GRAFTECH INTERNATIONAL LTD

(1)Organization and Summary of Significant Accounting Policies

A. Organization

GrafTech International Ltd. (the “Company” or “GrafTech”) is a leading global manufacturer of high-quality graphite electrode products essential to the production of electric arc furnace (“EAF”) steel and other ferrous and non-ferrous metals. Building on its core graphite electrode and needle coke capabilities, GrafTech also has deep experience in research and development, engineering and processing of specialized carbon and graphite materials supporting selected applications in industrial manufacturing, energy storage, anode materials, defense, and other emerging technologies. References herein to “we,” “our,” or “us” refer collectively to the Company and its subsidiaries. The Company’s common stock is listed on the New York Stock Exchange “NYSE” under the symbol “EAF.”

The Company’s only reportable segment, Industrial Materials, is comprised of itstwo major product categories: graphite electrodes and petroleum needle coke products. Petroleum needle coke is our key raw material used in the production of graphite electrodes. The Company’s vision is to provide highly engineered graphite electrode products, services and solutions to EAF operators.

B. Basis of Presentation

The interim condensed consolidated financial statements are unaudited; however, in the opinion of management, they have been prepared in accordance with Rule 10-01 of Regulation S-X and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The December 31, 2025 Consolidated Balance Sheet data included herein was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, but does not include all disclosures required by GAAP in audited financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, including the accompanying notes, contained in the Company’s Annual Report on Form 10-K.

The unaudited condensed consolidated financial statements reflect all adjustments (all of which are of a normal, recurring nature) which management considers necessary for a fair presentation of our financial statements for the interim periods presented. The results for the interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.

C. New Accounting Standards

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Under this ASU, a public entity would be required to disclose information about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. This ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. This ASU allows for early adoption and requires either prospective adoption to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact of this ASU on its financial statements and disclosures, but does not expect it to be material.

In May 2026, the FASB issued ASU 2026‑02, Environmental Credits and Environmental Credit Obligations (Topic 818). The standard establishes a comprehensive framework for the recognition, measurement, presentation, and disclosure of environmental credits and environmental credit obligations. The guidance is intended to reduce diversity in practice by providing specific accounting requirements for environmental credits acquired, generated, or received by an entity, as well as obligations that may be settled using such credits. For public business entities, the standard is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adoption of ASU 2026‑02 will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effects, if any, that the new guidance will have on its financial position, results of operations, cash flows, or financial statement disclosures.

(2)Revenue from Contracts with Customers

Disaggregation of Revenue

The following table provides information about disaggregated revenue by type of product:

(3)Segment Reporting

Our Industrial Materials segment, our only operating and reportable segment, manufactures high-quality graphite electrodes essential to the production of EAF steel and other ferrous and non-ferrous metals. Petroleum needle coke, a crystalline form of carbon derived from decant oil, is a key raw material used in the production of graphite electrodes. We utilize the substantial majority of the needle coke that we produce internally to manufacture our graphite electrodes, and, as a result, approximately 89% of our revenues from external customers for the nine months ended September 30, 2026 are derived from the sale of graphite electrodes.

Our chief operating decision maker is our Chief Executive Officer. The chief operating decision maker assesses performance for our Industrial Materials segment and decides how to allocate resources based on net income or losses, which are reported on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The chief operating decision maker uses net loss to evaluate growth trends, establish budgets, assess operational efficiencies and evaluate our overall financial performance.

The following table presents selected financial information with respect to the Company’s single operating segment for the three and nine months ended September 30, 2026 and 2025:

(1)Cash cost of goods sold is defined as cost of goods sold less depreciation and amortization and less cost of goods sold associated with the portion of our sales that consists of deliveries of by-products of the manufacturing processes, and is the significant expense the chief operating decision maker uses to evaluate segment expenses.

(4)Intangible Assets

The following table summarizes intangible assets with determinable useful lives by major category, which are included in “Other assets” on our Condensed Consolidated Balance Sheets:

Amortization expense for intangible assets was $1.7 million and $1.8 million for the three months ended September 30, 2026 and 2025, respectively, and $5.1 million and $5.6 million for the nine months ended September 30, 2026 and 2025, respectively. Amortization expense is expected to be approximately $1.6 million for the remainder of 2026, $6.1 million in 2027, $5.5 million in 2028, $4.9 million in 2029, $2.9 million in 2030 and $0.3 million in 2031.

