Rationalizations and Impairments

Throughout 2013, 2014 and 2015 the Company undertook rationalization plans in order to streamline our organization and lower our production costs. The total rationalization and related charges incurred are as follows:



All Plans	For the Three Months Ended September 30, 2014 (Predecessor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	838	$	2,807	$	—	$	3,645
Inventory loss	324		2,606		—		2,930
Fixed asset write-offs and other	1,294		180		—		1,474
Recorded in Research and Development
Accelerated Depreciation	—		—		89		89
Recorded in Selling and General Administrative
Other	20		—		—		20
Recorded in Rationalizations
Severance and related costs	4,643		3,102		2,870		10,615
Contract terminations	82		146		—		228
Total	$	7,201	$	8,841	$	2,959	$	19,001



All Plans	For the Period July 1, 2015 Through August 14, 2015 (Predecessor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other			Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—		$	—
Inventory loss	27		28		—			55
Fixed asset write-offs and other	59		105		—			164
Recorded in Research and Development
Accelerated Depreciation	—		461		164			625
Recorded in Selling and General Administrative
Other	—		—		—			—
Recorded in Rationalizations
Severance and related costs	—		282		(39		)	243
Contract terminations	—		—		—			—
Total	$	86	$	876	$	125		$	1,087



All Plans	For the Period August 15, 2015 Through September 30, 2015 (Successor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Inventory loss	15		132		—		147
Fixed asset write-offs and other	15		351		—		366
Recorded in Research and Development
Accelerated Depreciation	—		—		—		—
Recorded in Selling and General Administrative
Other	—		201		10		211
Recorded in Rationalizations
Severance and related costs	156		480		—		636
Contract terminations	—		—		—		—
Total	$	186	$	1,164	$	10	$	1,360

During the second quarter of 2015, in connection with our rationalization initiatives, two sites, located in Salvador, Brazil and Pennsylvania, United States, substantially completed their decommissioning efforts and met the criteria for assets held for sale. Because the carrying value of the sites did not exceed their estimated fair value, no additional impairment was recorded. Our Pennsylvania facility was sold in the third quarter of 2015 for a gain of $0.3 million. Additionally, during the third quarter of 2015, our facility in Meyerton, South Africa substantially completed their decommissioning efforts and met the criteria for assets held for sale. As of September 30, 2015, the sites held for sale represent $7.7 million of assets reported under "Property, plant and equipment" and $1.5 million of liabilities, reported under "Other accrued liabilities".



All Plans	For the Nine Months Ended September 30, 2014 (Predecessor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	21,690	$	3,633	$	—	$	25,323
Inventory loss	991		13,654		—		14,645
Fixed asset write-offs and other	5,203		310		—		5,513
Recorded in Research and Development
Accelerated Depreciation	—		—		89		89
Recorded in Selling and General Administrative
Other	98		—		—		98
Recorded in Rationalizations
Severance and related costs	5,061		3,074		2,870		11,005
Contract terminations	610		146		—		756
Total	$	33,653	$	20,817	$	2,959	$	57,429



All Plans	For the Period January 1 Through August 14, 2015 (Predecessor)
	Industrial Materials Segment			Engineered Solutions Segment		Corp, R&D and Other			Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	432		$	—	$	—		$	432
Inventory loss	(33		)	975		—			942
Fixed asset write-offs and other	1,715			1,078		—			2,793
Recorded in Research and Development
Accelerated Depreciation	—			—		940			940
Recorded in Selling and General Administrative
Other	400			755		954			2,109
Recorded in Rationalizations
Severance and related costs	157			4,288		(168		)	4,277
Contract terminations	25			204		—			229
Total	$	2,696		$	7,300	$	1,726		$	11,722



All Plans	For the Period August 15 Through September 30, 2015 (Successor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Inventory loss	15		132		—		147
Fixed asset write-offs and other	15		351		—		366
Recorded in Research and Development
Accelerated depreciation	—		—		—		—
Recorded in Selling and General Administrative
Other	—		201		10		211
Recorded in Rationalizations
Severance and related costs	156		480		—		636
Contract terminations	—		—		—		—
Total	$	186	$	1,164	$	10	$	1,360

2013 Industrial Materials Rationalization

On October 31, 2013, we announced a global initiative to reduce our Industrial Materials segment's cost base and improve our competitive position. As part of this initiative, we ceased production at our two highest cost graphite electrode plants, located in Brazil and South Africa, as well as a machine shop in Russia. Our graphite electrode capacity was reduced by approximately 60,000 metric tons as a result of these actions. In parallel, we adopted measures for reductions in overhead and related corporate operations. These actions and measures reduced global headcount by approximately 600 people, or approximately 20 percent of our global workforce. These actions were substantially completed during the first half of 2014.

