, other business objectives and market conditions. In 2023, we did not repurchase any shares of our common stock.
We define adjusted net income, a non‑GAAP financial measure, as net income or loss and exclude the items used to calculate adjusted EBITDA, less the tax effect of those adjustments. We define adjusted EPS, a non‑GAAP financial measure, as adjusted net income divided by the weighted average diluted common shares outstanding during the period.
We define adjusted net (loss) income, a non‑GAAP financial measure, as net (loss) income, excluding the items used to calculate adjusted EBITDA, less the tax effect of those adjustments. We define adjusted (loss) earnings per share, a non‑GAAP financial measure, as adjusted net (loss) income divided by the weighted average diluted common shares outstanding during the period.
The 2020 Senior Secured Notes are guaranteed on a senior secured basis by the Company and all of its existing and future direct and indirect U.S. subsidiaries that guarantee, or borrow under, the credit facilities under its 2018 Credit Agreement.
The 2020 Senior Secured Notes are guaranteed on a senior secured basis by the Company and all of its existing and future direct and indirect U.S. subsidiaries that guarantee, or borrow under, the 2018 Revolving Credit Facility, other than GrafTech Finance.
Marys (MT) (3)(6) 202.0 202.0 Capacity utilization excluding St. Marys (5)(6) 78 % 82 % (1) Sales volume reflects only graphite electrodes manufactured by us. (2) Production volume reflects graphite electrodes we produced during the period. (3) Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage. Actual production may vary.
Marys (MT) (2)(5) 202.0 202.0 Capacity utilization excluding St. Marys (4)(5) 44 % 78 % (1) Production volume reflects graphite electrodes we produced during the period. (2) Production capacity reflects expected maximum production volume during the period depending on product mix and expected maintenance outage. Actual production may vary.
GrafTech Finance is the sole borrower under the 2018 Term Loan Facility while GrafTech Finance, GrafTech Switzerland SA (“Swissco”) and GrafTech Luxembourg II S.à.r.l. (“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co-Borrowers”) are co-borrowers under the 2018 Revolving Credit Facility.
GrafTech Finance Inc. (“GrafTech Finance”) was the sole borrower under the 2018 Term Loan Facility while GrafTech Finance, GrafTech Switzerland SA (“Swissco”) and GrafTech Luxembourg II S.à.r.l. (“Luxembourg Holdco” and, together with GrafTech Finance and Swissco, the “Co-Borrowers”) are co-borrowers under the 2018 Revolving Credit Facility. The 2018 Revolving Credit Facility matures on May 31, 2027.
The actual revenue realized from these contracted volumes may vary in timing and total due to contract non-performance, force majeure notices, arbitrations, credit risk associated with certain customers facing financial challenges and customer demand related to contracted volume ranges.
For 2024, the contractual revenue amounts above are based upon the minimum volume for those contracts with specified ranges. The actual revenue realized from these contracted volumes may vary in timing and total due to contract non-performance, force majeure notices, arbitrations, credit risk associated with certain customers facing financial challenges and customer demand related to contracted volume ranges.
Our presentations of EBITDA, adjusted EBITDA, adjusted net income, adjusted EPS, should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non‑recurring items.
Our presentations of EBITDA, adjusted EBITDA, adjusted net (loss) income adjusted (loss) earnings per share, free cash flow and adjusted free cash flow should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non‑recurring items.
As of December 31, 2022, we had liquidity of $461.6 million, consisting of $327.0 million of availability under our 2018 Revolving Credit Facility, after giving effect to $3.0 million of letters of credit, and cash and cash equivalents of $134.6 million.
We had gross long-term debt of $950.0 million and short-term debt of $0.1 million as of December 31, 2023. As of December 31, 2022, we had liquidity of $461.6 million, consisting of $327.0 million available under our 2018 Revolving Credit Facility, after giving effect to $3.0 million of letters of credit, and cash and cash equivalents of $134.6 million.
The 2018 Credit Agreement also contains customary events of default.
