10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended June 30, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from              to             

Commission file number: 1-13888

GRAFTECH INTERNATIONAL LTD.

(Exact name of registrant as specified in its charter)

Delaware	06-1385548
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

12900 Snow Road Parma, OH	44130
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (216) 676-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x    Accelerated Filer  ¨    Non-Accelerated Filer  ¨    Smaller Reporting Company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes  ¨    No  x

As of July 17, 2008, 119,527,909 shares of common stock, par value $.01 per share, were outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
	Consolidated Balance Sheets at December 31, 2007 and June 30, 2008 (unaudited)	Page 3
	Consolidated Statements of Operations for the Three Months and Six Months ended June 30, 2007 and 2008 (unaudited)	Page 4
	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2007 and 2008 (unaudited)	Page 5
	Consolidated Statement of Stockholders’ Equity	Page 6
	Notes to Consolidated Financial Statements (unaudited)	Page 7
Introduction to Part I, Item 2, and Part II, Item 1		Page 31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		Page 36
Item 3. Quantitative and Qualitative Disclosures About Market Risk		Page 51
Item 4. Controls and Procedures		Page 53
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings		Page 54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		Page 54
Item 4. Submission of Matters to a Vote of Security Holders		Page 54
Item 6. Exhibits		Page 55
SIGNATURE		Page 56
EXHIBIT INDEX		Page 57

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

	At December 31, 2007			At June 30, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	54,741		$	13,563
Restricted cash		—			1,713
Accounts and notes receivable, net of allowance for doubtful accounts of $2,971 at December 31, 2007 and $1,832 at June 30, 2008		158,486			188,590
Inventories		285,433			302,060
Prepaid expenses and other current assets		10,133			10,829
Total current assets		508,793			516,755
Property, plant and equipment		881,067			933,837
Less: accumulated depreciation		564,613			594,432
Net property, plant and equipment		316,454			339,405
Deferred income taxes		7,144			6,254
Goodwill		9,683			8,604
Other assets		23,080			18,499
Long-term investment		—			136,123
Restricted cash		1,547			—
Total assets	$	866,701		$	1,025,640
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	58,975		$	82,875
Interest payable		9,633			3,119
Short-term debt		1,014			16,358
Accrued income and other taxes		29,996			44,805
Other accrued liabilities		104,066			84,937
Total current liabilities		203,684			232,094
Long-term debt:
Principal value		423,234			160,376
Fair value adjustments for hedge instruments		2,421			814
Unamortized bond premium		481			162
Total long-term debt		426,136			161,352
Other long-term obligations		94,010			96,770
Deferred income taxes		30,171			29,429
(see Contingencies – Note 14)
Stockholders’ equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued		—			—
Common stock, par value $.01, 150,000,000 shares authorized, 105,169,507 shares issued at December 31, 2007 and 122,268,619 shares issued at June 30, 2008		1,052			1,223
Additional paid-in capital		988,662			1,262,468
Accumulated other comprehensive loss		(278,316	)		(246,130	)
Accumulated deficit		(506,666	)		(414,328	)
Less: cost of common stock held in treasury, 2,501,201 shares at December 31, 2007 and 3,172,252 shares at June 30, 2008		(85,197	)		(96,629	)
Less: common stock held in employee benefit and compensation trusts, 471,373 shares at December 31, 2007 and 42,950 shares at June 30, 2008.		(6,835	)		(609	)
Total stockholders’ equity		112,700			505,995
Total liabilities and stockholders’ equity	$	866,701		$	1,025,640

See accompanying Notes to Consolidated Financial Statements

3

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
Net sales	$	255,889		$	319,538		$	484,120		$	609,540
Cost of sales		163,189			205,188			316,132			387,089
Gross profit		92,700			114,350			167,988			222,451
Research and development		2,045			1,835			4,279			4,100
Selling and administrative		25,462			23,688			47,856			46,279
Restructuring (credits) charges, net		(138	)		190			746			342
Operating income		65,331			88,637			115,107			171,730
Other (income) expense, net		(24,305	)		6,979			(14,281	)		28,014
Interest expense		9,546			3,790			21,257			9,476
Interest income		(258	)		(206	)		(1,224	)		(578	)
Income from continuing operations before provision for income taxes and minority stockholders’ share of subsidiaries’ income		80,348			78,074			109,355			134,818
Provision for income taxes		15,376			24,382			25,906			42,480
Income from continuing operations before minority interest		64,972			53,692			83,449			92,338
Minority stockholders’ share of subsidiaries’ income		2			—			35			—
Income from continuing operations		64,970			53,692			83,414			92,338
Loss from discontinued operations, net of tax		—			—			(3,117	)		—
Net income	$	64,970		$	53,692		$	80,297		$	92,338
Basic income (loss) per common share:
Income per share from continuing operations	$	0.65		$	0.51		$	0.84		$	0.89
Loss per share from discontinued operations		—			—			(0.03	)		—
Net income per share	$	0.65		$	0.51		$	0.81		$	0.89
Weighted average common shares outstanding		99,759			106,050			99,202			104,161
Diluted earnings (loss) per common share:
Income per share from continuing operations	$	0.57		$	0.46		$	0.75		$	0.80
Loss per share from discontinued operations		—			—			(0.03	)		—
Net income per share	$	0.57		$	0.46		$	0.72		$	0.80
Weighted average common shares outstanding		116,549			119,521			114,508			118,581