2013 Engineered Solutions Rationalization

In order to optimize our Engineered Solutions platform and improve our cost structure, we also initiated actions to centralize certain operations and reduce overhead in our Engineered Solutions segment. These actions reduced global headcount by approximately 40 people and were substantially completed during 2014.

Total 2013 Rationalization Initiatives Impact to Financial Results

Charges incurred related to the 2013 rationalization initiatives are as follows:



2013 Plans	For the Three Months Ended September 30, 2014 (Predecessor)
	Industrial Materials Segment			Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	838		$	—	$	—	$	838
Inventory loss	324			—		—		324
Fixed asset write-offs and other	1,294			6		—		1,300
Recorded in Selling and General Administrative
Other	20			—		—		20
Recorded in Rationalizations
Severance and related costs	(52		)	—		—		(52		)
Contract terminations	82			—		—		82
Total	$	2,506		$	6	$	—	$	2,512



2013 Plans	For the Period July 1, 2015 Through August 14, 2015 (Predecessor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Inventory loss	27		—		—		27
Fixed asset write-offs and other	59		12		—		71
Recorded in Selling and General Administrative
Other	—		—		—		—
Recorded in Rationalizations
Severance and related costs	—		10		—		10
Contract terminations	—		—		—		—
Total	$	86	$	22	$	—	$	108



2013 Plans	For the Period August 15 Through September 30, 2015 (Successor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Inventory loss	15		—		—		15
Fixed asset write-offs and other	15		—		—		15
Recorded in Selling and General Administrative
Other	—		—		—		—
Recorded in Rationalizations
Severance and related costs	156		—		—		156
Contract terminations	—		—		—		—
Total	$	186	$	—	$	—	$	186



2013 Plans	For the Nine Months Ended September 30, 2014 (Predecessor)
	Industrial Materials Segment		Engineered Solutions Segment			Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	21,690	$	826		$	—	$	22,516
Inventory loss	991		491			—		1,482
Fixed asset write-offs and other	5,203		131			—		5,334
Recorded in Selling and General Administrative
Other	99		—			—		99
Recorded in Rationalizations
Severance and related costs	366		(28		)	—		338
Contract terminations	609		—			—		609
Total	$	28,958	$	1,420		$	—	$	30,378



2013 Plans	For the Period January 1, 2015 Through August 14, 2015 (Predecessor)
	Industrial Materials Segment			Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	432		$	—	$	—	$	432
Inventory loss	(33		)	—		—		(33		)
Fixed asset write-offs and other	1,715			270		—		1,985
Recorded in Selling and General Administrative
Other	—			—		—		—
Recorded in Rationalizations
Severance and related costs	97			156		—		253
Contract terminations	25			—		—		25
Total	$	2,236		$	426	$	—	$	2,662



2013 Plans	For the Period August 15, 2015 Through September 30, 2015 (Successor)
	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Inventory loss	15		—		—		15
Fixed asset write-offs and other	15		—		—		15
Recorded in Selling and General Administrative
Other	—		—		—		—
Recorded in Rationalizations
Severance and related costs	156		—		—		156
Contract terminations	—		—		—		—
Total	$	186	$	—	$	—	$	186

The following table represents the roll-forward of the liability incurred for employee termination benefits and contract termination costs incurred in connection with the the rationalization initiatives described above. This liability is included in "Rationalizations" on the Consolidated Balance Sheets.



2013 Plans
	(Dollars in thousands)
Balance as of December 31, 2013	$	18,421
Charges incurred	613
Change in estimates	153
Payments and settlements	(16,494		)
Effect of change in currency exchange rates	(1,658		)
Balance as of December 31, 2014	1,035
Charges incurred	193
Change in estimates	214
Payments and settlements	(1,057		)
Effect of change in currency exchange rates	(212		)
Balance as of September 30, 2015	$	173

2014 Engineered Solutions Rationalization

On July 29, 2014, we announced additional rationalization initiatives to increase profitability, reduce cost and improve global competitiveness in our Engineered Solutions segment. During the second quarter of 2014, worldwide pricing of our isomolded graphite products ("isomolded") within our Advanced Graphite Material ("AGM") product group, as well as our expectation of future pricing, significantly eroded, driven by significant over-capacity and recent competitor responses. In addition, solar product demand continued to erode, with polysilicon, silicon and silicon wafer production migrating to China. New competitors servicing this industry commenced production in China at pricing levels making the market now unprofitable. As a result of these conditions, the Company decided to cease isomolded production and pursue alternative supply chain relationships in our isomolded product line.

