Guarantor Information

9 Months Ended

Sep. 30, 2017

Guarantor Information

On November 20, 2012, GrafTech International Ltd. (the “Parent”) issued $300 million aggregate principal amount of Senior Notes. The Senior Notes mature on November 15, 2020 and bear interest at a rate of 6.375% per year, payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Notes are guaranteed on a senior basis by the following wholly-owned direct and indirect subsidiaries of the Parent: GrafTech Finance Inc., GrafTech Holdings Inc., GrafTech USA LLC, Seadrift Coke LP, GrafTech Global Enterprises Inc., GrafTech International Holdings Inc., GrafTech DE LLC, GrafTech Seadrift Holding Corp, GrafTech Technology LLC, GrafTech NY Inc., and Graphite Electrode Network LLC.

The guarantors of the Senior Notes, solely in their respective capacities as such, are collectively called the “Guarantors.” Our other subsidiaries, which are not guarantors of the Senior Notes, are called the “Non-Guarantors.”

All of the guarantees are unsecured. All of the guarantees are full, unconditional (subject to limited exceptions described below) and joint and several. Each of the Guarantors are 100% owned, directly or indirectly, by the Parent. All of the guarantees of the Senior Notes continue until the Senior Notes have been paid in full, and payment under such guarantees could be required immediately upon the occurrence of an event of default under the Senior Notes. If a Guarantor makes a payment under its guarantee of the Senior Notes, it would have the right under certain circumstances to seek contribution from the other Guarantors.

The Guarantors will be released from the guarantees upon the occurrence of certain events, including the following: the unconditional release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Senior Notes by such Guarantor; the sale or other disposition, including by way of merger or consolidation or the sale of its capital stock, following which such Guarantor is no longer a subsidiary of the Parent; or the Parent's exercise of its legal defeasance option or its covenant defeasance option as described in the indenture applicable to the Senior Notes. If any Guarantor is released, no holder of the Senior Notes will have a claim as a creditor against such Guarantor. The indebtedness and other liabilities, including trade payables and preferred stock, if any, of each Guarantor are effectively senior to the claim of any holders of the Senior Notes.

Investments in subsidiaries are recorded on the equity basis.

The following tables set forth condensed consolidating balance sheets as of December 31, 2016 and September 30, 2017, condensed consolidating statements of operations and comprehensive income for the three and nine months ended September 30, 2016 and 2017 and the condensed consolidating statements of cashflows for the nine months ended September 30, 2016 and 2017.



CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2016
(in thousands)
							Consolidating
					Non-		Entries and
	Parent		Guarantors		Guarantors		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	636	$	10,974	$	—		$	11,610
Accounts receivable - affiliates	51,592		3,624		19,643		(74,859		)	—
Accounts receivable - trade	—		7,518		73,050		—			80,568
Inventories	—		44,563		111,548		—			156,111
Prepaid and other current assets	1,350		4,853		15,462		—			21,665
Current assets of discontinued operations	—		51,160		14,296		(4,477		)	60,979
Total current assets	52,942		112,354		244,973		(79,336		)	330,933

Investment in affiliates	844,379		601,597		—		(1,445,976		)	—
Property, plant and equipment	—		191,503		317,352		—			508,855
Deferred income taxes	—		—		19,803		—			19,803
Goodwill	—		70,399		100,718		—			171,117
Notes receivable - affiliate	—		49,003		—		(49,003		)	—
Other assets	—		70,767		70,801		—			141,568
Total Assets	$	897,321	$	1,095,623	$	753,647	$	(1,574,315	)	$	1,172,276

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - affiliate	$	806	$	71,243	$	2,810	$	(74,859	)	$	—
Accounts payable - trade	964		8,033		38,666		—			47,663
Short-term debt	—		3,062		5,790		—			8,852
Accrued income and other taxes	—		2,095		3,161		—			5,256
Other accrued liabilities	2,444		12,205		15,945		—			30,594
Short-term liabilities of discontinued operations	—		20,381		4,138		(4,477		)	20,042
Total current liabilities	4,214		117,019		70,510		(79,336		)	112,407

Long-term debt - affiliate	41,590		—		7,413		(49,003		)	—
Long-term debt - third party	274,132		81,695		753		—			356,580
Other long-term obligations	—		50,943		31,205		—			82,148
Deferred income taxes	—		909		41,997		—			42,906
Long-term liabilities of discontinued operations	—		678		172		—			850
Stockholders' equity	577,385		844,379		601,597		(1,445,976		)	577,385
Total Liabilities and Stockholders' Equity	$	897,321	$	1,095,623	$	753,647	$	(1,574,315	)	$	1,172,276



CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2017
(in thousands)
								Consolidating
					Non-			Entries and
	Parent		Guarantors		Guarantors			Eliminations				Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	1,117	$	15,259		$	—			$	16,376
Accounts receivable - affiliates	51,592		9,022		25,510			(86,124		)		—
Accounts receivable - trade	—		9,262		70,870			—				80,132
Inventories	—		41,118		123,450							164,568
Prepaid and other current assets	555		3,641		15,782			—				19,978
Current assets of discontinued operations	—		10,083		5,447			(155		)		15,375
Total current assets	52,147		74,243		256,318			(86,279		)		296,429

Investment in affiliates	839,335		592,304		—			(1,431,639		)		—
Property, plant and equipment	—		179,635		329,829			—				509,464
Deferred income taxes	—		—		19,220			—				19,220
Goodwill	—		70,399		100,718			—				171,117
Notes receivable - affiliate			61,006		—			(61,006		)		—
Other assets	—		61,554		62,224			—				123,778
Total Assets	$	891,482	$	1,039,141	$	768,309		$	(1,578,924	)		$	1,120,008

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - affiliate	$	825	$	77,103	$	8,196		$	(86,124	)		$	—
Accounts payable - trade	—		10,392		47,984			—				58,376
Short-term debt	—		4,334		8,948			—				13,282
Accrued income and other taxes	—		1,686		6,445			—				8,131
Other accrued liabilities	7,225		9,350		17,452			—				34,027
Liabilities of discontinued operations	—		8,805		3,307			(155		)		11,957
Total current liabilities	8,050		111,670		92,332			(86,279		)		125,773

Long-term debt - affiliate	53,593		—		7,413			(61,006		)		—
Long-term debt - third party	278,959		40,595		876			—				320,430
Other long-term obligations	—		45,882		33,094			—				78,976
Deferred income taxes	—		1,283		42,085			—				43,368
Long-term liabilities of discontinued operations	—		376		205		—	—			—	581
Stockholders' equity	550,880		839,335		592,304			(1,431,639		)		550,880
Total Liabilities and Stockholders' Equity	$	891,482	$	1,039,141	$	768,309		$	(1,578,924	)		$	1,120,008



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three months ended September 30, 2016
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations				Consolidated

Sales - affiliates	$	—		$	16,334		$	10,078		$	(26,412	)		$	—
Sales - third party	—			21,891			89,699			—				111,590
Net sales	—			38,225			99,777			(26,412		)		111,590
Cost of sales	—			36,886			103,128			(26,412		)		113,602
Additions to lower cost or market inventory reserve	—			1,915			2,983			—				4,898
Gross loss	—			(576		)	(6,334		)	—				(6,910		)

Research and development	—			526			—			—				526
Selling and administrative expenses	—			3,906			8,309			—				12,215
Operating loss	—			(5,008		)	(14,643		)	—				(19,651		)

Other expense (income), net	—			287			(854		)	—				(567		)
Interest expense - affiliate	268			—			—			(268		)		—
Interest expense - third party	6,362			473			129			—				6,964
Interest income - affiliate	—			(268		)	—			268				—
Interest income - third party	—			—			(158		)	—				(158		)
Loss from continuing operations before provision for income taxes	(6,630		)	(5,500		)	(13,760		)	—			`	(25,890		)

Provision for income taxes	—			123			(1,912		)	—				(1,789		)
Equity in loss from continuing operations of subsidiary	(17,471		)	(11,848		)	—			29,319				—
Net loss from continuing operations	(24,101		)	(17,471		)	(11,848		)	29,319				(24,101		)

Income from discontinued operations, net of tax	—			958			176			—				1,134
Equity in income from discontinued operations	1,134			176			—			(1,310		)		—
Net income from discontinued operations	1,134			1,134			176			(1,310		)		1,134

Net loss	$	(22,967	)	$	(16,337	)	$	(11,672	)	$	28,009			$	(22,967	)


Statements of Comprehensive Income (Loss)

Net loss	$	(22,967	)	$	(16,337	)	$	(11,672	)	$	28,009			$	(22,967	)
Other comprehensive income	2,418			2,418			2,418			(4,836		)		2,418
Comprehensive loss	$	(20,549	)	$	(13,919	)	$	(9,254	)	$	23,173			$	(20,549	)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three months ended September 30, 2017
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations				Consolidated

Sales - affiliates	$	—		$	23,063		$	22,665		$	(45,728	)		$	—
Sales - third party	—			32,617			104,628			—				137,245
Net sales	—			55,680			127,293			(45,728		)		137,245
Cost of sales	—			58,380			107,768			(45,728		)		120,420
Additions to lower of cost or market inventory reserve	—			—			264			—				264
Gross (loss) profit	—			(2,700		)	19,261			—				16,561