(5)Debt and Liquidity

The following table presents our long-term debt:

The fair value of our debt was approximately $983.0 million and $946.6 million as of September 30, 2026 and December 31, 2025, respectively. The fair values were determined using Level 1 quoted market prices for the same or similar debt instruments.

Initial First Lien Term Loan Facility; Delayed Draw First Lien Term Loan Facility

In the second quarter of 2026, the Company drew the remaining $100.0 million available under its Delayed Draw First Lien Term Loan Facility. Following this draw, the delayed draw commitment was fully utilized andno additional amounts remain available for borrowing under the delayed draw portion of the Delayed Draw First Lien Term Loan Facility.

The proceeds from the borrowing were used for general corporate purposes, including working capital requirements. The borrowing bears interest and is subject to the same terms, covenants, maturity date, and repayment provisions as the Initial First Lien Term Loans, as set forth in the Initial First Lien Term Loan Facility.

2018 Revolving Credit Facility

As of September 30, 2026 and December 31, 2025, the availability under our 2018 Revolving Credit Facility (after giving effect to the financial covenant and letters of credit described below) was $107.6 million and $101.6 million, respectively. As any borrowings under the 2018 Revolving Credit Facility remain subject to compliance with the financial covenant thereunder, our operating performance as of September 30, 2026 and December 31, 2025 resulted in our inability to access the full amount of commitments under the facility. As of September 30, 2026 and December 31, 2025, there wereno borrowings outstanding on the 2018 Revolving Credit Facility, and there was $7.9 million and $13.8 million, respectively, of letters of credit drawn against the 2018 Revolving Credit Facility.

We were in compliance with all of our debt covenants as of September 30, 2026 and December 31, 2025.

(6)Inventories

Inventories are comprised of the following:

In the third quarter and first nine months of 2026, we recorded lower of cost or market inventory valuation adjustments of $2.0 million and $9.8 million, respectively, compared to $1.7 million and $6.3 million, in the third quarter and first nine months of 2025, respectively, in order to state our inventories at net realizable value.

(7)Interest Expense

The following table presents the components of interest expense:

The Existing 9.875% Notes and the New 9.875% Notes carry fixed interest rates of 9.875%. The Existing 4.625% Notes and the New 4.625% Notes carry fixed interest rates of 4.625%. The Initial First Lien Term Loan had an effective interest rate of 9.81% as of September 30, 2026. The Delayed Draw First Lien Term Loan had an interest rate of 9.73% as of September 30, 2026. The Company paid a ticking fee associated with the undrawn Delayed Draw Commitments in an amount equal to 3.75% per annum.

See Note 5, “Debt and Liquidity” for details of our debt.

(8)Commitments and Contingencies

Legal Proceedings

We are involved in various investigations, lawsuits, claims, demands, labor disputes and other legal proceedings, including with respect to environmental and human exposure or other personal injury matters, arising out of or incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of these matters and proceedings, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows. Additionally, we are involved in the following legal proceedings:

Brazil Clause IV

Pending litigation in Brazil has been brought by employees seeking to recover additional amounts and interest thereon under certain wage increase provisions applicable in 1989 and 1990 under collective bargaining agreements to which employers in the Bahia region of Brazil were a party (including our subsidiary in Brazil). Companies in Brazil have settled claims arising out of these provisions and, in May 2015, the litigation was remanded by the Brazilian Supreme Court in favor of the employees union. After denying an interim appeal by the Bahia region employers on June 26, 2019, the Brazilian Supreme Court finally ruled in favor of the employees union on September 26, 2019. The employers union has determined not to seek annulment of such decision. Separately, on October 1, 2015, a related action was filed by current and former employees against our subsidiary in Brazil to recover amounts under such provisions, plus interest thereon, and such amounts together with interest could be material to us. If the Brazilian Supreme Court proceeding above had been determined in favor of the employers union, it would also have resolved this proceeding in our favor. In the first quarter of 2017, the lower state court initially ruled in favor of the employees. Our subsidiary in Brazil appealed, and the appeal was rejected by the labor court of appeal. Our subsidiary in Brazil filed a further appeal to the Superior Labor Court (“TST”). The 5th Panel of the TST reversed the prior decisions, holding that the Labor Union’s claim was fully time barred. The employees filed a further appeal, and, on September 12, 2022, we filed our response in opposition. On March 19, 2026, the SDI-1 at the TST granted the appeal filed by the employees to reject one of the statute of limitations defenses argued by our subsidiary in Brazil and remanded the case to the 5th Panel for further adjudication on secondary defenses. On May 8, 2026, our subsidiary in Brazil filed a motion for clarification at the SDI-1 of the TST, which was denied in September 2026. In May 2026, the Labor Union applied for provisional enforcement to quantify the compensation to be paid to employees. The proceeding is still in the early stages and no quantification has been made as of September 30, 2026. We intend to vigorously defend our position. As of September 30, 2026, we were 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.

