GrafTech Reports Fourth Quarter and Year Ended 2007 Results

GrafTech International Ltd. (NYSE:GTI) today announced financial results for the fourth quarter and year ended December 31, 2007. 2007 Full Year Highlights Net sales increased 18 percent, to $1,005 million, versus 2006 net sales of $855 million. Graphite electrode segment sales increased 21 percent to $812 million, as compared to $670 million in 2006. Graphite electrode sales volume was 210 thousand metric tons, virtually flat with 2006. Gross profit increased 36 percent, to $331 million, as compared to $243 million in 2006. Gross margin expanded over four percentage points to 32.9 percent as compared to 28.4 percent in 2006. Selling and administrative expenses were reduced by $11 million or 11 percent, to $90 million, as compared to $101 million in 2006. Income from continuing operations was $156 million, or $1.39 per diluted share, versus $42 million, or $0.43 per diluted share, in 2006. Income from continuing operations before special items* increased over two and a half times to $151 million, or $1.35 per diluted share, as compared to $56 million, or $0.55 per diluted share, in 2006. Net cash provided by operating activities more than doubled to $131 million, versus $64 million in 2006. Net debt* was reduced by $139 million to $370 million. Craig Shular, Chief Executive Officer of GrafTech, commented, "The significant improvement in the results was enabled by better price realization and the team’s relentless pursuit of cost reductions and increased production efficiencies. Operating cash flow more than doubled to $131 million, allowing us to complete the year with net debt of $370 million, the lowest in our Company’s history. Finally, growing sales by 18 percent while at the same time reducing selling and administrative costs by 11 percent rounded out a solid year.” 2007 Fourth Quarter Highlights Net sales increased $34 million to $269 million, a 14 percent increase over net sales of $235 million in the fourth quarter of 2006. Currency effects benefited net sales by approximately five percentage points. Gross profit increased approximately 17 percent, to $81 million, or 30.1 percent of net sales, as compared to $69 million, or 29.4 percent of net sales, in the fourth quarter of 2006. Gross profit in the quarter was negatively impacted by a one-time $5 million charge associated with the termination and closure of our defined benefit South African pension plan. Excluding the impact of this charge, gross margin for the quarter would have been 32.0 percent. Income from continuing operations was $39 million, or $0.34 per diluted share, versus $26 million, or $0.24 per diluted share, in the 2006 fourth quarter. Income from continuing operations before special items* was $44 million, or $0.38 per diluted share, as compared to $21 million, or $0.20 per diluted share, in the 2006 fourth quarter. The year on year change included the benefit of a seven percentage point improvement, or approximately $0.03 per share, in our effective income tax rate from 28 percent to 21 percent. Net cash provided by operating activities increased to $55 million, versus $20 million in the 2006 fourth quarter. Graphite Electrode Segment The Graphite Electrode segment’s net sales increased 15 percent to $218 million in the 2007 fourth quarter, as compared to $190 million in the 2006 fourth quarter. The increase was primarily due to higher selling prices for graphite electrodes and the positive impact of currency exchange rates, offset slightly by lower sales volume in the quarter. Operating income for the Graphite Electrode segment was $50 million in the fourth quarter of 2007, a 47 percent or $16 million improvement over the same period in 2006. Operating income in the quarter was favorably impacted by higher graphite electrode selling prices and the flow through of successful productivity initiatives, partially offset by rising raw material costs and pension termination and closure costs. Operating income margin for the segment expanded four and a half percentage points to 22.9 percent in the 2007 fourth quarter, as compared to 18.1 percent in the 2006 fourth quarter. Advanced Graphite Materials Segment Net sales for the Advanced Graphite Materials (AGM) segment were $31 million in the 2007 fourth quarter, as compared to $28 million in the 2006 fourth quarter. Operating income for the AGM segment was $6 million, as compared to $4 million in the 2006 fourth quarter, primarily the result of higher AGM selling prices as we continue to penetrate higher margin end markets. In addition, our productivity initiatives are gaining traction in this segment. Other Segment (Natural