[February 08, 2019]

GrafTech Reports Unaudited Full Year and Fourth Quarter 2018 Results

GrafTech International Ltd. (NYSE: EAF) (GrafTech or the Company) today announced unaudited financial results for the fiscal year ended December 31, 2018, including net income of $854 million, or $2.87 per share, and Adjusted EBITDA from continuing operations of $1.2 billion. Results for the fourth quarter of 2018 were also strong including net income of $230 million, or $0.79 per share, and Adjusted EBITDA from continuing operations of $326 million.

"2018 was a very successful year for GrafTech including record net sales of $1.9 billion and net income of $854 million," said David Rintoul, President and Chief Executive Officer. "Based on our strong cash flow from operations of $837 million in 2018 and consistent with our stated policy to be a shareholder friendly and responsible company, we returned cash to shareholders and maintained a strong balance sheet. Looking ahead to 2019, demand for our products remains solid and we expect to have continued robust cash flows."

Key Financial Measures

Net sales for the year ended December 31, 2018, increased to $1.9 billion compared to $551 million in 2017. Net sales for the fourth quarter of 2018 also increased to $533 million, compared to $192 million in the fourth quarter of 2017. The improvement was primarily due to an increase in graphite electrode pricing. The weighted average realized price of graphite electrodes rose to $9,937 per metric ton (MT) in 2018, including $9,950 per MT in the fourth quarter. During 2018, graphite electrode demand and pricing remained positive due to a combination of growth in electric arc furnace steel manufacturing, long-term reductions in electrode manufacturing capacity, and limited supply of petroleum needle coke, the primary raw material for graphite electrodes.

Net income for 2018 increased to $854 million, or $2.87 per share, compared to $8 million, or $0.03 per share in 2017. Likewise, fourth quarter 2018 net income increased to $230 million, or $0.79 per share, compared to $56 million, or $0.18 per share, in the fourth quarter of 2017.

Adjusted EBITDA from continuing operations also climbed to $1.2 billion in 2018 compared to $96 million in 2017. Fourth quarter Adjusted EBITDA from continuing operations climbed to $326 million compared to $57 million in the prior year period. Higher graphite electrode revenues were the primary driver of higher net income and Adjusted EBITDA from continuing operations.

Cash flow from operations increased to $837 million in fiscal year 2018 up from $37 million in 2017. Fourth quarter cash flow from operations increased to $224 million in the quarter up from $3 million in the prior year period. This increase was primarily due to higher net income. Full-year 2018 capital expenditures were $68 million, including $21 million in the fourth quarter.

Key operating metrics

Operational Update

Our graphite electrode manufacturing plants operated at high levels throughout 2018. Annual production was 179 thousand MT compared to 166 thousand MT for 2017. Fourth quarter 2018 production of 51 thousand MT was also up from 44 thousand MT in the prior year period due to progress on the debottlenecking projects at our graphite electrode plants.

Commercial Strategy

GrafTech has successfully sold approximately two-thirds of its cumulative long-term production capacity through three- to five-year, fixed-volume, fixed-price take or pay contracts. These contracts provide reliability of long-term graphite electrode supply for customers and stability of future operating results for shareholders.

Capital Structure

As of December 31, 2018, GrafTech has cash and equivalents of $50 million and total debt of $2.2 billion. During the fourth quarter, the Company returned $228 million cash to shareholders in the form of a special dividend of $0.70 per share and a regular quarterly dividend of $0.085 per share.

Distribution

The Board of Directors has declared a dividend of $.085 per share to stockholders of record as of the close of business on February 28, 2019, to be paid on March 29, 2019.

Conference Call

In conjunction with this earnings release, you are invited to listen to our earnings call being held on February 8, 2019 at 10:00 a.m. Eastern Standard Time. The webcast and accompanying slide presentation will be available at www.GrafTech.com, in the Investor Relations section. The earnings call dial-in number is +1 (866) 521-4909 in the U.S. and Canada or +1 (647) 427-2311 for international. A rebroadcast of the webcast will be available following the call until May 8, 2019, at www.GrafTech.com, in the Investor Relations section. GrafTech also makes its complete financial reports that have been filed with the Securities and Exchange Commission (SEC) and other information available at www.GrafTech.com. The information in our website is not part of this release or any report we file or furnish to the SEC.

About GrafTech

GrafTech International Ltd. is a leading manufacturer of high quality graphite electrode products essential to the production of electric arc furnace steel and other ferrous and non-ferrous metals. The Company has a competitive portfolio of low-cost graphite electrode manufacturing facilities, including three of the highest capacity facilities in the world. GrafTech is also the only large scale graphite electrode producer that is substantially vertically integrated into petroleum needle coke, the primary raw material for graphite electrode manufacturing, which is currently in limited supply. This unique position provides competitive advantages in product quality and cost.