Brazil Income Tax Audit

On October 23, 2024, GrafTech Brasil Participações Ltda. received an income tax assessment notice from the Brazilian Internal Revenue Service (“IRS”) totaling approximately $31.2 million, including approximately $18.8 million of interest and penalties, resulting from an audit carried out between 2023 and 2024, related to the period from 2019 to 2020. In this assessment, two issues were raised by the tax auditor. The first item disallowed the investment tax incentive (75% reduction of income tax), under the allegation that the Company did not have a negative tax debt certificate. The second disallowed the use of the Value-Added Tax benefit (called Desenvolve) to increase the investment tax incentive. On October 3, 2025, our subsidiary in Brazil received a summons to acknowledge the decision issued by the Regional Judgment Office, which fully upheld the assessment issued against our subsidiary in Brazil, without any reductions.The Company believes that the IRS assessment and the decision by the Regional Judgment Office is incorrect and does not believe that it is probable that it will incur a loss related to these matters. The Company intends to vigorously defend its position regarding both items and filed an appeal on the Regional Judgment Office’s decision in November 2025, which has been assigned to the 2nd Ordinary Panel of the 3rd Chamber of the 1st Section of Conselho Administrativo de Recursos Fiscais (Administrative Council of Tax Appeals).

(9)Income Taxes

We compute and apply to ordinary income or loss an estimated annual effective tax rate on a quarterly basis based on current and forecasted business levels and activities, including the mix of domestic and foreign results and enacted tax laws. The estimated annual effective tax rate is updated quarterly based on actual results and updated operating forecasts. Ordinary income or loss refers to income or loss before income taxes excluding significant, unusual or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs as a discrete item of tax.

The following table summarizes the income tax expense:

The effective tax rate for the third quarter and first nine months of 2026 was different than the U.S. statutory tax rate of 21% primarily due to no tax benefit being recorded on U.S. and Switzerland losses with a valuation allowance and the mix of foreign earnings.

The effective tax rate for the third quarter and first nine months of 2025 was different from the U.S. statutory rate of 21% primarily due to the recording of a valuation allowance against the Company’s previously realizable U.S. and Switzerland deferred tax assets of $34.2 million and $8.4 million, respectively. No benefit continues to be recognized on these losses through September 30, 2026.

We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2022 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. Other jurisdictions are generally closed for years prior to 2020.

There were no material changes to our valuation allowances in the first nine months of 2026.

(10)Fair Value Measurements and Derivative Instruments

In the normal course of business, we are exposed to certain risks related to fluctuations in currency exchange rates. We use various derivative financial instruments, primarily foreign currency derivatives as part of our overall strategy to manage risks from these market fluctuations.

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 anticipate nonperformance by any of the counterparties to our instruments.

Foreign currency derivatives

We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, are used to hedge global currency exposures such as foreign currency denominated debt, receivables, payables, sales and purchases.

Foreign currency forward and swap contracts are used to mitigate the foreign exchange risk of balance sheet items. These derivatives are fair value hedges. Gains and losses from these derivatives are recorded in cost of goods sold and they are largely offset by the financial impact of translating foreign currency-denominated payables and receivables.