As a result of the above, we tested our long-lived assets used to produce advanced graphite materials for recovery, based on undiscounted cash flows from the use and eventual disposition of these assets. The carrying value of the assets exceeded these undiscounted cash flow and, accordingly, we estimated the fair-value of these long-lived assets based on a market participant view. This resulted in an impairment charge totaling $121.6 million during 2014, and included the impairment of certain acquired customer relationship and technology intangible assets.

Charges incurred related to the 2014 Engineered Solutions rationalization initiatives are as follows:



	Predecessor				Successor
2014 Engineered Solutions Rationalization	For the Three Months Ended September 30, 2014		For the Period July 1, 2015 Through August 14, 2015		For the Period August 15, 2015 Through September 30, 2015
	Engineered Solutions Segment
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	2,802	$	—	$	—
Inventory loss	2,606		28		132
Fixed asset write-offs and other	174		15		(267		)
Recorded in Rationalizations					—
Severance and related costs	2,537		36		—
Contract terminations	74		—		—
Total	$	8,193	$	79	$	(135	)



	Predecessor					Successor
2014 Engineered Solutions Rationalization	For the Nine Months Ended September 30, 2014		For the Period January 1, 2015 Through August 14, 2015			For the Period August 15, 2015 Through September 30, 2015
	Engineered Solutions Segment
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	2,802	$	—		$	—
Inventory loss	13,168		571			132
Fixed asset write-offs and other	174		372			(267		)
Recorded in Rationalizations
Severance and related costs	2,537		(713		)	—
Contract terminations	74		50			—
Total	$	18,755	$	280		$	(135	)

The following table represents the roll-forward of the liability incurred for employee termination benefits and contract termination costs incurred in connection with the 2014 Engineered Solutions rationalization initiatives described above. This liability is included in "Rationalizations" on the Consolidated Balance Sheets.



2014 Engineered Solutions Plan
	(Dollars in thousands)
Balance as of December 31, 2013	$	—
Charges incurred	2,611
Change in estimates	(40		)
Payments and settlements	(916		)
Balance as of December 31, 2014	1,655
Charges incurred	50
Change in estimates	(716		)
Payments and settlements	(979		)
Balance as of September 30, 2015	$	10

2014 Corporate and Research & Development Rationalization

During the third quarter of 2014, we announced the conclusion of another phase of our on-going company-wide cost savings assessment. This resulted in changes to the Company’s operating and management structure in order to streamline, simplify and decentralize the organization. These actions are designed to reduce costs by a combination of reduced contractor costs, attrition, early retirements and layoffs. Additionally, the Company downsized its corporate functions by approximately 25 percent, relocated to a smaller, more cost effective corporate headquarters and established a new Technology and Innovation Center. The 2014 Corporate and Research and Development rationalization plan will result in approximately $20 million of charges consisting of severance, accelerated depreciation and other related costs, of which approximately $14 million have been incurred through September 30, 2015. Approximately $12 million of these costs will be cash outlays, the majority of which are expected to be disbursed in 2015.

Charges incurred related to the 2014 Corporate and Research & Development rationalization initiatives are as follows:



2014 Corporate, Research and Development Plan	For the Three Months Ended September 30, 2014 (Predecessor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	5	$	—	$	5
Fixed asset write-offs and other	—		—		—		—
Recorded in Research and Development
Accelerated depreciation	—		—		89		89
Recorded in Selling and General Administrative
Other	—		—		—		—
Recorded in Rationalizations
Severance and related costs	4,695		565		2,870		8,130
Contract terminations	—		74		—		74
Total	$	4,695	$	644	$	2,959	$	8,298



2014 Corporate, Research and Development Plan	For the Period July 1, 2015 Through August 14, 2015 (Predecessor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other			Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—		$	—
Fixed asset write-offs and other	—		—		—			—
Recorded in Research and Development
Accelerated depreciation	—		—		—			—
Recorded in Selling and General Administrative
Other	—		—		164			164
Recorded in Rationalizations
Severance and related costs	—		—		(39		)	(39		)
Contract terminations	—		—		—			—
Total	$	—	$	—	$	125		$	125