graphite, carbon electrodes and refractories) Net sales for the Other segment were $20 million, as compared to $18 million in the 2006 fourth quarter. Lower sales volume associated with the exit of the carbon electrode business was offset by increased refractories and natural graphite sales. Operating income for the Other segment improved to $1 million in the fourth quarter of 2007 versus a loss of $2 million in 2006. Corporate Selling and administrative and research and development expenses were $24 million in the 2007 fourth quarter, as compared to $29 million in the 2006 fourth quarter. The decrease resulted largely from realized benefits associated with restructuring and productivity projects. Interest expense was $7 million in the 2007 fourth quarter or $4 million lower than the same period in the prior year as a result of successful deleveraging efforts. Other expense, net, was $2 million in the 2007 fourth quarter, as compared to other income, net, of $8 million in the same period in 2006. The change in the quarter is largely due to inter-company loan currency translation losses. The effective income tax rate in 2007, excluding other special charges, was 25 percent, approximately two percentage points better than our previous guidance primarily as a result of favorable jurisdictional profitability mix. The positive impact of currency exchange rate fluctuations on 2007 revenue, which was approximately four percent, was largely offset by production costs in corresponding jurisdictions. The net impact was a benefit to 2007 full year profitability by approximately $0.03 per share. Outlook Mr. Shular commented on outlook stating, "We began 2008 by announcing a further $125 million redemption of our senior notes, our most expensive debt. This latest call leaves just $75 million senior notes remaining from the total $550 million issued and represents a significant improvement to our balance sheet. On a macro level, we remain encouraged by underlying global steel demand and expect solid demand from our end markets in 2008. Based on various steel industry projections, world wide electric arc furnace steel production is expected to grow approximately two to three percent year over year.” Mr. Shular further commented, "We have built a solid order book, secured pricing for approximately 70 percent of our key raw materials related to graphite electrode production, including 100% of our needle coke requirements, and if industry forecasts are correct, we would expect gross margin and operating margin expansion for 2008.” We expect capital expenditures to increase in 2008 as we continue to enhance our production platform and seek opportunities to improve product quality, increase efficiencies and lower costs. There are several projects underway in the graphite electrode segment, notably a multi-year project at our facility in Spain which will employ our latest technology and equipment, resulting in a higher quality product for our customers and improved efficiencies. In the AGM segment, a number of projects with attractive returns have also been identified to enable us to address growing end markets, including solar. Based on the assumption of stable global economic conditions for 20081, GrafTech expects: Total company net sales to increase approximately 12 to 14 percent; Operating income before special items targeted to be approximately $295 million; The effective book tax rate to be between 27 percent and 29 percent; Capital expenditures to be approximately $70 million to $75 million; Depreciation expense of approximately $32 million; and Cash flow from operations to be about $165 million. In conjunction with this earnings release, you are invited to listen to our earnings call being held today at 11:00 a.m. EST. The call will be webcast and available at www.graftech.com, in the investor relations section. A conference call will also be available. The dial-in number is 877-795-3604 for domestic and 719-325-4805 for international. The rebroadcast webcast will be available following the call, and for 30 days thereafter, at www.graftech.com, in the investor relations section. GrafTech International Ltd. is one of the world’s largest manufacturers and providers of high quality synthetic and natural graphite and carbon based products and technical and research and development services, with customers in 80 countries engaged in the manufacture of steel, automotive products and electronics. We manufacture graphite electrodes, products essential to the production of electric arc furnace steel. We also manufacture thermal management, fuel cell and other specialty graphite and carbon products for, and provide services to, the