Research and development	—			1,338			—			—				1,338
Selling and administrative expenses	—			3,471			9,851			—				13,322
Operating (loss) income	—			(7,509		)	9,410			—				1,901

Other expense (income), net	1			229			(873		)	—				(643		)
Interest expense - affiliate	916			—			—			(916		)		—
Interest expense - third party	6,399			1,264			129			—				7,792
Interest income - affiliate	—			(916		)				916				—
Interest income - third party	—			—			(58		)	—				(58		)
(Loss) income from continuing operations before provision for income taxes	(7,316		)	(8,086		)	10,212			—			`	(5,190		)

(Benefit from) provision for income taxes	—			(524		)	2,487			—				1,963
Equity in income from continuing operations of subsidiary	163			7,725			—			(7,888		)		—
Net (loss) income from continuing operations	(7,153		)	163			7,725			(7,888		)		(7,153		)

Income (loss) income from discontinued operations, net of tax	—			7,637			(4,403		)	—				3,234
Equity in income (loss) from discontinued operations	3,234			(4,403		)	—			1,169				—
Net income (loss) from discontinued operations	3,234			3,234			(4,403		)	1,169				3,234

Net (loss) income	$	(3,919	)	$	3,397		$	3,322		$	(6,719	)		$	(3,919	)


Statements of Comprehensive Income (Loss)

Net (loss) income	$	(3,919	)	$	3,397		$	3,322		$	(6,719	)		$	(3,919	)
Other comprehensive income	7,546			7,546			7,546			(15,092		)		7,546
Comprehensive income	$	3,627		$	10,943		$	10,868		$	(21,811	)		$	3,627



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Nine Months Ended September 30, 2016
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations				Consolidated

Sales - affiliates	$	—		$	95,471		$	45,802		$	(141,273	)		$	—
Sales - third party	—			64,534			257,996			—				322,530
Net sales	—			160,005			303,798			(141,273		)		322,530
Cost of sales	—			142,299			330,271			(141,273		)		331,297
Additions to lower cost or market inventory reserve	—			5,697			13,826			—				19,523
Gross profit (loss)	—			12,009			(40,299		)	—				(28,290		)

Research and development	—			1,964			—			—				1,964
Selling and administrative expenses	—			13,695			25,735			—				39,430
Operating (loss) income	—			(3,650		)	(66,034		)	—				(69,684		)

Other expense (income), net	6			1,029			(2,563		)	—				(1,528		)
Interest expense - affiliate	702			—			—			(702		)		—
Interest expense - third party	19,059			527			274			—				19,860
Interest income - affiliate	—			(702		)	—			702				—
Interest income - third party	—			—			(169		)	—				(169		)
Income (Loss) from continuing operations before provision for income taxes	(19,767		)	(4,504		)	(63,576		)	—			`	(87,847		)

Provision for (benefit from) income taxes	—			378			(8,053		)	—				(7,675		)
Equity in loss from continuing operations of subsidiary	(60,405		)	(55,523		)	—			115,928				—
Net loss from continuing operations	(80,172		)	(60,405		)	(55,523		)	115,928				(80,172		)

Loss from discontinued operations, net of tax	—			(104,372		)	(3,196		)	—				(107,568		)
Equity in loss from discontinued operations	(107,568		)	(3,196		)	—			110,764				—
Net loss from discontinued operations	(107,568		)	(107,568		)	(3,196		)	110,764				(107,568		)

Net loss	$	(187,740	)	$	(167,973	)	$	(58,719	)	$	226,692			$	(187,740	)


Statements of Comprehensive Income (Loss)

Net loss	$	(187,740	)	$	(167,973	)	$	(58,719	)	$	226,692			$	(187,740	)
Other comprehensive income	14,119			14,119			14,119			(28,238		)		14,119
Comprehensive loss	$	(173,621	)	$	(153,854	)	$	(44,600	)	$	198,454			$	(173,621	)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Nine Months Ended September 30, 2017
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations				Consolidated

Sales - affiliates	$	—		$	69,860		$	47,373		$	(117,233	)		$	—
Sales - third party	—			76,980			281,318			—				358,298
Net sales	—			146,840			328,691			(117,233		)		358,298
Cost of sales	—			150,164			296,269			(117,233		)		329,200
Additions to lower of cost or market inventory reserve	—			934			839			—				1,773
Gross (loss) profit	—			(4,258		)	31,583			—				27,325

Research and development	—			3,110			—			—				3,110
Selling and administrative expenses	—			10,740			26,460			—				37,200
Operating (loss) profit	—			(18,108		)	5,123			—				(12,985		)