2014 Corporate, Research and Development Plan	For the Period August 15, 2015 Through September 30, 2015 (Successor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Fixed asset write-offs and other	—		—		—		—
Recorded in Research and Development
Accelerated depreciation	—		—		—		—
Recorded in Selling and General Administrative
Other	—		—		10		10
Recorded in Rationalizations
Severance and related costs	—		—		—		—
Contract terminations	—		—		—		—
Total	$	—	$	—	$	10	$	10



2014 Corporate, Research and Development Plan	For the Nine Months Ended September 30, 2014 (Predecessor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	5	$	—	$	5
Fixed asset write-offs and other	—		—		—		—
Recorded in Research and Development
Accelerated depreciation	—		—		89		89
Recorded in Selling and General Administrative
Other	—		—		—		—
Recorded in Rationalizations
Severance and related costs	4,695		565		2,870		8,130
Contract terminations	—		74		—		74
Total	$	4,695	$	644	$	2,959	$	8,298



2014 Corporate, Research and Development Plan	For the Period January 1 Through August 14, 2015 (Predecessor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other			Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—		$	—
Fixed asset write-offs and other	—		1		—			1
Recorded in Research and Development
Accelerated depreciation	—		—		940			940
Recorded in Selling and General Administrative
Other	400		—		954			1,354
Recorded in Rationalizations
Severance and related costs	60		8		(168		)	(100		)
Contract terminations	—		—		—			—
Total	$	460	$	9	$	1,726		$	2,195



2014 Corporate, Research and Development Plan	For the Period August 15 Through September 30, 2015 (Successor)
2014 Corporate, Research and Development Plan	Industrial Materials Segment		Engineered Solutions Segment		Corp, R&D and Other		Total
	(Dollars in thousands)
Recorded in Cost of Sales
Accelerated depreciation	$	—	$	—	$	—	$	—
Fixed asset write-offs and other	—		—		—		—
Recorded in Research and Development
Accelerated depreciation	—		—		—		—
Recorded in Selling and General Administrative
Other	—		—		10		10
Recorded in Rationalizations
Severance and related costs	—		—		—		—
Contract terminations	—		—		—		—
Total	$	—	$	—	$	10	$	10

The following table represents the roll-forward of the liability incurred for employee termination benefits and contract termination costs incurred in connection with the 2014 Corporate and Research & Development rationalization initiatives described above. This liability is included in "Rationalizations" on the Consolidated Balance Sheets.



2014 Corporate and R&D Plan
	(Dollars in thousands)
Balance as of December 31, 2013	$	—
Charges incurred	8,159
Change in estimates	21
Payments and settlements	(1,155		)
Effect of change in currency exchange rates	(152		)
Balance as of December 31, 2014	6,873
Charges incurred	(33		)
Change in estimates	(67		)
Payments and settlements	(5,046		)
Effect of change in currency exchange rates	(121		)
Balance as of September 30, 2015	$	1,606

2015 Advanced Graphite Materials Rationalization

On March 2, 2015, GrafTech announced plans to further optimize the production platform for its advanced graphite materials business. These actions included the closure of our Notre Dame, France facility and further reductions in force in our Columbia, Tennessee facility and other locations totaling approximately 85 people. The 2015 Advanced Graphite Materials rationalization plan will result in approximately $10 million of charges consisting of severance, inventory losses and other related costs. Approximately $8 million of these costs will be cash outlays, the majority of which are expected to be disbursed in 2015.

Charges incurred related to the 2015 Advanced Graphite Materials rationalization initiative are as follows:



	Predecessor				Successor
2015 Advanced Graphite Materials Rationalization	For the Period July 1 Through August 14, 2015		For the Period January 1 Through August 14, 2015		For the Period August 15 Through September 30, 2015
	Engineered Solutions Segment
	(Dollars in thousands)
Recorded in Cost of Sales
Inventory loss	—		404		—
Fixed asset write-offs and other	78		434		618
Recorded in Selling and General Administrative
Other	461		755		201
Recorded in Rationalizations
Severance and related costs	236		4,838		480
Contract terminations	—		154		—
Total	$	775	$	6,585	$	1,299

The following table represents the roll-forward of the liability incurred for employee termination benefits and contract termination costs incurred in connection with the 2015 Advanced Graphite Materials rationalization initiative described above. This liability is included in "Rationalizations" on the Consolidated Balance Sheets.



2015 Advanced Graphite Materials Rationalization
	(Dollars in thousands)
Balance as of December 31, 2014	$	—
Charges incurred	5,543
Payments and settlements	(2,032		)
Effect of change in currency exchange rates	(38		)
Balance as of September 30, 2015	$	3,473