See accompanying Notes to Consolidated Financial Statements

4

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	For the Six Months Ended June 30,
	2007			2008
Cash flow from operating activities:
Net income	$	80,297		$	92,338
Adjustments to reconcile net income to net cash used in operating activities:
Loss from discontinued operations, net of tax		3,117			—
Depreciation and amortization		16,202			17,416
Deferred income taxes		3,623			1,189
Restructuring charges		746			342
Currency (gains) losses		(495	)		14,313
Stock based compensation		2,172			2,373
Interest expense		2,396			3,013
Other (credits) charges, net		(4,137	)		3,982
Increase in working capital*		(20,764	)		(35,002	)
(Gain) loss on sale of assets		(23,662	)		8
Long-term assets and liabilities		(5,703	)		2,389
Net cash provided by operating activities		53,792			102,361
Cash flow from investing activities:
Capital expenditures		(20,218	)		(27,554	)
Proceeds from derivative instruments		—			224
Purchase of equity investment		—			(134,611	)
Proceeds from sale of assets		24,663			18
Increase in restricted cash		—			(166	)
Payments for purchase price adjustments		(2,794	)		—
Patents capitalization		(472	)		—
Net cash provided by (used in) investing activities		1,179			(162,089	)
Cash flow from financing activities:
Short-term debt borrowings		574			14,993
Revolving Facility borrowings		183,645			155,625
Revolving Facility reductions		(183,000	)		(70,810	)
Long-term debt reductions		(184,750	)		(124,508	)
Excess tax benefit from stock-based compensation		—			12,136
Purchase of treasury shares		—			(5,323	)
Proceeds from exercise of stock options		12,331			36,315
Net cash (used in) provided by financing activities		(171,200	)		18,428
Net decrease in cash and cash equivalents		(116,229	)		(41,300	)
Effect of exchange rate changes on cash and cash equivalents		186			122
Cash and cash equivalents at beginning of period		149,517			54,741
Cash and cash equivalents at end of period	$	33,474		$	13,563
*  Net change in working capital due to the following components:
(Increase) decrease in current assets:
Accounts and notes receivable	$	(6,699	)	$	(48,186	)
Effect of factoring on accounts receivable		22,533			23,773
Inventories		(7,116	)		(5,559	)
Prepaid expenses and other current assets		918			(976	)
Payments for antitrust investigations and related lawsuits and claims		(5,380	)		—
Restructuring payments		(4,469	)		(816	)
(Decrease) increase in accounts payable and accruals		(13,427	)		3,276
Decrease in interest payable		(7,124	)		(6,514	)
Increase in working capital	$	(20,764	)	$	(35,002	)

See accompanying Notes to Consolidated Financial Statements

5

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

(Unaudited)

	Issued Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Common Stock Held in Employee Benefit & Compensation Trust		Total Stockholders’ Equity		Total Comprehensive Income (Loss)
Balance at December 31, 2007	105,169,507	$	1,052	$	988,662	$	(278,316)	$	(506,666)	$	(85,197)	$	(6,835)	$	112,700
Comprehensive income (loss):
Net income	—		—		—		—		92,338		—		—		92,338	$	92,338
Other comprehensive income:
Actuarial gain	—		—		—		—		—		—		—		—		—
Amortization of initial net asset	—		—		—		(43)		—		—		—		(43)		(43)
Amortization of prior service credit	—		—		—		(596)		—		—		—		(596)		(596)
Amortization of net loss	—		—		—		2,889		—		—		—		2,889		2,889
Plan settlements	—		—		—		171		—		—		—		171		171
Unrealized gains on securities	—		—		—		152		—		—		—		152		152
Foreign currency translation adjustments	—		—		—		29,613		—		—		—		29,613		29,613
Total comprehensive income (loss)																$	124,524
Debenture conversion	13,559,604		136		221,753										221,889
Treasury stock	61,078										(11,432)		—		(11,432)
Stock-based compensation	295,710		—		14,352		—		—		—		—		14,352
Stock held in employee benefit and compensation trusts	—		—		—		—		—		—		6,226		6,226
Common stock issued to savings and pension plan trusts	86,923		—		1,386		—		—		—		—		1,386
Sale of common stock under stock options	3,095,797		35		36,315		—		—		—		—		36,350
Balance at June 30, 2008	122,268,619	$	1,223	$	1,262,468	$	(246,130)	$	(414,328)	$	(96,629)	$	(609)	$	505,995

See accompanying Notes to Consolidated Financial Statements

6

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Interim Financial Presentation

These interim Consolidated Financial Statements are unaudited; however, in the opinion of management, they have been prepared in accordance with Rule 10-01 of Regulation S-X and reflect all adjustments (all of which are of a normal, recurring nature) which management considers necessary for a fair statement of financial position, results of operations and cash flows for the periods presented. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, including the accompanying Notes, contained in our Annual Report on Form 10-K for the year ended December 31, 2007 (the “Annual Report”). The year-end Consolidated Balance Sheet was derived from audited Consolidated Financial Statements, but does not include all disclosures required annually by accounting principles generally accepted in the United States of America.

Certain amounts in the Consolidated Financial Statements for the three and six months ended June 30, 2007 have been reclassified to conform with the current period presentation.

As previously disclosed in our second quarter 2007 Form 10-Q, we identified and corrected an error in the 2007 second quarter for expenses associated with final price adjustments relating to the sale of our former cathodes business in 2006. By correcting the error in the 2007 second quarter, we understated income from discontinued operations in the 2007 second quarter by $2.5 million and overstated income from discontinued operations by $2.5 million in the 2007 first quarter. We determined that this adjustment was not material to our consolidated financial statements for any of the periods affected; therefore, no revisions were made to the 2007 quarterly financial statements included in our previously filed Form 10-Q’s for this matter. However, consistent with Item 6, Selected Financial Data in our 2007 Annual Report, we have revised our results of operations for the three and six months ended June 30, 2007 to reflect the purchase price adjustments in 2007 in the appropriate reporting period.

During the first quarter of 2008, we revised our segment structure. Please refer to Note 6 for more information.

(2) New Accounting Standards

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AICPA Professional Standards AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The adoption of SFAS 162 is not expected to have a material impact on our consolidated financial statements.