electronics, power generation, solar, oil and gas, transportation, petrochemical and other metals markets. We operate 11 manufacturing facilities strategically located on four continents. For additional information on GrafTech International Ltd., call 216-676-2000, or visit our website at www.graftech.com. NOTE ON FORWARD-LOOKING STATEMENTS: This news release and related discussions may contain forward-looking statements about such matters as: our preliminary unaudited results for the fourth quarter and full year ended December 31, 2007 and outlook for 2008; estimated future capital expenditures and their impact on product quality and efficiencies; the anticipated timing for our filing of the financial statements and annual report on Form 10-K with the SEC; growth rates and future production and sales of products that incorporate or that are produced using our products; changes in production capacity in our operations and our customers’ operations; growth rates for, future prices and sales of, and demand for our products and our customers products; costs of materials and production, including anticipated increases therein; productivity, business process and operational initiatives, and their impact on us; our position in markets we serve; tax rates; capital expenditures and their impact on us; nature and timing of restructuring charges and payments; future operational and financial performance; strategic plans; regional and global economic and industry market conditions, changes in such conditions and the impact thereof; interest rates; financing and deleveraging activities; stock repurchases plans; rationalization and restructuring activities; raw material and supply chain management; future sales, costs, working capital, revenues, business opportunities; operational and financial performance; debt levels; cash flows and use of cash; cost savings and reductions; margins; earnings; and growth plans. We have no duty to update these statements. Our expectations and targets are not predictions of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. Actual future events, circumstances, performance and trends could differ materially, positively or negatively, from those set forth in these statements due to various factors, including: the extent of any adjustments to our preliminary 2007 fourth quarter and full year results; the actual timing of the filing of our Form 10-K with the SEC and potential effects of delays in such filing; changes in economic conditions or product end market conditions; non-attainment of anticipated EAF steel production; graphite electrode manufacturing capacity increases; failure of increased EAF steel production or stable graphite electrode production to result in stable or increased graphite electrode demand, prices or sales volumes; differences between actual graphite electrode prices and spot or announced prices; changes in inventory management and utilization or in supply chain management; consolidation of steel producers; limitations on the amounts of or delays in the timing of our capital expenditures; absence of successful development and commercialization of new or improved products or subsequent displacement thereof by other products or technologies; failure to expand manufacturing capacity to meet growth in demand, if any; inability to protect our intellectual property rights or infringement of intellectual property rights of others; unanticipated developments in legal proceedings or litigation; non-realization of price increases or adjustments; non-realization of anticipated benefits from organizational changes and restructurings; significant changes in our provision for income taxes and effective income tax rate; unanticipated developments relating to health, safety or environmental compliance or remediation obligations or liabilities to third parties, labor relations, raw materials or energy; unavailability of raw materials; changes in the cost of key and other raw materials, including petroleum based coke, by reason of shortages, market pricing, pricing terms in applicable supply contracts, or other events; changes in credit markets, changes in market prices of our securities, or other events that affect our financing and capital structure plans; changes in interest or currency exchange rates, competitive conditions or inflation; changes in appropriation of government funds or failure to satisfy conditions to government grants; changes in performance that affect financial covenant compliance or funds available for borrowing; failure to achieve earnings or other estimates; business interruptions adversely affecting our ability to supply our products; and other risks and