Special note regarding forward-looking statements

This news release and related discussions may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "will," "may," "plan," "estimate," "project," "believe," "anticipate," "expect," "intend," "should," "would," "could," "target," "goal," "continue to," "positioned to," "are confident", "remain solid", "remain positive", "remain optimistic" or the negative version of those words or other comparable words. Any forward-looking statements contained in this news release are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our expectations and targets are not predictions of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. These forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to: our history of net losses and the possibility that we may not maintain profitability in the future; the possibility that we may be unable to implement our business strategies, including our initiative to secure and maintain longer-term customer contracts, in an effective manner; the possibility that recent tax legislation could adversely affect us or our stockholders; the fact that pricing for graphite electrodes has historically been cyclical and, in the future, the price of graphite electrodes will likely decline from recent highs; the sensitivity of our business and operating results to economic conditions; our dependence on the global steel industry generally and the electric arc furnace (EAF) steel industry in particular; the possibility that global graphite electrode overcapacity may adversely affect graphite electrode prices; the competitiveness of the graphite electrode industry; our dependence on the supply of petroleum needle coke; our dependence on supplies of raw materials (in addition to petroleum needle coke) and energy; the legal, economic, social and political risks associated with our substantial operations in multiple countries; the possibility that fluctuation of foreign currency exchange rates could materially harm our financial results; the possibility that our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period, including as a result of equipment failure, climate change, natural disasters, public health crises, political crises or other catastrophic events; the possibility that plant capacity expansions may be delayed or may not achieve the expected benefits; our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services; the possibility that we are unable to recruit or retain key management and plant operating personnel or successfully negotiate with the representatives of our employees, including labor unions; the possibility that we may divest or acquire businesses, which could require significant management attention or disrupt our business; the sensitivity of goodwill on our balance sheet to changes in the market; the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security; our dependence on protecting our intellectual property; the possibility that third parties may claim that our products or processes infringe their intellectual property rights; the possibility that our manufacturing operations are subject to hazards; changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities; the possibility that significant changes in our jurisdictional earnings mix or in the tax laws of those jurisdictions could adversely affect our business; the possibility that our indebtedness could limit our financial and operating activities or that our cash flows may not be sufficient to service our indebtedness; the possibility that restrictive covenants in our financing agreements could restrict or limit our operations; the fact that borrowings under certain of our existing financing agreements subjects us to interest rate risk; the possibility of a lowering or withdrawal of the ratings assigned to our debt; the possibility that disruptions in the capital and credit markets could adversely affect our results of operations, cash flows and financial condition, or those of our customers and suppliers; the possibility that highly concentrated ownership of our common stock may prevent minority stockholders from influencing significant corporate decisions; the fact that certain of our stockholders have the right to engage or invest in the same or similar businesses as us; the fact that certain provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated By-Laws could hinder, delay or prevent a change of control; the fact that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders; our status as a "controlled company" within the meaning of the NYSE corporate governance standards, which allows us to qualify for exemptions from certain corporate governance requirements; and other risks described in the "Risk Factors" section of our quarterly reports on Form 10-Q and other filings with the SEC.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our quarterly reports on Form 10-Q and other filings with the SEC. The forward-looking statements made in this press release relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement, except as required by law, whether as a result of new information, future developments or otherwise.

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 from continuing operations and adjusted EBITDA from continuing operations are non-GAAP financial measures. We define EBITDA from continuing operations, a non-GAAP financial measure, as net income or loss plus interest expense, minus interest income, plus income taxes, discontinued operations and depreciation and amortization from continuing operations. We define adjusted EBITDA from continuing operations as EBITDA from continuing operations plus any pension and other post-employment benefit ("OPEB") plan expenses, impairments, rationalization-related charges, initial public offering expenses, acquisition and proxy contest costs, non-cash gains or losses from foreign currency remeasurement of non-operating liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar, related party Tax Receivable Agreement expense, stock-based compensation and non-cash fixed asset write-offs. Adjusted EBITDA from continuing operations is the primary metric used by our management and our board of directors to establish budgets and operational goals for managing our business and evaluating our performance.

We monitor adjusted EBITDA from continuing operations as a supplement to our GAAP measures, and believe it is useful to present to investors, because we believe that it facilitates evaluation of our period-to-period operating performance by eliminating items that are not operational in nature, allowing comparison of our recurring core business operating results over multiple periods unaffected by differences in capital structure, capital investment cycles and fixed asset base. In addition, we believe adjusted EBITDA from continuing operations and similar measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities. We also monitor, and present to investors, the ratio of total debt to adjusted EBITDA from continuing operations, because we believe it is a useful and widely used way to assess our leverage.

Our use of adjusted EBITDA from continuing operations has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• adjusted EBITDA from continuing operations does not reflect changes in, or cash requirements for, our working capital needs;
• adjusted EBITDA from continuing operations does not reflect our cash expenditures for capital equipment or other contractual commitments, including any capital expenditures to augment or replace our capital assets;
• adjusted EBITDA from continuing operations does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
• adjusted EBITDA from continuing operations does not reflect tax payments that may represent a reduction in cash available to us;
• adjusted EBITDA from continuing operations does not reflect expenses relating to our pension and OPEB plans;
• adjusted EBITDA from continuing operations does not reflect impairment of long-lived assets and goodwill;
• adjusted EBITDA from continuing operations does not reflect the non-cash gains or losses from foreign currency remeasurement of non-operating liabilities in our foreign subsidiaries where the functional currency is the U.S. dollar;
• adjusted EBITDA from continuing operations does not reflect initial public offering expenses or acquisition and proxy contest costs;
• adjusted EBITDA from continuing operations does not reflect related party Tax Receivable Agreement expenses;
• adjusted EBITDA from continuing operations does not reflect rationalization-related charges, stock-based compensation or the non-cash write-off of fixed assets; and
• other companies, including companies in our industry, may calculate EBITDA from continuing operations and adjusted EBITDA from continuing operations differently, which reduces its usefulness as a comparative measure.

In evaluating EBITDA from continuing operations and adjusted EBITDA from continuing operations, you should be aware that in the future, we will incur expenses similar to the adjustments in the reconciliation presented below. Our presentations of EBITDA from continuing operations and adjusted EBITDA from continuing operations should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider EBITDA from continuing operations and adjusted EBITDA from continuing operations alongside other financial performance measures, including our net income (loss) and other GAAP measures.

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