7

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In May 2008, the FASB issued FASB Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement of the conversion option. FSP APB 14-1 requires bifurcation of the instrument into a debt component that is initially recorded at fair value and an equity component. The difference between the fair value of the debt component and the initial proceeds from issuance of the instrument is recorded as a component of equity. The liability component of the debt instrument is accreted to par using the effective yield method; accretion is reported as a component of interest expense. The equity component is not subsequently re-valued as long as it continues to qualify for equity treatment. FSP APB 14-1 must be applied retrospectively to previously issued cash-settleable convertible instruments as well as prospectively to newly issued instruments. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently evaluating the impact of FSP APB 14-1 to our consolidated financial statements.

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), which amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), to provide an enhanced understanding of an entity’s use of derivative instruments, how they are accounted for under SFAS 133 and their effect on the entity’s financial position, financial performance and cash flows. The provisions of SFAS 161 are effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact of adopting SFAS 161 on our financial statements.

In December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations” (SFAS 141R), and SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS 160), to improve, simplify, and converge internationally the accounting for business combinations and the reporting of non-controlling interests in consolidated financial statements. The provisions of SFAS 141R and SFAS 160 are effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact of adopting SFAS 141R and SFAS 160 on our financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115,” (“SFAS 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS 159 are elective; however, the amendment to FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” applies to all entities with available-for-sale and trading securities. The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions,

8

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. We have adopted SFAS 159 as of January 1, 2008. The adoption of SFAS No. 159 did not have an impact on our consolidated results of operations and financial position.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 requires disclosure of information that enables users of the financial statements to assess the inputs used to develop fair value measurements and, for recurring fair value measurements using significant unobservable inputs, the effects of the measurements on earnings for the period. This statement is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position 157-2, “Effective Date of FASB Statement No. 157,” which delays the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The delay is intended to allow the Board and constituents additional time to consider the effect of various implementation issues that have arisen, or that may arise, from the application of Statement 157.

In accordance with the Staff Position, we adopted SFAS No. 157 for financial assets and liabilities as of January 1, 2008. The adoption did not have an impact on our consolidated results of operations and financial position.

(3) Stock-Based Compensation

In the three months ended June 30, 2007 and 2008, we recognized $1.4 million and $1.5 million, respectively, in stock-based compensation expense. A majority of the expense, $1.2 million and $1.4 million respectively, was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales and research and development.

In the six months ended June 30, 2007 and 2008, we recognized $2.8 million and $2.7 million, respectively, in stock-based compensation expense. A majority of the expense, $2.5 million in each period, was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales and research and development.

As of June 30, 2008, the total compensation cost related to non-vested restricted stock and stock options not yet recognized was $3.5 million, which will be recognized over the weighted average life of 1.09 years.

Restricted stock activity under the plans for the six months ended June 30, 2008 was as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2008	1,077,300		$	7.32
Granted	19,002			15.25
Vested	(271,649	)		6.31
Forfeited	(23,667	)		15.70
Outstanding at June 30, 2008	800,986		$	7.60

9

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock option activity under the plans for the six months ended June 30, 2008 was as follows:

	Number of Shares		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2008	5,079,566		$	7.16
Granted	—			—
Vested	—			—
Expired	(8,000	)		11.50
Exercised	(3,066,895	)		7.28
Outstanding at June 30, 2008	2,004,671		$	6.93

(4) Equity Investment

On June 30, 2008, we acquired 100% of the outstanding capital stock of Falcon-Seadrift Holding Corp (“Falcon”). Falcon’s only material assets are limited partnership units constituting approximately 18.9% of the equity interest in Seadrift Coke, L.P. (“Seadrift”), a producer of needle coke. As of June 30, 2008, a controlling interest of Seadrift is owned by one investor and the balance of the partnership is owned by various other investors and Seadrift employees.

The investment balance of $136.1 million includes the purchase price of $135.0 million and transaction costs of $1.7 million, net of cash of acquired of $0.4 million and prepaid assets of $0.2 million. The acquisition was paid for in cash, of which $100 million was funded through borrowings under our principal revolving credit facility. The balance of the purchase price was paid from cash on hand.

Falcon has certain contractual rights related to Seadrift. These include the right to one of five seats on the board of directors of Seadrift (or, at our election, board observation rights in lieu thereof), a right of approval with respect to certain mergers and other transactions involving Seadrift, the right to veto Seadrift’s repurchase of its own equity (other than from former employees), the right to receive certain information concerning Seadrift, certain registration rights, and customary tag along rights permitting us to participate in any proposed sale of the

10

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

majority owners’ interests on the same terms and conditions. Falcon is subject to customary drag along obligations requiring us, if the majority owners sell their interests, to sell our interests on the same terms and conditions. Falcon has the right to require Seadrift to buy its equity interests in Seadrift (a “put” to Seadrift) at then fair market value beginning May 1, 2011. Upon exercise of the put, the fair market value would be determined assuming a sale of Seadrift as a going concern and without applying a discount for lack of liquidity, marketability, or lack of control.

Due to the limited partnership structure, we will account for the investment in Seadrift under FASB Staff Position SOP 78-9-1, “Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-5”, which requires the application of the equity method of accounting for the investment. As of June 30, 2008, the carrying value of our equity method investee exceeded our share of its equity by approximately $122 million. Due to the timing of the transaction, we are in the process of completing a valuation, which will determine the basis difference attributable to the assets and liabilities of Seadrift, which will primarily consist of fixed assets, goodwill and deferred taxes.

(5) Earnings Per Share

Basic and diluted EPS are calculated based upon the provisions of SFAS No. 128, “Earnings Per Share”, and EITF No. 04-08, “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effects on Diluted Earnings Per Share”, using the following share data:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2007		2008		2007		2008
	(In thousands, except share data)
Net income as reported	$	64,970	$	53,692	$	80,297	$	92,338
Interest on Debentures, net of tax benefit		898		802		1,795		1,718
Amortization of Debentures issuance costs, net of tax benefit		422		385		845		816
Net income as adjusted	$	66,290	$	54,879	$	82,937	$	94,872
Weighted average common shares outstanding for basic calculation		99,759,078		106,050,313		99,202,210		104,160,899
Add: Effect of stock options and restricted stock		3,218,867		1,870,313		1,735,446		1,834,515
Add: Effect of Debentures		13,570,560		11,600,335		13,570,560		12,585,447
Weighted average common shares outstanding for diluted calculation		116,548,505		119,520,961		114,508,216		118,580,861

Basic earnings per common share are calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share are calculated by dividing net income, as adjusted, by the sum of the weighted average number of common shares outstanding plus the additional common shares that would have been outstanding if potentially dilutive securities had been issued.