uncertainties, including those detailed in our SEC filings, as well as future decisions by us. This news release does not constitute an offer or solicitation as to any securities. References to street or analyst earnings estimates mean those published by First Call. GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) (Unaudited)   At December 31, ASSETS 2006 2007 Current assets: Cash and cash equivalents $ 149,517 $ 54,741 Accounts and notes receivable, net of allowance for doubtful accounts of $3,186 at December 31, 2006 and $2,971 at December 31, 2007 166,528 158,486 Inventories 239,129 285,433 Prepaid expenses and other current assets 14,071   10,133   Total current assets 569,245   508,793     Property, plant and equipment 889,389 881,067 Less: accumulated depreciation 599,636   564,613   Net property, plant and equipment 289,753 316,454 Deferred income taxes 6,326 7,144 Goodwill 9,822 9,683 Other assets 29,253 23,080 Assets held for sale 1,802 - Restricted cash -   1,547   Total assets $ 906,201   $ 866,701   LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 62,094 $ 58,975 Interest payable 18,872 9,633 Short-term debt 458 1,014 Accrued income and other taxes 41,099 29,996 Other accrued liabilities 98,068   104,066   Total current liabilities 220,591   203,684   Long-term debt: Principal value 657,714 423,234 Fair value adjustments for hedge instruments 6,421 2,421 Unamortized bond premium 1,265   481   Total long-term debt 665,400   426,136   Other long-term obligations 103,408 94,010 Deferred income taxes 27,000 30,171 Minority stockholders’ equity in consolidated entities 3,722 -   Stockholders’ (deficit) equity: Preferred stock, par value $.01, 10,000,000 shares authorized, none issued - - Common stock, par value $.01, 150,000,000 shares authorized, 101,433,949 shares issued at December 31, 2006 and 105,169,507 shares issued at December 31, 2007 1,026 1,052 Additional paid-in capital 950,023 988,662 Accumulated other comprehensive loss (312,763 ) (278,316 ) Accumulated deficit (660,153 ) (506,666 ) Less: cost of common stock held in treasury, 2,501,201 shares at December 31, 2006 and 2007 (85,197 ) (85,197 ) Less: common stock held in employee benefit and compensation trusts, 472,566 shares at December 31, 2006 and 471,373 shares at December 31, 2007. (6,856 ) (6,835 ) Total stockholders’ (deficit) equity (113,920 ) 112,700   Total liabilities and stockholders’ (deficit) equity $ 906,201   $ 866,701   GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share data) (Unaudited)   For the For the Three Months Ended Twelve Months Ended December 31, December 31, 2006   2007   2006   2007     Net sales $ 235,482 $ 269,430 $ 855,433 $ 1,004,818 Cost of sales   166,351   188,070   612,298   673, 833   Gross Profit 69,131 81,360 243,135 330,985   Research and development 2,391 2,147 10,558 8,550 Selling and administrative expenses 27,058 22,080 101,415 90,467 Restructuring charges 2,262 563 9,956 1,369 Impairment loss on long-lived assets 1,676 - 10,464 - Antitrust investigations and related lawsuits and claims - - 2,513 - Other (income) expense, net (7,845 ) 1,765 (6,555 ) (8,080 ) Interest expense 10,771 6,976 46,524 35,949 Interest income   (585 ) (256 ) (957 ) (1,680 ) 35,728 33,275 173,918 126,575   Income from continuing operations before provision for income taxes and minority stockholders’ share of income 33,403 48,085 69,217 204,410 Provision for (benefit from) income taxes   7,459   8,892   27,085   48,327   Income (loss) from continuing operations before minority interest 25,944 39,193 42,132 156,083 Less: minority stockholders' share of income (loss)   (284 ) (92 ) (268 ) (50 ) Income (loss) from continuing operations 26,228 39,285 42,400 156,133 Income (loss) from discontinued operations, (including gain from sale of discontinued operations of $58,631 in 2006), net of tax   51,052     685     48,934     (2,432 )   Net income (loss) $ 77,280   $ 39,970   $ 91,334   $ 153,701     Basic income (loss) per common share:   Income (loss) per share from continuing operations $ 0.27 $ 0.38 $ 0.43 $ 1.55 Income (loss) per share from discontinued operations   0.52   0.01   0.50   (0.02 ) Net income (loss) per share $ 0.79   $ 0.39   $ 0.93   $ 1.53     Weighted average common shares outstanding (in thousands) 99,282 102,121 97,965 100,468   Diluted income (loss) per common share:   Income (loss) per share from continuing operations $ 0.24 $ 0.34 $ 0.43 $ 1.39 Income (loss) per share from discontinued operations   0.45   0.01   0.43   (0.02 ) Net income (loss) per share $ 0.69   $ 0.35   $ 0.86   $ 1.37     Weighted average common shares outstanding (in thousands) 112,852 117,778 112,152 116,343 GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)   For the For the Three Months Ended Twelve Months Ended December 31, December 31, 2006 2007 2006 2007   Cash flow from operating activities: Net income (loss) $ 77,280 $ 39,970 $ 91,334 $ 153,701 Adjustments to reconcile net income (loss) to cash provided by operations: (Income) loss from discontinued operations (including gain from the sale of discontinued operations of $58,631 in 2006, net of tax) (51,052 ) (685 ) (48,934 ) 2,432 Depreciation and amortization 9,174 13,521 39,124 39,005 Deferred income taxes (2,226 ) 1,634 1,457 4,213 Antitrust investigations and related lawsuits and claims - - 258 - Restructuring charges 2,262 563 9,956 1,369 Impairment loss on long-lived and other assets 1,676 - 10,464 - Interest expense - 177 2,664 3,392 Post retirement plan changes (2,106 ) (3,374 ) (12,799 ) (5,637 ) Gain on sale of assets (1,854 ) (4,636 ) (3,974 ) (29,861 ) Other (credits) charges, net 1,094 (1,717 ) 7,271 765 (Increase) decrease in working capital* (15,812 ) 1,396 (23,907 ) (36,676 ) (Increase) decrease long-term assets and liabilities 1,151 11,095 (8,733 ) 6,441 Excess tax benefit from stock-based compensation -   (3,311 ) -   (8,372 ) Net cash provided by operating activities 19,587 54,633 64,181 130,772   Cash flow from investing activities: Capital expenditures (11,801 ) (17,188 ) (46,035 ) (50,817 ) Patent capitalization (180 ) - (875 ) (659 ) Purchase of derivative investments - (144 ) (266 ) (144 ) Proceeds from sale of assets 1,668 3,120 14,394 29,745 Proceeds from sale of discontinued operations, net of purchase price adjustments 151,320 - 151,320 (2,794 ) Increase in restricted cash - - - (1,547 ) Sale of investments - 1,151 - 1,151 Payments for dissolution of joint venture - (200 ) - (200 ) Payments for minority share redemption -   (1,260 ) -   (1,260 ) Net cash (used in) provided by investing activities 141,007 (14,521 ) 118,538 (26,525 )   Cash flow from financing activities: Short-term debt borrowings (reductions), net (523 ) (317 ) (772 ) 414 Revolving Facility borrowings 60,312 (20 ) 510,042 241,625 Revolving Facility payments (90,099 ) (763 ) (549,088 ) (241,922 ) Long-term debt reductions - 169 - (234,310 ) Proceeds from exercise of stock options 462 3,327 462 22,994 Purchase of treasury shares -   - (212 ) - Excess tax benefit from stock-based compensation - 3,311 - 8,372 Proceeds from long-term financing obligation -   (35 ) -   2,940   Net cash provided by (used in) financing activities (29,848 ) 5,672 (39,568 ) (199,887 )   Net increase (decrease) in cash and cash equivalents 130,746 45,784 143,151 (95,640 ) Effect of exchange rate changes on cash and cash equivalents 61 75 398 864 Cash and cash equivalents at beginning of period 18,710   8,882   5,968   149,517   Cash and cash equivalents at end of period $ 149,517   $ 54,741   $ 149,517   $ 54,741   * Net change in working capital due to the following components: (Increase) decrease in current assets: Accounts and notes receivable, net $ (18,891 ) $ 23,134 $ 17,901 $ 16,309 Effect of factoring on accounts receivable (21,096 ) (9,070 ) (12,213 ) 276 Inventories 7,574 (11,701 ) (5,909 ) (27,277 ) Prepaid expenses and other current assets 1,422 (1,020 ) (396 ) 422 Payments for antitrust investigations and related lawsuits and claims (5,643 ) - (23,314 ) (5,380 ) Restructuring payments (5,370 ) (1,172 ) (14,842 ) (6,884 ) Increase (decrease) in accounts payable and accruals 14,246 (4,806 ) 14,823 (4,903 ) Increase (decrease) in interest payable 11,946   6,031   43   (9,239 ) (Increase) decrease in working capital $ (15,812 ) $ 1,396   $ (23,907 ) $ (36,676 ) GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES SEGMENT DATA SUMMARY (Dollars in thousands) (Unaudited)   For the Three Months Ended December 31, For theTwelve Months EndedDecember 31, 2006   2007 2006   2007   Net sales: Graphite Electrodes $189,715 $218,429 $670,012 $812,325 Advanced Graphite Materials 27,997 30,859 103,738 114,423 Other 17,769 20,142 81,683 78,070 Net sales $235,481 $269,430 $855,433 $1,004,818   Operating income (loss): Graphite Electrodes $34,312 $50,108 $113,576 $209,799 Advanced Graphite Materials 3,675 5,888 11,913 20,453 Other (2,243) 574 (14,747) 347 Operating Income $35,744 $56,570 $110,742 $230,599 Operating income (loss) margin: Graphite Electrodes 18.1% 22.9% 17.0% 25.8% Advanced Graphite Materials 13.1% 19.1% 11.5% 17.9% Other (12.6%) 2.8% (18.1%) 0.4% Operating income margin 15.2% 21.0% 12.9% 22.9% RECONCILIATION OF NON-GAAP FINANCIAL MEASURES GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES (Dollars in thousands, except per share data) (Unaudited)   Income From Continuing Operations and