<SEC-DOCUMENT>0001193125-24-166828.txt : 20240822
<SEC-HEADER>0001193125-24-166828.hdr.sgml : 20240822
<ACCEPTANCE-DATETIME>20240624150925
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ACCESSION NUMBER:		0001193125-24-166828
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20240624

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GRAFTECH INTERNATIONAL LTD
		CENTRAL INDEX KEY:			0000931148
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRICAL INDUSTRIAL APPARATUS [3620]
		ORGANIZATION NAME:           	04 Manufacturing
		IRS NUMBER:				272496053
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		982 KEYNOTE CIRCLE
		CITY:			BROOKLYN HEIGHTS
		STATE:			OH
		ZIP:			44131
		BUSINESS PHONE:		2166762000

	MAIL ADDRESS:	
		STREET 1:		982 KEYNOTE CIRCLE
		CITY:			BROOKLYN HEIGHTS
		STATE:			OH
		ZIP:			44131

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	UCAR INTERNATIONAL INC
		DATE OF NAME CHANGE:	19941011
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<Center><DIV STYLE="width:8.5in" align="left">
 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>VIA EDGAR CORRESPONDENCE </U></B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">United States Securities and Exchange Commission </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of
Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Office of Manufacturing </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street,
N.E. </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Attention: Andi Carpenter and
Hugh West </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">June&nbsp;24, 2024 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Re: GrafTech
International Ltd. </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><FONT STYLE="white-space:nowrap">Form&nbsp;10-K&nbsp;for</FONT> the Fiscal Year Ended December&nbsp;31, 2023 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><FONT STYLE="white-space:nowrap">Form&nbsp;10-Q&nbsp;for</FONT> the Quarterly Period Ended March&nbsp;31, 2024 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Filed April&nbsp;26, 2024 </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><FONT
STYLE="white-space:nowrap">File&nbsp;No.&nbsp;001-13888</FONT> </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Dear Ms.&nbsp;Carpenter and Mr.&nbsp;West, </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">GrafTech International Ltd., a Delaware corporation (the &#147;Company&#148;), is submitting this letter in response to the comment letter it received from
the staff (the &#147;Staff&#148;) of the Securities and Exchange Commission, dated June&nbsp;12, 2024 (the &#147;Comment Letter&#148;), in regard to the above-referenced Annual Report on Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the
fiscal year ended December&nbsp;31, 2023 filed by the Company on February&nbsp;14, 2024 and the Quarterly Report on Form <FONT STYLE="white-space:nowrap">10-Q</FONT> for the period ended March&nbsp;31, 2024 filed by the Company on April&nbsp;26,
2024. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Below is the Company&#146;s response to the comment contained in the Comment Letter. For the convenience of the Staff, the response set forth below
corresponds to the italicized comment contained in the Comment Letter. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U><FONT STYLE="white-space:nowrap">Form&nbsp;10-Q</FONT> for the Quarterly Period
Ended March&nbsp;31, 2024 </U></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations </U> </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U><FONT STYLE="white-space:nowrap">Non-GAAP</FONT> Financial Measures </U></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Reconciliation of Net Loss to Adjusted Net Loss, page 34 </U></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left">1.</TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><I>We note your reconciliation includes adjustments for Rationalization-related expenses, consisting primarily
of inventory and fixed asset write-offs ($2,202 and $453, respectively), associated with the cost rationalization and footprint optimization plan announced in February 2024. It is not clear to us how you determined such costs would not be considered
a normal, recurring part of your operations. In this regard, we believe that decisions about the timing, method, and pricing of dispositions of inventory are normal, recurring activities integral to the management of an ongoing business. Tell us how
you determined that these adjustments are appropriate based on the guidance in Question 100.01 of the Division&#146;s Compliance</I><I></I><I>&nbsp;&amp; Disclosure Interpretations on <FONT STYLE="white-space:nowrap">Non-</FONT> GAAP Financial
Measures. Please advise or revise to remove the aforementioned adjustments from this, and any other <FONT STYLE="white-space:nowrap">non-GAAP</FONT> measure (e.g., cash cost of goods sold on page 37), for all periods presented in your future
filings.</I> </P></TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Response</U>: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We
respectfully acknowledge the Staff&#146;s comment and confirm that the Company has considered the guidance set forth in Question 100.01 of the Compliance and Disclosure Interpretations
<FONT STYLE="white-space:nowrap">for&nbsp;Non-GAAP&nbsp;Financial</FONT> Measures and believe that these write-offs are not recurring and are not part of normal operations as discussed below. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The write-offs of $2.2&nbsp;million of inventory and $0.5&nbsp;million of fixed assets, which were included in the Condensed Consolidated Statements of
Operations as a component of Cost of Goods Sold, were those costs incurred as a direct result of the decision to indefinitely suspend the majority of production activities at the Company&#146;s facility in St. Marys, Pennsylvania and to indefinitely
idle certain assets within its remaining graphite electrode footprint. These actions were associated with the Company&#146;s cost rationalization and footprint optimization plan announced in February 2024 and resulted in the Company incurring an
immaterial amount of severance costs, contract termination costs, as well as the write-offs noted above. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The inventory