11

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The calculation of weighted average common shares outstanding for the diluted calculation excludes consideration of stock options covering 2,161,413 and 92,398 shares in the three months ended June 30, 2007 and 2008, respectively, and 3,873,521 and 1,018,856 shares in the six months ended June 30, 2007 and 2008, respectively, because the exercise of these options would not have been dilutive for those periods due to the fact that the exercise prices were greater than the weighted average market price of our common stock for each of those periods.

(6) Segment Reporting

Previously, until the fourth quarter of 2007, our businesses were reported in the following reportable segments: graphite electrode, advanced graphite materials, and other businesses, which consisted of natural graphite products, refractories and carbon electrodes.

During the fourth quarter of 2007 and first quarter of 2008, we made certain organizational changes and have realigned the management of our segment structure to better serve our customers in a cost effective manner. Information utilized by our chief operating decision maker to assess the performance and allocate resources was also changed so that it more closely aligned with the new operating structure of the company. With these changes, we evaluated our segments under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.”

Industrial Materials. Our industrial materials segment manufactures and delivers high quality graphite electrodes and refractories products. Electrodes are key components of the conductive power systems used to produce steel and other non-ferrous metals. Refractory products are used in blast furnaces and submerged arc furnaces due to their high thermal conductivity and the ease with which they can be machined to large or complex shapes.

Engineered Solutions. Engineered solutions include advanced graphite materials products for the transportation, solar, and oil and gas exploration industries, as well as natural graphite products.

We continue to evaluate the performance of our segments based on segment operating income. Intersegment sales and transfers are not material and the accounting policies of the reportable segments are the same as those for our Consolidated Financial Statements as a whole. Corporate expenses are allocated to segments based on each segment’s percentage of consolidated sales.

Segment information for the three and six months ended June 30, 2007 has been restated to reflect the current presentation.

The following tables summarize financial information concerning our reportable segments:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
	(Dollars in thousands)
Net sales to external customers:
Industrial materials	$	220,857		$	275,121		$	415,370		$	523,410
Engineered solutions		35,032			44,417			68,750			86,130
Total net sales	$	255,889		$	319,538		$	484,120		$	609,540
Segment operating income:
Industrial materials	$	61,439		$	79,646		$	109,556		$	154,311
Engineered solutions		3,892			8,991			5,551			17,419
Total segment operating income	$	65,331		$	88,637		$	115,107		$	171,730
Reconciliation of segment operating income to income from continuing operations before provision for income taxes and minority stockholders’ share of subsidiaries’ income:
Other income, net		(24,305	)		6,979			(14,281	)		28,014
Interest expense		9,546			3,790			21,257			9,476
Interest income		(258	)		(206	)		(1,224	)		(578	)
Income from continuing operations before provision for income taxes and minority stockholders’ share of subsidiaries’ income	$	80,348		$	78,074		$	109,355		$	134,818

Assets by reportable segment are estimated based on the value of long-lived assets at each location and the sales mix to third party customers at that location.

	At December 31, 2007		At June 30, 2008
	(Dollars in thousands)
Long-lived assets (a):
Industrial materials	$	275,115	$	296,574
Engineered solutions		51,022		51,435
Total long-lived assets	$	326,137	$	348,009

(a) Long-lived assets represent fixed assets, net of accumulated depreciation and goodwill.

(7) Restructuring

At June 30, 2008, the outstanding balance of our restructuring reserve was $2.4 million. We expect approximately half of the remaining payments to be paid by the end of 2008, with the remaining payments made during 2009 and after. The balance at June 30, 2008 consisted of the following:

Industrial Materials Segment:

• $0.8 million related to the restructuring of our manufacturing facilities in France.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

• $1.6 million related to the closure of our graphite electrode manufacturing operations in Caserta, Italy.

For the three months ended June 30, 2008, we recorded a net restructuring charge of $0.2 million. For the six months ended June 30, 2008, we recorded a net restructuring charge of $0.3 million. These charges related to severance and related costs associated with our Switzerland facility.

The following table summarizes activity relating to the restructuring liability at June 30, 2008:

	Severance and Related Costs			Plant Shutdown and Related Costs			Total
	(Dollars in thousands)
Balance at January 1, 2008	$	2,393		$	237		$	2,630
Restructuring charges		342			—			342
Payments and settlements		(668	)		(148	)		(816	)
Effect of change in currency exchange rates		165			42			207
Balance at June 30, 2008	$	2,232		$	131		$	2,363

(8) Other (Income) Expense, Net

The following table presents an analysis of other (income) expense, net:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
	(Dollars in thousands)
Currency (gains) losses	$	(2,753	)	$	(2,772	)	$	(1,305	)	$	12,692
Loss on extinguishment of debt		2,765			—			10,288			4,725
Debenture make-whole payment		—			9,034			—			9,034
Loss (gain) on sale of assets		(23,893	)		40			(23,187	)		(8	)
Bank and other financing fees		493			538			1,159			983
Loss on the sale of accounts receivable		325			235			475			575
Other		(1,242	)		(96	)		(1,711	)		13
Total other (income) expense, net	$	(24,305	)	$	6,979		$	(14,281	)	$	28,014

We have non-dollar-denominated intercompany loans between our GrafTech Finance, Inc. subsidiary (“Finco”) and some of our foreign subsidiaries. At December 31, 2007 and June 30, 2008, the aggregate principal amount of these loans was $493.5 million and $529.3 million, respectively (based on currency exchange rates in effect at such dates). These

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded in accumulated other comprehensive loss in the stockholders’ equity section of the Consolidated Balance Sheets. The balance of these loans is deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency gains / losses in other income / expense, net, on the Consolidated Statements of Operations. In the three and six months ended June 30, 2007, we had a net total of $2.8 million and $1.3 million, respectively, of currency gains, primarily due to the remeasurement of intercompany loans and the effect of transaction losses related to foreign subsidiaries which use the dollar as their functional currency. In the three and six months ended June 30, 2008, we had a net total of $2.8 million of currency gains and $12.7 million of currency losses, respectively, due to the remeasurement of intercompany loans related to foreign subsidiaries which use the dollar as their functional currency. These losses were primarily driven by fluctuations in the euro.