The 2018 Revolving Credit Facility also contains customary events of default.
Investing activities Net cash used in investing activities was $72.0 million in the year ended December 31, 2022 compared to $57.9 million in the year ended December 31, 2021 primarily driven by increased capital expenditures.
Investing activities Net cash used in investing activities was $53.8 million in the year ended December 31, 2023 compared to $72.0 million in the year ended December 31, 2022 primarily driven by decreased capital expenditures.
A downturn could significantly and negatively impact our results of operations and cash flows, which, coupled with increased borrowings, could negatively impact our credit ratings, our ability to comply with debt covenants, our ability to secure additional financing and the cost of such financing, if available.
A downturn, including any recession or potential resurgence of a global pandemic, could significantly and negatively impact our results of operations and cash flows, which, coupled with increased borrowings, could negatively impact our credit ratings, our ability to comply with debt covenants, our ability to secure additional financing and the cost and availability of such financing.
Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our Board of Directors. 36 Potential uses of our liquidity include dividends, stock repurchases, capital expenditures, acquisitions, scheduled debt repayments, optional debt repayments and other general purposes.
Our ability to pay dividends will depend upon many factors, including our financial position and liquidity, results of operations, legal requirements, restrictions that may be imposed by the terms of our current and future credit facilities and other debt obligations and other factors deemed relevant by our Board of Directors.
(3) Non-cash losses (gains) from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
(2) Legal, accounting, printing and registration fees associated with the public offerings and related expenses. 31 (3) Non-cash losses from foreign currency remeasurement of non-operating assets and liabilities of our non-U.S. subsidiaries where the functional currency is the U.S. dollar. (4) Non-cash expense for stock-based compensation grants. (5) Non-cash fixed asset write-off recorded for obsolete assets.
Operational and Commercial Update Sales volume for 2022 was approximately 149 thousand MT, consisting of LTA volume of 91 thousand MT and non-LTA volume of 58 thousand MT, representing a decrease of 11% compared to 167 thousand MT in 2021, consisting of LTA volume of 110 thousand MT and non-LTA volume of 57 thousand MT.
Operational and Commercial Update Sales volume for 2023 was approximately 92 thousand MT, consisting of LTA volume of 29 thousand MT and non-LTA volume of 63 thousand MT, representing a decrease of 39% compared to 149 thousand MT in 2022, consisting of LTA volume of 91 thousand MT and non-LTA volume of 58 thousand MT.
Production volume, production capacity and capacity utilization help us understand the efficiency of our production and evaluate cost of sales. Year ended December 31, (in thousands) 2022 2021 Sales volume (MT) (1) 149.1 167.4 Production volume (MT) (2) 157.1 165.2 Total production capacity(MT) (3)(4) 230.0 230.0 Total capacity utilization (4)(5) 68 % 72 % Production capacity excluding St.
Production volume, production capacity and capacity utilization help us understand the efficiency of our production and evaluate cost of goods sold. Year ended December 31, (in thousands, except percentages) 2023 2022 Sales volume (MT) 91.6 149.1 Production volume (MT) (1) 88.1 157.1 Total production capacity(MT) (2)(3) 230.0 230.0 Total capacity utilization (3)(4) 38 % 68 % Production capacity excluding St.
In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to LIBOR plus 1.00% per annum.
In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to the one-month period secured overnight financing rate administered by the Federal Reserve Bank of New York plus 1.10% per annum.
Cash flows The following table summarizes our cash flow activities: Year Ended December 31, 2022 2021 (Dollars in thousands) Cash flow provided by (used in): Operating activities $ 324,628 $ 443,040 Investing activities (71,970) (57,860) Financing activities (176,267) (471,792) Net change in cash and cash equivalents $ 76,391 $ (86,612) Operating activities Cash provided by operating activities totaled $324.6 million in 2022 versus $443.0 million in the prior-year period.