<FONT STYLE="white-space:nowrap">write-off&nbsp;consisted</FONT> primarily of raw materials that are used in the production of graphite electrodes. The majority of production processes, including forming, baking, pitch impregnation and <FONT
STYLE="white-space:nowrap">re-baking</FONT> processes at the Company&#146;s facility in St. Marys, Pennsylvania, were indefinitely suspended. Because the raw materials in question could only be used in the suspended operations, the St. Marys
facility was no longer able to use the raw materials located on the premises. Furthermore, certain of these raw materials were unique to the St. Marys operations and others could not be transported to other locations without a significant loss in
value, as such relocation thereof would lead to a deterioration in the properties and quality of the raw materials. As a result, the Company recognized a $2.2 <FONT STYLE="white-space:nowrap">million&nbsp;write-off</FONT> of such inventory. Absent
the decision to indefinitely suspend the majority of production processes at the Company&#146;s facility in St. Marys, Pennsylvania, the raw material inventory would not have lost its utility to the Company and these charges would not have been
incurred. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">By contrast to this <FONT STYLE="white-space:nowrap">one-time</FONT> inventory <FONT
STYLE="white-space:nowrap">write-off</FONT> related to raw materials at St. Marys, the Company&#146;s recurring inventory write-offs are generally related to products not meeting required specifications. These write-offs affect products that have
been manufactured, either to an intermediate or to a complete level, and which, after testing, are found to not meet specifications and are therefore deemed not eligible for further processing or for sale. The write-offs of <FONT
STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">out-of-specification</FONT></FONT> products represented an annual average cost of approximately $1.3&nbsp;million over the last four years. Although these write-offs are recurring, their
magnitude varies greatly between quarters depending on the production cycles, specific customer specification requests and results of quality trials. For example, these inventory write-offs represented $1.4&nbsp;million in the fourth quarter of 2023
and $2.5&nbsp;million in the second quarter of 2020. Despite the irregular intervals of the elevated level of such write-offs, the Company does not adjust for them when preparing its <FONT STYLE="white-space:nowrap">non-GAAP</FONT> measures, because
these write-offs are deemed to be a recurring and normal part of our operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Further, the Company does not adjust its
<FONT STYLE="white-space:nowrap">non-GAAP</FONT> measures for inventory write-offs recorded under the ASC <FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">330-10-35</FONT></FONT> guidance. In the first quarter of 2024 and the fourth
quarter of 2023, the Company recorded <FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">lower-of-cost-or-market</FONT></FONT></FONT></FONT> inventory valuation
adjustments of $2.7&nbsp;million and $12.4&nbsp;million, respectively, which were not excluded from <FONT STYLE="white-space:nowrap">non-GAAP</FONT> measures as they reflected the impact of market conditions integral to the management of the
Company&#146;s ongoing business. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In contrast to the above, the inventory write-offs recorded in the first quarter of 2024 and adjusted from <FONT
STYLE="white-space:nowrap">non-GAAP</FONT> measures were not related to <FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">out-of-specification</FONT></FONT> products or to <FONT STYLE="white-space:nowrap"><FONT
STYLE="white-space:nowrap">lower-of-</FONT></FONT> <FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">cost-or-market</FONT></FONT> inventory valuation adjustments: they were <FONT STYLE="white-space:nowrap">non-recurring</FONT> and
not part of our normal operations. As noted above, absent the decision to indefinitely suspend most production processes at the Company&#146;s facility in St. Marys, Pennsylvania, these charges would not have been incurred. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The rationalization-related fixed asset <FONT STYLE="white-space:nowrap">write-off</FONT> of $0.5&nbsp;million consisted of construction in process projects
that will no longer be completed as a direct result of the majority of the production processes at the St. Marys facility being indefinitely suspended and the decision to indefinitely idle certain assets within the Company&#146;s remaining graphite
electrode footprint. Absent these decisions made in the first quarter of 2024, these projects would not have been halted prior to their conclusion and the write-offs would not have been incurred. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company believes that based on the facts and circumstances, the write-offs of the inventory located at the St. Marys facility and of the construction in
process assets were distinct from the recurring write-offs incurred in normal operations because they were a direct result of the decision to indefinitely suspend the majority of the production activities at the Company&#146;s St. Marys facility and
indefinitely idle certain assets within its remaining graphite electrode footprint. By adjusting for these charges related to the rationalization initiative, the Company believes that it improved comparability between periods. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company believes that the rationalization-related expenses in its presentation <FONT STYLE="white-space:nowrap">of&nbsp;non-GAAP&nbsp;financial</FONT>
measures were appropriate under the circumstances and not misleading. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">If you have any questions regarding the foregoing, please do not hesitate to
contact the undersigned at 1.216.676.2322. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Very truly yours, </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">/s/ Catherine Hedoux-Delgado </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Catherine Hedoux-Delgado </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Interim Chief Financial Officer and Treasurer </P>
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