In the three months ended June 30, 2007, we sold land and certain assets related to our former graphite electrode manufacturing facility in Caserta, Italy. The gain recognized on this sale was $23.7 million.

In connection with the redemption of $185 million of the outstanding principal of the Senior Notes in the six months ended June 30, 2007, we incurred a $10.3 million loss on the extinguishment of debt, $9.5 million of which related to the call premium and $0.8 million of charges for the accelerated amortization of the debt issuance fees, terminated interest rate swaps and the premium related to the Senior Notes.

In connection with the redemption of $125 million of the outstanding principal of the Senior Notes during the six months ended June 30, 2008, we incurred a $4.7 million loss on the extinguishment of debt, which includes $4.3 million related to the call premium and $0.4 million of charges for the accelerated amortization of the debt issuance fees, terminated interest rate swaps and the premium related to the Senior Notes.

In connection with the conversion of our $225 million of Convertible Senior Debentures in the three months ended June 30, 2008, we incurred a $9.0 million charge related to the make-whole provision. This charge represented the present value of all remaining scheduled interest payments from the date of conversion through January 15, 2011.

(9) Benefit Plans

The components of our consolidated net pension and postretirement cost (benefit) are set forth in the following tables:

	Pension Benefits
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
	(Dollars in thousands)
Service cost	$	245		$	246		$	488		$	492
Interest cost		2,857			2,890			5,684			5,780
Expected return on plan assets		(3,112	)		(3,254	)		(6,194	)		(6,509	)
Amortization of transition obligation		(22	)		(22	)		(43	)		(43	)
Amortization of prior service cost		30			34			60			68
Amortization of unrecognized loss		579			497			1,155			995
Settlements		102			171			102			171
Net cost	$	679		$	562		$	1,252		$	954

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Post Retirement Benefits
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
	(Dollars in thousands)
Service cost	$	125		$	120		$	247		$	240
Interest cost		210			554			418			1,108
Amortization of prior service benefit		(2,838	)		(332	)		(5,670	)		(664	)
Amortization of unrecognized loss		1,126			1,051			2,246			2,102
Net (benefit) cost	$	(1,377	)	$	1,393		$	(2,759	)	$	2,786

(10) Long-Term Debt and Liquidity

The following table presents our long-term debt:

	At December 31, 2007		At June 30, 2008
	(Dollars in thousands)
Revolving Facility	$	—	$	84,815
Senior Notes:
Senior Notes due 2012		199,649		74,816
Fair value adjustments for terminated hedge instruments*		2,421		814
Unamortized bond premium		481		162
Total Senior Notes		202,551		75,792
Debentures		222,905		—
Other European debt		680		745
Total	$	426,136	$	161,352

* Fair value adjustments for terminated hedge instruments will be amortized as a credit to interest expense over the remaining term of the Senior Notes.

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In the six months ended June 30, 2007, we redeemed a total of $185 million of the outstanding principal amount of the 10 ¹/4% Senior Notes, due 2012, at 105.125% plus accrued interest. In connection with this redemption, we incurred a $10.3 million loss on the extinguishment of debt.

In the six months ended June 30, 2008, we redeemed a total of $125 million of the outstanding principal amount of the 10 ¹/4% Senior Notes, due 2012, at 103.417% plus accrued interest. In connection with this redemption, we incurred a $4.7 million loss on the extinguishment of debt.

On May 30, 2008, we called for redemption of the $225 million outstanding principal amount of our 1 ⁵/8% Convertible Senior Debentures.

On the redemption date, the Debenture holders who exercised their conversion rights received 60.3136 shares of our common stock for each $1,000 principal amount of Debentures on conversion, together with a make-whole payment totaling approximately $9.0 million, which represented the present value of all remaining scheduled payments of interest on the redeemed Debentures from the date of conversion through January 15, 2011. We also made a payment of $0.2 million to the Debenture holders who did not exercise their conversion rights and opted to receive a redemption price in cash equal to 100% of the principal plus accrued but unpaid interest until the redemption date. These Debenture holders received the make-whole value in shares.

(11) Inventories

Inventories are comprised of the following:

	At December 31, 2007			At June 30, 2008
	(Dollars in thousands)
Inventories:
Raw materials and supplies	$	97,009		$	103,537
Work in process		132,709			145,880
Finished goods		57,183			54,198
		286,901			303,615
Reserves		(1,468	)		(1,555	)
	$	285,433		$	302,060

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(12) Interest Expense

The following table presents an analysis of interest expense:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2007			2008			2007			2008
	(Dollars in thousands)
Interest incurred on debt	$	8,693		$	2,999		$	19,442		$	7,831
Amortization of fair value adjustments for terminated hedge instruments		(155	)		(45	)		(358	)		(116	)
Amortization of premium on Senior Notes		(31	)		(9	)		(69	)		(23	)
Amortization of discount on Debentures		168			150			334			320
Amortization of debt issuance costs		809			628			1,684			1,324
Interest incurred on other items		62			67			224			140
Total interest expense	$	9,546		$	3,790		$	21,257		$	9,476