Cash flows The following table summarizes our cash flow activities: Year Ended December 31, 2023 2022 (Dollars in thousands) Cash flow provided by (used in): Operating activities $ 76,561 $ 324,628 Investing activities (53,820) (71,970) Financing activities 18,713 (176,267) Net change in cash and cash equivalents $ 41,454 $ 76,391 Operating activities Cash provided by operating activities totaled $76.6 million in 2023 versus $324.6 million in the prior-year period.
(9) The tax impact on the non-GAAP adjustments is affected by their tax deductibility and the applicable jurisdictional tax rates. 31 Reconciliation of EPS to Adjusted EPS Year Ended December 31, 2022 2021 EPS $ 1.48 $ 1.46 Adjustments per share: Pension and OPEB plan benefits (1) (0.03) (0.01) Public offerings and related expenses (2) — — Non-cash losses on foreign currency remeasurement (3) — — Stock-based compensation (4) 0.01 — Non-cash fixed asset write-off (5) 0.01 0.01 Related party Tax Receivable Agreement adjustment (6) — — Change in Control LTIP award (7) — 0.27 Change in Control stock-based compensation acceleration (7) — 0.06 Brazil value-added tax credit (8) — (0.04) Total non-GAAP adjustments pre-tax per share (0.01) 0.29 Income tax impact on non-GAAP adjustments per share (9) — 0.01 Adjusted EPS $ 1.47 $ 1.74 (1) Net periodic benefit credit for our pension and OPEB plans, including a mark-to-market (gain) loss, representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
Reconciliation of (Loss) Earnings Per Share to Adjusted (Loss) Earnings Per Share Year Ended December 31, 2023 2022 (Loss) Earnings per share $ (0.99) $ 1.48 Adjustments per share: Pension and OPEB plan expenses (benefits) (1) 0.02 (0.03) Public offerings and related expenses (2) — — Non‑cash losses on foreign currency remeasurement (3) — — Stock-based compensation expense (4) 0.02 0.01 Non‑cash fixed asset write‑off (5) — 0.01 Related party Tax Receivable Agreement adjustment (6) — — Goodwill impairment charges (7) 0.67 — Total non-GAAP adjustments pre-tax per share 0.71 (0.01) Income tax impact on non-GAAP adjustments per share (8) 0.11 — Adjusted (Loss) Earnings per share $ (0.39) $ 1.47 (1) Net periodic benefit cost (credit) for our pension and OPEB plans, including a mark-to-market loss (gain), representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
We define adjusted EBITDA as EBITDA plus any pension and other post-employment benefit (OPEB) plan expenses, adjustments for public offerings and related expenses, non‑cash gains or losses from foreign currency remeasurement of non‑operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar, related party payable - Tax Receivable Agreement adjustments, non-cash stock-based compensation expense, non‑cash fixed asset write‑offs, value-added tax credit gains in Brazil and Change in 29 Control charges that were triggered as a result of the ownership of our largest stockholder falling below 30% of our total outstanding shares.
We define adjusted EBITDA as EBITDA plus any pension and other post-employment benefit (“OPEB”) plan expenses or benefits, adjustments for public offerings and related expenses, non‑cash gains or losses from foreign currency remeasurement of non‑operating assets and liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar, stock-based compensation expense, non-cash fixed asset write-offs, related party payable - Tax Receivable Agreement adjustments and goodwill impairment charges.
The 2020 Senior Secured Notes are secured on a pari passu basis by the collateral securing the term loans under the 2018 Credit Agreement.
The 2020 Senior Secured Notes are secured on a pari passu basis by the collateral securing the debt under the 2018 Revolving Credit Facility and the 2023 Senior Secured Notes.