In the third quarter and first nine months of 2026, we entered into foreign currency derivatives with maturities ofone month to 12 months in order to protect against the risk that cash flows associated with certain sales and purchases denominated in a currency other than the U.S. dollar will be adversely affected by future changes in foreign exchange rates. These derivatives are designated as cash flow hedges. The resulting unrealized gains or losses from these derivatives are recorded in Accumulated Other Comprehensive Loss (“AOCL”) and subsequently, when realized, are reclassified to net sales or cost of goods sold in the Condensed Consolidated Statements of Operations when the hedged exposures affect earnings.

All derivatives are recorded on the balance sheet at fair value. If the derivative is designated and effective as a cash flow hedge, changes in the fair value of the derivative are recognized in AOCL until the hedged item is recognized in earnings. The ineffective portion of a derivative's fair value, if any, is recognized in earnings immediately. If a derivative is not a hedge, changes in the fair value are adjusted through earnings. The fair values of the outstanding derivatives are recorded on the balance sheet as assets (if the derivatives are in a gain position) or liabilities (if the derivatives are in a loss position). The fair values will also be classified as short-term or long-term depending upon their maturity dates. The fair value of all of our derivatives was determined using Level 2 inputs.

The notional amounts of our outstanding derivative instruments as of September 30, 2026 and December 31, 2025 were as follows:

The fair value of our outstanding derivatives designated as hedges was a pre-tax unrealized loss of $0.3 million as of September 30, 2026, which was recorded in other accrued liabilities on the Condensed Consolidated Balance Sheets.

As of September 30, 2026, net unrealized pre-tax losses of $0.6 million related to our foreign currency derivatives were reported in AOCL and will be released to earnings within the next 12 months. No ineffectiveness expense was recorded in the third quarter or first nine months of 2026 or 2025.

The pre-tax realized gains on designated cash flow hedges are recognized in the Statements of Operations when the hedged item impacts earnings and were as follows for the periods ended September 30, 2026 and 2025:

Pretax gains on non-designated derivatives recognized in earnings were as follows:

The following table summarizes the fair value of our outstanding derivatives not designated as hedges (on a gross basis) and balance sheet classification as of September 30, 2026 and December 31, 2025:

(11)Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss, including the amounts reclassified, for the third quarter and first nine months of 2026 and 2025 were as follows:

(12)Loss per Share

The following table presents a reconciliation of the numerator and denominator of basic and diluted loss per share for the three and nine months ended September 30, 2026 and 2025, respectively:

Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding. Diluted loss per share is calculated by dividing net loss by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.

The weighted average common shares outstanding for the diluted loss per share calculation for the three and nine months ended September 30, 2026 excludes the dilutive effect of approximately 5,847 shares and 7,416 shares, respectively, and 71,431 shares and 38,435 shares for the three and nine months ended September 30, 2025, respectively, primarily related to restricted stock units (“RSUs”), as their inclusion would have been anti-dilutive due to the Company’s net loss.

Additionally, the weighted average common shares outstanding for the diluted loss per share calculation excludes consideration of 419,731 and 477,646 equivalent shares for the three and nine months ended September 30, 2026, respectively, and 344,189 and 379,827 equivalent shares for the three and nine months ended September 30, 2025, respectively, as their effect would have been anti-dilutive.

(13)Stock-Based Compensation

The Human Resources and Compensation Committee of our Board of Directors granted 38,291 deferred share units (“DSUs”) and 55,866 deferred RSUs (“DRSUs”) to our non-employee directors in the first nine months of 2026 under our Omnibus Equity Incentive Plan. No equity grants were made to our employees in the first nine months of 2026 under our Omnibus Equity Incentive Plan.

We measure the fair value of grants of DSUs and DRSUs based on the closing market price of a share of our common stock on the date of the grant (or if the market is not open for trading on such date, the immediately preceding day on which the market is open for trading). The weighted average fair value per share was $6.86 for DSUs and $8.95 for DRSUs granted to non-employee directors during the nine months ended September 30, 2026.

During the first nine months of 2026, the Company issued an aggregate of 250,000 common stock purchase warrants to a consultant pursuant to an agreement with respect to consulting services. The warrants were measured at their fair value on the grant date, resulting in stock-based compensation expense of $0.7 million, which was recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations.

In the three months ended September 30, 2026 and 2025, we recognized $1.6 million and $1.0 million, respectively, of stock-based compensation expense. The majority of the expense, $1.3 million and $0.7 million, respectively, was recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations, with the remaining expense recorded in cost of goods sold.