(13) Other Comprehensive Income

Other comprehensive income consisted of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2007		2008		2007		2008
	(Dollars in thousands)
Net income	$	64,970	$	53,692	$	80,297	$	92,338
Other comprehensive income:
Foreign currency translation adjustments, net of tax		5,137		6,008		7,737		29,613
Amortization of prior service costs and unrecognized gains and losses		977		1,097		2,252		2,573
Total comprehensive income	$	71,084	$	60,797	$	90,286	$	124,524

(14) Contingencies

We are involved in various investigations, lawsuits, claims, demands, environmental compliance programs and other legal proceedings arising out of or incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of these matters, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Product Warranties

We generally sell products with a limited warranty. We accrue for known warranty claims if a loss is probable and can be reasonably estimated. We also accrue for estimated warranty claims incurred based on a historical claims charge analysis. Claims accrued but not yet paid amounted to $1.5 million at December 31, 2007 and $1.4 million at June 30, 2008. The following table presents the activity in this accrual for the six months ended June 30, 2008:

	(Dollars in Thousands)
Balance at January 1, 2008	$	1,452
Product warranty charges		1,491
Payments and settlements		(1,578	)
Balance at June 30, 2008	$	1,365

(15) Financial Information About the Issuers and Guarantors of Our Debt Securities and Subsidiaries Whose Securities Secure the Senior Notes and Related Guarantees

On February 15, 2002, Finco, a direct subsidiary of GTI (the “Parent”), issued $400 million aggregate principal amount of Senior Notes and, on May 6, 2002, $150 million aggregate principal amount of additional Senior Notes. All of the Senior Notes have been issued under a single Indenture and constitute a single class of debt securities. The Senior Notes mature on February 15, 2012. The Senior Notes have been guaranteed on a senior basis by the Parent and the following wholly-owned direct and indirect subsidiaries of the Parent: GrafTech Global, GrafTech International Holdings Inc., GrafTech International Trading Inc. (formerly named UCAR International Trading Inc.), and GrafTech Technology LLC (formerly named UCAR Carbon Technology LLC). The Parent, Finco and these subsidiaries together hold a substantial majority of our U.S. assets.

On January 22, 2004, the Parent issued $225 million aggregate principal amount of Debentures. The guarantors of the Debentures were the same as the guarantors of the Senior Notes, except for the Parent (which was the issuer of the Debentures but a guarantor of the Senior Notes) and Finco (which was a guarantor of the Debentures but the issuer of the Senior Notes). The Parent and Finco were both obligors on the Senior Notes and the Debentures, although in different capacities.

The Debentures were called for redemption during the three months ended June 30, 2008. In connection therewith, the entire $225 million outstanding principal amount of the Debentures was either converted into shares of common stock or redeemed and the obligations of the guarantors of the Debentures under the applicable guarantees thereof were released. The guarantees of the Senior Notes remain in full force and effect.

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

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

All of the guarantees are unsecured. All of the guarantees are full, unconditional and joint and several. Finco and each of the other U.S. Guarantors (other than the Parent) 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 of the Senior Notes.

Provisions in the Revolving Facility restrict the payment of dividends by our subsidiaries to the Parent. At June 30, 2008, retained earnings of our subsidiaries subject to such restrictions were approximately $1,199 million. Investments in subsidiaries are recorded on the equity basis.

The following table sets forth condensed consolidating balance sheets at December 31, 2007 and June 30, 2008 and condensed consolidating statements of operations and cash flows for each of the three month and six months ended June 30, 2007 and 2008 of the Parent, Finco, all other U.S. Guarantors and the Non-Guarantors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet

at December 31, 2007

	Parent (Guarantor of Senior Notes)		Finco (Issuer of Senior Notes)		All Other U.S. Guarantors		Non- Guarantors		Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	168	$	31,021	$	—	$	23,670	$	(118	)	$	54,741
Intercompany loans		—		155,568		—		495,849		(651,417	)		—
Intercompany accounts receivable		—		8,446		—		7,525		(15,971	)		—
Accounts receivable - third party		—		—		25,945		132,541		—			158,486
Accounts and notes receivable, net		—		164,014		25,945		635,915		(667,388	)		158,486
Inventories		—		—		46,674		238,759		—			285,433
Prepaid expenses and other current assets		—		13		4,585		5,535		—			10,133
Total current assets		168		195,048		77,204		903,879		(667,506	)		508,793
Property, plant and equipment, net		—		—		74,464		241,990		—			316,454
Deferred income taxes		—		—		850		6,404		(110	)		7,144
Intercompany loans		—		585,739		—		—		(585,739	)		—
Investments in affiliates		333,897		—		330,848		—		(664,745	)		—
Goodwill		—		—		—		9,683		—			9,683
Other assets		3,216		7,013		5,197		7,654		—			23,080
Assets held for sale		—		—		—		—		—			—
Restricted cash		—		—		—		1,547		—			1,547
Total assets	$	337,281	$	787,800	$	488,563	$	1,171,157	$	(1,918,100	)	$	866,701
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	—	$	—	$	10,709	$	48,384	$	(118	)	$	58,975
Interest payable		1,676		7,949		—		8		—			9,633
Intercompany loans		—		503,373		142,775		21,240		(667,388	)		—
Third party loans		—		—		—		1,014		—			1,014
Short-term debt		—		503,373		142,775		22,254		(667,388	)		1,014
Accrued income and other taxes		—		—		2,780		27,216		—			29,996
Other accrued liabilities		—		99		29,582		74,385		—			104,066
Total current liabilities		1,676		511,421		185,846		172,247		(667,506	)		203,684
Long-term debt		222,905		202,551		—		680		—			426,136
Intercompany loans		—		—		—		585,739		(585,739	)		—
Other long-term obligations		—		—		42,648		51,362		—			94,010
Payable to equity of investees		—		—		—		—		—			—
Deferred income taxes		—		—		—		30,281		(110	)		30,171
Minority stockholders’ equity in consolidated Entities		—		—		—		—		—			—
Stockholders’ equity (deficit)		112,700		73,828		260,069		330,848		(664,745	)		112,700
Total liabilities and stockholders’ deficit	$	337,281	$	787,800	$	488,563	$	1,171,157	$	(1,918,100	)	$	866,701