Partially offsetting these items was a $10.0 million increase in cash used for repurchases of our common stock during 2022. 37 Financing transactions 2018 Term Loan and 2018 Revolving Credit Facility In February 2018, the Company entered into a credit agreement (as amended, the "2018 Credit Agreement"), which provides for (i) a $2,250 million senior secured term facility (the "2018 Term Loan Facility") after giving effect to the June 2018 amendment (the “First Amendment”) that increased the aggregate principal amount of the 2018 Term Loan Facility from $1,500 million to $2.250 million and (ii) a $330 million senior secured revolving credit facility after giving effect to the May 2022 amendment that increased the revolving commitments under the 2018 Credit Agreement by $80 million from $250 million (the " 2018 Revolving Credit Facility" and, together with the 2018 Term Loan Facility, the "Senior Secured Credit Facilities").
Financing transactions 2018 Term Loan and 2018 Revolving Credit Facility In February 2018, the Company entered into a credit agreement (as amended, the "2018 Credit Agreement"), which provided for (i) a $2,250 million senior secured term facility (the "2018 Term Loan Facility") after giving effect to the June 2018 amendment (the “First Amendment”) that increased the aggregate principal amount of the 2018 Term Loan Facility from $1,500 million to $2,250 million and (ii) a $330 million senior secured revolving credit facility after giving effect to the Third Amendment that increased the revolving commitments under the 2018 Credit Agreement by $80 million from $250 million (the "2018 Revolving Credit Facility").
As of December 31, 2022, we had a valuation allowance of $9.3 million against certain deferred tax assets. Our losses in certain tax jurisdictions in recent periods represented sufficient negative evidence to require a full valuation allowance.
If our estimates are incorrect, our deferred tax assets or liabilities may be overstated or understated. As of December 31, 2023, we had a valuation allowance of $9.0 million against certain deferred tax assets. Our losses in certain tax jurisdictions in recent periods represented sufficient negative evidence to require a full valuation allowance.
(8) Gain from the settlement of a value-added tax matter in Brazil. 33 Results of Operations Results of operations for 2022 as compared to 2021 The tables presented in our period-over-period comparisons summarize our Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results.
Results of Operations Results of operations for 2023 as compared to 2022 The tables presented in our period-over-period comparisons summarize our Consolidated Statements of Operations and illustrate key financial indicators used to assess the consolidated financial results.
In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to LIBO Rate plus 1.00% per annum.
In addition, we will pay interest on the payments we will make to Brookfield with respect to the amount of these cash savings from the due date (without extensions) of our tax return where we realize these savings to the payment date at a rate equal to the one-month period secured overnight financing rate administered by the Federal Reserve Bank of New York plus 1.10%.
(9) The tax impact on the non-GAAP adjustments is affected by their tax deductibility and the applicable jurisdictional tax rates. 32 Reconciliation of Net Income to Adjusted EBITDA Year Ended December 31, 2022 2021 Net income $ 382,962 $ 388,330 Add: Depreciation and amortization 55,496 65,716 Interest expense 36,568 68,760 Interest income (4,480) (872) Income taxes 69,356 68,076 EBITDA 539,902 590,010 Adjustments: Pension and OPEB plan benefits (1) (7,355) (2,545) Public offerings and related expenses (2) 100 663 Non-cash losses (gains) on foreign currency remeasurement (3) 521 (119) Stock-based compensation (4) 2,311 1,917 Non-cash fixed asset write-off (5) 1,068 3,197 Related party Tax Receivable Agreement adjustment (6) (83) 231 Change in Control LTIP award (7) — 73,384 Change in Control stock-based compensation acceleration (7) — 14,713 Brazil value-added tax credit (8) — (11,511) Adjusted EBITDA $ 536,464 $ 669,940 (1) Net periodic benefit credit for our pension and OPEB plans, including a mark-to-market (gain) loss, representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
(8) The tax impact on the non-GAAP adjustments is affected by their tax deductibility and the applicable jurisdictional tax rates. 32 Reconciliation of Net (Loss) Income to Adjusted EBITDA Year Ended December 31, 2023 2022 (Dollars in thousands) Net (loss) income $ (255,250) $ 382,962 Add: Depreciation and amortization 56,889 55,496 Interest expense 58,087 36,568 Interest income (3,439) (4,480) Income taxes (18,514) 69,356 EBITDA (162,227) 539,902 Adjustments: Pension and OPEB plan expenses (benefits) (1) 6,309 (7,355) Public offerings and related expenses (2) — 100 Non‑cash losses on foreign currency remeasurement (3) 603 521 Stock-based compensation expense (4) 4,433 2,311 Non‑cash fixed asset write‑off (5) — 1,068 Related party Tax Receivable Agreement adjustment (6) 249 (83) Goodwill impairment charges (7) 171,117 — Adjusted EBITDA $ 20,484 $ 536,464 (1) Net periodic benefit cost (credit) for our pension and OPEB plans, including a mark-to-market loss (gain), representing actuarial gains and losses that result from the remeasurement of plan assets and obligations due to changes in assumptions or experience.