In the nine months ended September 30, 2026 and 2025, we recognized $4.9 million and $3.4 million, respectively, of stock-based compensation expense. The majority of the expense, $4.2 million and $2.6 million, respectively, was recorded in selling and administrative expense in the Condensed Consolidated Statements of Operations, with the remaining expense recorded in cost of goods sold.

As of September 30, 2026, the unrecognized compensation cost related to the unvested portion of all stock-based awards was approximately $2.9 million and is expected to be recognized over the remaining vesting period of the respective grants.

(14)Supplementary Balance Sheet Detail

Supplier Finance Program (“SFP”) Obligations

GrafTech Mexico S.A. de C.V. (“GrafTech Mexico”) participates in an electronic vendor voucher payment program supported by the Mexican Government through one of its national banks, whereby suppliers can factor their invoices through a financial intermediary. This program gives GrafTech Mexico’s suppliers the option to settle trade receivables by obtaining payment from the financial intermediary prior to the invoice due date for a discounted amount. GrafTech Mexico’s responsibility is limited to making payment on the terms originally negotiated with its supplier, regardless of whether the supplier elects to receive early payment. The range of payment terms GrafTech Mexico negotiates with its suppliers is consistent, irrespective of whether a supplier participates in the program.

As of September 30, 2026 and December 31, 2025, $7.7 million and $3.9 million, respectively, of SFP obligations were included in accounts payable on the Condensed Consolidated Balance Sheets and, upon settlement, are reflected as cash flow from operating activities in the Condensed Consolidated Statements of Cash Flows.

(15)Other (Income) Expense, net

The following table presents the details of other (income) expense, net:

In the first nine months of 2026, the Company completed the sale of certain landfill assets located at sites that were previously divested as part of prior business disposals. These landfill assets primarily consisted of land and other related fixed assets retained by the Company following the earlier divestitures.

The carrying value of the disposed assets consisted primarily of land and other fixed assets with a net book value of less than $0.1 million. In connection with the sale, the Company also settled associated obligations related to closure and post-closure activities at the landfill sites.

Total consideration received in the transactions was $9.7 million in cash. The Company recognized a pre-tax gain on sale of $12.8 million, which was comprised of (i) cash proceeds in excess of the carrying value of the land assets, net of fees and (ii) the derecognition of $3.1 million of liabilities associated with the sites.

Cash proceeds from the sale are presented within investing activities in the Condensed Consolidated Statements of Cash Flows.

The Company had no significant continuing involvement with the disposed landfill assets following the sale.

(16)Restructuring

On August 6, 2026, the Company’s Board of Directors approved a plan to permanently cease manufacturing operations at its graphite electrode and pin manufacturing facility in Monterrey, Mexico. The Company expects this action to better align its manufacturing capacity with market conditions. The Company expects the planned closure to improve manufacturing utilization, reduce the Company’s cost structure and capital requirements, and concentrate production at the Company’s larger and more efficient manufacturing facilities, while preserving the product capabilities required to serve its customers. The Company expects to wind down operations at its Monterrey facility in phases, with production expected to conclude early in the second quarter of 2027, although the timing remains subject to operational requirements and compliance with applicable labor, regulatory and other legal obligations in Mexico.

In connection with this restructuring plan, the Company recognized restructuring and other exit charges of $13.9 million during the three and nine months ended September 30, 2026, consisting primarily of write-offs of fixed assets and severance and related costs.

The following table summarizes our restructuring and other exit charges for the third quarter and first nine months of 2026:

The following table presents a roll-forward of the liability incurred for restructuring and other exit charges, which are recorded in other accrued liabilities on the Condensed Consolidated Balance Sheets:

The above amount is expected to be substantially paid by the end of the second quarter of 2027.

The Company expects to incur approximately $20 million to $25 million of costs associated with the Mexico Facility Closure, primarily consisting of employee termination benefits, facility closure and other environmental costs. These amounts are expected to be recognized through the end of 2027.

The Company intends to sell the Monterrey property following the wind-down and permanent removal of graphite electrode production capabilities at the site and has begun preliminary activities in preparation for a potential sale. Any potential proceeds from a future sale would be used to provide additional liquidity and reduce the Company’s existing debt as permitted under our credit agreements and indentures.