Other expense (income), net	7			665			2,938			—				3,610
Interest expense - affiliate	2,363			—			—			(2,363		)		—
Interest expense - third party	19,170			3,739			331			—				23,240
Interest income - affiliate	—			(2,363		)	—			2,363				—
Interest income - third party	—			—			(320		)	—				(320		)
(Loss) income from continuing operations before provision for income taxes	(21,540		)	(20,149		)	2,174			—			`	(39,515		)

(Benefit from) provision for income taxes	—			(270		)	3,519			—				3,249
Equity in loss from continuing operations of subsidiary	(21,224		)	(1,345		)	—			22,569				—
Net loss from continuing operations	(42,764		)	(21,224		)	(1,345		)	22,569				(42,764		)

Income (loss) from discontinued operations, net of tax	77			(143		)	(4,816		)	—				(4,882		)
Equity in loss from discontinued operations	(4,959		)	(4,816		)	—			9,775				—
Net loss from discontinued operations	(4,882		)	(4,959		)	(4,816		)	9,775				(4,882		)

Net loss	$	(47,646	)	$	(26,183	)	$	(6,161	)	$	32,344			$	(47,646	)


Statements of Comprehensive Income (Loss)

Net loss	$	(47,646	)	$	(26,183	)	$	(6,161	)	$	32,344			$	(47,646	)
Other comprehensive income	21,141			21,141			21,141			(42,282		)		21,141
Comprehensive (loss) income	$	(26,505	)	$	(5,042	)	$	14,980		$	(9,938	)		$	(26,505	)



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2016
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations			Consolidated
Net cash (used in) provided by operating activities:	$	(9,568	)	$	19,207		$	19,092		$	—		$	28,731

Cash flow from investing activities:
(Loans to) repayments from affiliates	—			(9,568		)	—			9,568			—
Capital expenditures	—			(7,453		)	(14,804		)	—			(22,257		)
Other	—			—			(1,171		)	—			(1,171		)
Proceeds from sale of fixed assets	—			458			227			—			685
Net cash (used in) provided by investing activities	—			(16,563		)	(15,748		)	9,568			(22,743		)

Cash flow from financing activities:
Loans from (Repayments to) affiliates	9,568			—			—			(9,568		)	—
Short-term debt, net	—			3			500			—			503
Revolving Facility borrowings	—			35,000			5,000			—			40,000
Revolving Facility reductions	—			(36,000		)	(5,000		)	—			(41,000		)
Principal payments on long term debt	—			(104		)	—			—			(104		)
Revolver facility refinancing	—			(922		)	—			—			(922		)
Net cash provided by (used in) financing activities	9,568			(2,023		)	500			(9,568		)	(1,523		)

Net change in cash and cash equivalents	—			621			3,844			—			4,465
Effect of exchange rate changes on cash and cash equivalents	—			—			755			—			755
Cash and cash equivalents at beginning of period	—			646			6,281			—			6,927
Cash and cash equivalents at end of period	$	—		$	1,267		$	10,880		$	—		$	12,147



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2017
(in thousands)
										Consolidating
							Non-			Entries and
	Parent			Guarantors			Guarantors			Eliminations			Consolidated
Net cash (used in) provided by operating activities:	$	(9,660	)	$	25,784		$	42,076		$	(24,619	)	$	33,581

Cash flow from investing activities:
Loans to affiliates	—			(9,660		)	—			9,660			—
Capital expenditures	—			(2,835		)	(20,193		)	—			(23,028		)
Proceeds from sale of assets	—			433			3,605			—			4,038
Proceeds from divestitures	—			26,818			—			—			26,818
Net cash provided by (used in) investing activities	—			14,756			(16,588		)	9,660			7,828

Cash flow from financing activities:
Loans from affiliates	9,660			—			—			(9,660		)	—
Dividends to affiliates	—			—			(24,619		)	24,619			—
Short-term debt, net	—			2,803			3,142			—			5,945
Revolving Facility borrowings	—			35,000			—			—			35,000
Revolving Facility reductions	—			(77,755		)	—			—			(77,755		)
Principal payments on long term debt	—			(107		)	—			—			(107		)
Net cash provided by (used in) financing activities	9,660			(40,059		)	(21,477		)	14,959			(36,917		)

Net change in cash and cash equivalents	—			481			4,011			—			4,492
Effect of exchange rate changes on cash and cash equivalents	—			—			274			—			274
Cash and cash equivalents at beginning of period	—			636			10,974			—			11,610
Cash and cash equivalents at end of period	$	—		$	1,117		$	15,259		$	—		$	16,376