Non-GAAP financial measures In addition to providing results that are determined in accordance with GAAP, we have provided certain financial measures that are not in accordance with GAAP. EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS are non-GAAP financial measures.
Non-GAAP financial measures In addition to providing results that are determined in accordance with GAAP, we have provided certain financial measures that are not in accordance with GAAP. EBITDA, adjusted EBITDA, adjusted net (loss) income, adjusted (loss) earnings per share, free cash flow, adjusted free cash flow and cash cost of goods sold per MT are non-GAAP financial measures.
In evaluating EBITDA, adjusted EBITDA, adjusted net income and adjusted EPS, you should be aware that in the future, we will incur expenses similar to the adjustments in the reconciliations presented below, other than the Change in Control charges.
In evaluating EBITDA, adjusted EBITDA, adjusted net (loss) income, adjusted (loss) earnings per share, free cash flow and adjusted free cash flow you should be aware that in the future, we will incur expenses similar to the adjustments in the reconciliations presented below.
The key operating metrics consist of sales volume, production volume, production capacity and capacity utilization. 28 Key financial measures Year ended December 31, (in thousands, except per share amounts) 2022 2021 Net sales $ 1,281,250 $ 1,345,788 Net income 382,962 388,330 Earnings per share (1) 1.48 1.46 EBITDA (2) 539,902 590,010 Adjusted net income (2) 379,666 464,585 Adjusted earnings per share (1)(2) 1.47 1.74 Adjusted EBITDA (2) 536,464 669,940 (1) Earnings per share represents diluted earnings per share.
The key operating metrics consist of sales volume, production volume, production capacity and capacity utilization. 28 Key financial measures Year ended December 31, (in thousands, except per share amounts) 2023 2022 Net sales $ 620,500 $ 1,281,250 Net (loss) income (255,250) 382,962 (Loss) earnings per share (1) (0.99) 1.48 EBITDA (2) (162,227) 539,902 Adjusted net (loss) income (2) (100,752) 379,666 Adjusted (loss) earnings per share (1)(2) (0.39) 1.47 Adjusted EBITDA (2) 20,484 536,464 (1) (Loss) earnings per share represents diluted (loss) earnings per share.
The result of these effects is to increase (or decrease) operating and net income. The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our net sales was a decrease of $11.7 million f or 2022 and increases of $5.5 million and $3.6 million for 2021 and 2020, respectively.
The impact of these changes in the average exchange rates of other currencies against the U.S. dollar on our net sales was an increase of $1.5 million in 2023, a decrease of $11.7 million in 2022 and an increase of $5.5 million in 2021.
Our Board of Directors may change the timing and amount of any future dividend payments or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.
There can be no assurance that we will resume paying dividends in the future in these amounts or at all. Our Board of Directors may change the timing and amount of any future dividend payments, if reinstated, or eliminate the payment of future dividends in its sole discretion, without any prior notice to our stockholders.
We recognize the actuarial gains and losses in connection with the annual remeasurement in earnings in the fourth quarter of each year. (2) Legal, accounting, printing and registration fees associated with the public offerings and related expenses.
We recognize the actuarial gains and losses in connection with the annual remeasurement in earnings in the fourth quarter of each year.