Earnings per Share Reconciliation   For the Three Months Ended December 31, 2006   For the Three Months Ended December 31, 2007 Income   EPS Impact Income   EPS Impact Income from continuing operations $ 26,228   $ 0.24 $ 39,285   $ 0.34 Adjustments, net of tax, per diluted share: Pension settlement charge - - 3,315 0.03 Income tax valuation allowance release - - (2,159) (0.02) Restructuring, antitrust investigations and related lawsuits and claims, impairment loss on long-lived assets and Other (income) expense, net, net of tax (4,917) (0.04) 3,346 0.03 Income from continuing operations before special items $ 21,311 $ 0.20 $ 43,787 $ 0.38   Income From Continuing Operations and Earnings per Share Reconciliation   For the Twelve Months Ended December 31, 2006 For the Twelve Months Ended December 31, 2007 Income   EPS Impact Income   EPS Impact Income from continuing operations $ 42,400 $ 0.43 $ 156,133 $ 1.39 Adjustments, net of tax, per diluted share: Pension settlement charge - - 3,315 0.03 Income tax valuation allowance release - - (2,486) (0.02) Restructuring, antitrust investigations and related lawsuits and claims, impairment loss on long-lived assets and Other (income) expense, net, net of tax 13,972 0.12 (5,683) (0.05) Income from continuing operations before special items $ 56,372 $ 0.55 $ 151,279 $ 1.35 The non-GAAP earnings per diluted share includes 13.6 million shares underlying our contingently convertible debentures and excludes approximately $1 million (before and after tax) in the 2006 fourth quarter and the 2007 fourth quarter and $5 million (before and after tax) in 2006 and 2007 contingently convertible debenture interest expense. NOTE ON RECONCILIATION OF EARNINGS DATA: Income (loss) excluding the items mentioned above is a non-GAAP financial measure that GrafTech calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GrafTech believes that the excluded items are not primarily related to core operational activities. GrafTech believes that income (loss) excluding items that are not primarily related to core operational activities is generally viewed as providing useful information regarding a company’s operating profitability. Management uses income (loss) excluding these items as well as other financial measures in connection with its decision-making activities. Income (loss) excluding these items should not be considered in isolation or as a substitute for net income (loss), income (loss) from continuing operations or other consolidated income data prepared in accordance with GAAP. GrafTech’s method for calculating income (loss) excluding these items may not be comparable to methods used by other companies. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES (Dollars in thousands) (Unaudited)   Net Debt Reconciliation 12/31/06   12/31/07 Long-term debt $665,400 $426,136 Short-term debt 458   1,014 Total debt $665,858 $427,150 Less: Fair value adjustments for hedge instruments 6,421 2,421 Unamortized bond premium 1,265 481 Cash and cash equivalents 149,517   54,741 Net debt $508,655   $369,507 NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP financial measure that GrafTech calculates according to the schedule above, using GAAP amounts from the Consolidated Financial Statements. GrafTech excludes the unamortized bond premium from its sale of $150 million aggregate principal amount of additional senior notes in May 2002 at a price of 104.5% of principal amount. The premium received in excess of principal amount is amortized to reduce interest expense over the term of the senior notes. GrafTech also excludes the fair value adjustments for hedge instruments, which includes interest rate swaps that have been marked-to-market and realized gains or (losses) on interest rate swaps. GrafTech believes that net debt is generally accepted as providing useful information regarding a company’s indebtedness and that net debt provides meaningful information to investors to assist them to analyze leverage. Management uses net debt as well as other financial measures in connection with its decision-making activities. Net debt should not be considered in isolation or as a substitute for total debt or total debt and other long term obligations calculated in accordance with GAAP. GrafTech’s method for calculating net debt may not be comparable to methods used by other companies and is not the same as the method for calculating net debt under its senior secured revolving credit facility. GrafTech does not forecast the fair value adjustment for hedging instruments. 1 Source: World Bank and International Monetary Fund 2008 GDP Forecast. * Non-GAAP financial measures. See attached reconciliations. GTI-G