21

PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet

at June 30, 2008

	Parent (Guarantor of Senior Notes)		Finco (Issuer of Senior Notes)		All Other U.S. Guarantors		Non- Guarantors		Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	195	$	6,841	$	—	$	6,696	$	(169	)	$	13,563
Restricted cash		—		—		—		1,713		—			1,713
Inter-company loans		—		258,707		—		652,729		(911,436	)		—
Inter-company accounts receivable		—		8,334		49		9,558		(17,941	)		—
Accounts receivable - third party		—		—		38,369		150,221		—			188,590
Accounts and notes receivable, net		—		267,041		38,418		812,508		(929,377	)		188,590
Inventories		—		—		48,099		253,961		—			302,060
Prepaid expenses and other current assets		—		88		4,482		6,259		—			10,829
Total current assets		195		273,970		90,999		1,081,137		(929,546	)		516,755
Property, plant and equipment, net		—		—		77,138		262,267		—			339,405
Deferred income taxes		—		—		1,741		4,734		(221	)		6,254
Intercompany loans		—		621,600		—		—		(621,600	)		—
Investments in affiliates		505,800		—		459,724		—		(965,524	)		—
Goodwill		—		—		—		8,604		—			8,604
Other assets		—		3,949		5,433		9,117		—			18,499
Long-term investment		—		—		136,123		—		—			136,123
Total assets	$	505,995	$	899,519	$	771,158	$	1,365,859	$	(2,516,891	)	$	1,025,640
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	—	$	—	$	10,570	$	72,474	$	(169	)	$	82,875
Interest payable		—		3,107		—		12		—			3,119
Intercompany loans		—		662,357		245,516		21,504		(929,377	)		—
Third party loans		—		12,000		—		4,358		—			16,358
Short-term debt		—		674,357		245,516		25,862		(929,377	)		16,358
Accrued income and other taxes		—		—		1,874		42,931		—			44,805
Other accrued liabilities		—		—		24,666		60,271		—			84,937
Total current liabilities		—		677,464		282,626		201,550		(929,546	)		232,094
Long-term debt		—		160,792		—		560		—			161,352
Intercompany loans		—		—		—		621,600		(621,600	)		—
Other long-term obligations		—		—		43,995		52,775		—			96,770
Payable to equity of investees		—		—		—		—		—			—
Deferred income taxes		—		—		—		29,650		(221	)		29,429
Stockholders’ equity		505,995		61,263		444,537		459,724		(965,524	)		505,995
Total liabilities and stockholders’ deficit	$	505,995	$	899,519	$	771,158	$	1,365,859	$	(2,516,891	)	$	1,025,640

22

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Operations

for the Three Months Ended June 30, 2007

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non-Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	—		$	—		$	61,809		$	194,080		$	—		$	255,889
Cost of sales		—			—			54,514			108,675			—			163,189
Gross profit		—			—			7,295			85,405			—			92,700
Research and development		—			—			2,045			—			—			2,045
Selling and administrative expenses		—			—			17,021			8,441			—			25,462
Restructuring charges		—			—			197			(335	)		—			(138	)
Operating income		—			—			(11,968	)		77,299			—			65,331
Other (income) expense, net		—			(9,738	)		(5,354	)		(26,477	)		17,264			(24,305	)
Interest expense		1,350			13,259			2,794			9,407			(17,264	)		9,546
Interest income		—			(1	)		(17	)		(240	)		—			(258	)
Income (loss) from continuing operations before provision for (benefit from) income taxes and minority stockholders’ share of subsidiaries’ income (loss)		(1,350	)		(3,520	)		(9,391	)		94,609			—			80,348
Provision for (benefit from) income taxes		1,753			(1,661	)		3,508			11,776			—			15,376
Income (loss) from continuing operations before minority interest		(3,103	)		(1,859	)		(12,899	)		82,833			—			64,972
Minority stockholders’ share of subsidiaries’ income (loss)		—			—			—			2			—			2
Income (loss) from continuing operations		(3,103	)		(1,859	)		(12,899	)		82,831			—			64,970
Loss from discontinued operations, net of tax		—			—			—			—			—			—
Equity (deficit) in earnings of subsidiaries		68,073			—			82,831			—			(150,904	)		—
Net income (loss)	$	64,970		$	(1,859	)	$	69,932		$	82,831		$	(150,904	)	$	64,970

23

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Operations

for the Six Months Ended June 30, 2007

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	—		$	—		$	114,138		$	369,982		$	—		$	484,120
Cost of sales		—			—			100,051			216,081			—			316,132
Gross profit		—			—			14,087			153,901			—			167,988
Research and development		—			—			4,279			—			—			4,279
Selling and administrative expenses		—			—			32,202			15,654			—			47,856
Restructuring charges		—			—			726			20			—			746
Operating income		—			—			(23,120	)		138,227			—			115,107
Other (income) expense, net		—			(12,464	)		(5,031	)		(31,169	)		34,383			(14,281	)
Interest expense		2,698			28,231			5,602			19,109			(34,383	)		21,257
Interest income		—			(711	)		(17	)		(496	)		—			(1,224	)
Income (loss) from continuing operations before provision for (benefit from) income taxes and minority stockholders’ share of subsidiaries’ income (loss)		(2,698	)		(15,056	)		(23,674	)		150,783			—			109,355
Provision for (benefit from) income taxes		(927	)		(5,675	)		11,802			20,706			—			25,906
Income (loss) from continuing operations before minority interest		(1,771	)		(9,381	)		(35,476	)		130,077			—			83,449
Minority stockholders’ share of subsidiaries’ income (loss)		—			—			—			35			—			35
Income (loss) from continuing operations		(1,771	)		(9,381	)		(35,476	)		130,042			—			83,414
Loss from discontinued operations, net of tax		—			—			(3,117	)		—			—			(3,117	)
Equity (deficit) in earnings of subsidiaries		82,068			—			130,042			—			(212,110	)		—
Net income (loss)	$	80,297		$	(9,381	)	$	91,449		$	130,042		$	(212,110	)	$	80,297