As of December 31, 2022, we have satisfied all required amortization installments through the maturity date. 38 The 2018 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to GrafTech and restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions.
The 2018 Revolving Credit Facility contains customary representations and warranties and customary affirmative and negative covenants applicable to GrafTech and restricted subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, and dividends and other distributions.
The 2018 Term Loan Facility and the 2018 Revolving Credit Facility mature on February 12, 2025 and May 31, 2027, respectively. As of December 31, 2022 and 2021, there was no debt outstanding on the 2018 Revolving Credit Facility and there was $3.0 million and $3.3 million of letters of credit drawn against the 2018 Revolving Credit Facility, respectively.
As of December 31, 2023 and December 31, 2022, there were no borrowings outstanding on the 2018 Revolving Credit Facility and there was $3.1 million and $3.0 million of letters of credit drawn against the 2018 Revolving Credit Facility as of each date, respectively.
Capital expenditures totaled $72.2 million in 2022. We anticipate capital expenditures between $55.0 million and $60.0 million in 2023.
Capital expenditures totaled $54.0 million in 2023. We anticipate capital expenditures between $35.0 million and $40.0 million in 2024.
As of December 31, 2021, we had liquidity of $304.2 million, consisting of $246.7 million available under our 2018 Revolving Credit Facility, after giving effect to $3.3 million of letters of credit, and cash and cash equivalents of $57.5 million. We had long-term debt of $1.0 billion and short-term debt of $0.1 million as of December 31, 2021.
As of December 31, 2023, we had liquidity of $289.3 million, consisting of $112.4 million of availability under our 2018 Revolving Credit Facility, after giving effect to $3.1 million of letters of credit, and cash and cash equivalents of $176.9 million.
In 2021, our weighted-average realized price from LTAs was approximately $9,500 per MT and our weighted-average realized price for non-LTA business sales of graphite electrodes was approximately $4,500 per MT.
In 2023, our weighted-average realized price from LTAs was approximately $8,800 per MT and our weighted-average realized price for non-LTA business sales of graphite electrodes was approximately $5,400 per MT. Our weighted-average realized non-LTA price decreased 10% compared to 2022, reflecting the soft commercial environment.
As of December 31, 2022 and 2021, $92.3 million and $49.1 million, respectively, of our cash and cash equivalents were located outside of the U.S. We repatriate funds from our foreign subsidiaries through dividends. All of our subsidiaries face the customary statutory limitation that distributed dividends do not exceed the amount of retained and current earnings.
We had gross long-term debt of $933.8 million and short-term debt of $0.1 million as of December 31, 2022. As of December 31, 2023 and 2022, $75.3 million and $92.3 million, respectively, of our cash and cash equivalents were located outside of the U.S. We repatriate funds from our foreign subsidiaries through dividends.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have entered into commodity derivative contracts to effectively fix some or all of our exposure to refined oil products. The outstanding commodity derivative contracts represented net unrealized gain of $8.5 million as of December 31, 2021. As of December 31, 2022, there were no commodity derivative contracts outstanding. Sensitivity analysis.
Biggest changeOur outstanding foreign currency derivatives represented a net unrealized pre-tax gain of $0.1 million at December 31, 2023 and a net unrealized pre-tax loss of $0.2 million at December 31, 2022. Energy commodity management. We previously entered into commodity derivative contracts to effectively fix some or all of our exposure to refined oil products.
These transactions relate primarily to financial instruments described below. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes.
These transactions primarily relate to the financial instruments described below. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes.
Our exposure to changes in currency exchange rates results primarily from: 42 • sales made by our subsidiaries in currencies other than local currencies; • raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and • investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the U.S. dollar.
Our exposure to changes in currency exchange rates results primarily from: • sales made by our subsidiaries in currencies other than local currencies; • raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and • investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the U.S. dollar.
Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. Purchased currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates.
Purchased currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. Forward exchange contracts and purchased currency options are carried at fair value.
As of December 31, 2022, a 10% appreciation or depreciation in the value of the U.S. dollar against foreign currencies from the prevailing market rates would result in a corresponding decrease of $4.7 million or a corresponding increase of $4.7 million, respectively, in the fair value of the foreign currency hedge portfolio.
As of December 31, 2023, a 10% appreciation or depreciation in the value of the U.S. dollar against foreign currencies from the prevailing market rates would result in a corresponding decrease of $2.0 million or a corresponding increase of $2.0 million, respectively, in the fair value of the foreign currency hedge portfolio.
For further information related to the financial instruments described above, see Note 1, "Business and Summary of Significant Accounting Policies" and Note 8, "Fair Value Measurement and Derivative Instruments" to the Consolidated Financial Statements for additional information. 43
For further information related to the financial instruments described above, see Note 1, "Business and Summary of Significant Accounting Policies" and Note 8, "Fair Value Measurements and Derivative Instruments" in the Notes to the Consolidated Financial Statements for additional information. 44
We use sensitivity analysis to quantify potential impacts that market rate changes may have on the underlying exposures as well as on the fair values of our derivatives. The sensitivity analysis for the derivatives represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction.
The sensitivity analysis for the derivatives represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction.
See Note 8, "Fair Value Measurements and Derivative Instruments" for additional details. Currency rate management. We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency derivatives, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures.
See Note 8, "Fair Value Measurements and Derivative Instruments" in the Notes to the Consolidated Financial Statements for further discussion. Currency rate management. We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates.
We periodically enter into agreements with financial institutions that are intended to limit our exposure to additional interest expense due to increases in variable interest rates. These instruments effectively cap our interest rate exposure. As of December 31, 2022 and 2021, we recorded unrealized pre-tax gains of $27.4 million and $5.9 million, respectively, on our interest rate swaps.
We have previously entered into agreements with financial institutions that were intended to limit our exposure to additional interest expense due to increases in variable interest rates. These instruments effectively capped our interest rate exposure. As of December 31, 2023, we did not have any outstanding interest rate swaps.
Removed
Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBO Rate, SOFR Rate or EURIBOR Rate.
Added
If we utilized our 2018 Revolving Credit Facility, we would be exposed to changes in interest rates.
Removed
Forward exchange contracts and purchased currency options are carried at fair value. Our outstanding foreign currency derivatives represented a net unrealized pre-tax loss of $0.2 million at December 31, 2022 and a net unrealized gain of $0.4 million as of December 31, 2021. Energy commodity management.
Added
Our 2018 Revolving Credit Facility bears interest, at our option, at a rate to either (i) the Adjusted Term SOFR Rate and Adjusted EURIBOR Rate (each, as defined in the 2018 Credit Agreement), plus an applicable margin initially equal to 3.00% per annum or (ii) the ABR Rate, plus an applicable margin initially equal to 2.00% per annum, in each case with two 25 basis point step downs based on achievement of certain senior secured first lien net leverage ratios.
Removed
A hypothetical increase in interest rates of 100 basis points (1%) would have decreased our interest expense by $0.2 million, n et of the impact of our interest rate swap, for the year ended December 31, 2022.
Added
As of December 31, 2022 , we recorded unrealized pre-tax gains of $27.4 million on our interest rate swaps. As of December 31, 2023, we no longer had any variable rate debt outstanding and therefore no exposure to variability in interest rates.
Removed
The same 100 basis points increase would have resulted in an increase of $3.5 million in fair value of our interest rate swap portfolio.
Added
These foreign currency derivatives, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate.
Removed
Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of the instruments are generally offset by reciprocal changes in the value of the underlying exposure.
Added
As of December 31, 2023 and 2022, there were no commodity derivative contracts outstanding. Sensitivity analysis. We use sensitivity analysis to quantify potential impacts that market rate changes may have on the underlying exposures as well as on the fair values of our derivatives.

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