24

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Operations

for the Three Months June 30, 2008

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	—		$	—		$	74,057		$	245,481		$	—		$	319,538
Cost of sales		—			—			36,919			168,269			—			205,188
Gross profit		—			—			37,138			77,212			—			114,350
Research and development		—			—			1,807			28			—			1,835
Selling, administrative, and other expenses		—			—			14,647			9,041			—			23,688
Restructuring charges		—			—			1			189			—			190
Operating income		—			—			20,683			67,954			—			88,637
Other (income) expense, net		9,040			(15,767	)		(940	)		(6,907	)		21,553			6,979
Interest expense		1,187			11,820			1,888			10,448			(21,553	)		3,790
Interest income		—			(12	)		—			(194	)		—			(206	)
Income (loss) from continuing operations before provision for (benefit from) income taxes and minority stockholders’ share of income (loss)		(10,227	)		3,959			19,735			64,607			—			78,074
Provision for (benefit from) income taxes		—			280			9,938			14,164			—			24,382
Income (loss) from continuing operations		(10,227	)		3,679			9,797			50,443			—			53,692
Minority stockholders’ share of income (loss)		—			—			—			—			—			—
Income (loss) from continuing operations		(10,227	)		3,679			9,797			50,443			—			53,692
Loss from discontinued operations, net of tax		—			—			—			—			—			—
Equity (deficit) in earnings of subsidiaries		63,919			—			50,443			—			(114,358	)		—
Net income (loss)	$	53,692		$	3,679		$	60,240		$	50,443		$	(114,358	)	$	53,692

25

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Operations

for the Six Months June 30, 2008

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Net sales	$	—		$	—		$	132,558		$	476,982		$	—		$	609,540
Cost of sales		—			—			103,781			283,308			—			387,089
Gross profit		—			—			28,777			193,674			—			222,451
Research and development		—			—			4,073			27			—			4,100
Selling, administrative, and other expenses		—			—			28,918			17,361			—			46,279
Restructuring charges		—			—			(1	)		343			—			342
Operating income		—			—			(4,213	)		175,943			—			171,730
Other (income) expense, net		9,040			(7,985	)		2,234			(18,961	)		43,686			28,014
Interest expense		2,539			24,205			5,770			20,648			(43,686	)		9,476
Interest income		—			(211	)		—			(367	)		—			(578	)
Income (loss) from continuing operations before provision for (benefit from) income taxes and minority stockholders’ share of income (loss)		(11,579	)		(16,009	)		(12,217	)		174,623			—			134,818
Provision for (benefit from) income taxes		—			560			12,906			29,014			—			42,480
Income (loss) from continuing operations		(11,579	)		(16,569	)		(25,123	)		145,609			—			92,338
Minority stockholders’ share of income (loss)		—			—			—			—			—			—
Income (loss) from continuing operations		(11,579	)		(16,569	)		(25,123	)		145,609			—			92,338
Loss from discontinued operations, net of tax		—			—			—			—			—			—
Equity (deficit) in earnings of subsidiaries		103,917			—			145,609			—			(249,526	)		—
Net income (loss)	$	92,338		$	(16,569	)	$	120,486		$	145,609		$	(249,526	)	$	92,338

26

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Cash Flows

for the Six Months Ended June 30, 2007

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Cash flow from operating activities:
Net income	$	80,297		$	(9,381	)	$	91,449		$	130,042		$	(212,110	)	$	80,297
Adjustments to reconcile net income to net cash used in:
Loss from discontinued operations, net of tax		—			—			3,117			—			—			3,117
Depreciation and amortization		—			—			3,674			12,528			—			16,202
Deferred income taxes		(360	)		557			639			2,786			—			3,622
Restructuring charges		—			—			726			20			—			746
Currency gains		—			—			—			(495	)		—			(495	)
Interest expense		(71	)		2,137			330			—			—			2,396
Other charges, net		93,104			(167,180	)		(86,796	)		(119,861	)		278,769			(1,964	)
(Increase) decrease in working capital		(522	)		(13,531	)		(3,959	)		(1,897	)		(855	)		(20,764	)
Gain on sale of assets		—			—			(141	)		(23,968	)		447			(23,662	)
Increase in long-term assets and liabilities		—			—			(5,028	)		(675	)		—			(5,703	)
Net cash provided by operating activities		172,448			(187,398	)		4,011			(1,520	)		66,251			53,792
Cash flow from investing activities:
Inter-company receivable/payable		—			70,396			—			(1,191	)		(69,205	)		—
Capital expenditures		—			—			(4,409	)		(15,809	)		—			(20,218	)
Proceeds from sale of assets		—			—			57			21,659			2,947			24,663
Purchase price adjustments		—			—			—			(2,794	)		—			(2,794	)
Patent capitalization		—			—			(472	)		—			—			(472	)
Net cash used in investing activities		—			70,396			(4,824	)		1,865			(66,258	)		1,179
Cash flow from financing activities:
Short-term debt borrowings, net		—			—			813			(239	)		—			574
Revolving Facility borrowings		—			183,645			—			—			—			183,645
Revolving Facility reductions		—			(183,000	)		—			—			—			(183,000	)
Long term debt reduction		(184,750	)		—			—			—			—			(184,750	)
Proceeds from exercise of stock options		12,331			—			—			—			—			12,331
Net cash used in financing activities		(172,419	)		645			813			(239	)		—			(171,200	)
Net decrease in cash and cash equivalents		29			(116,357	)		—			106			(7	)		(116,229	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			186			—			186
Cash and cash equivalents at beginning of period		151			125,161			—			24,335			(130	)		149,517
Cash and cash equivalents at end of period	$	180		$	8,804		$	—		$	24,627		$	(137	)	$	33,474

27

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statements of Cash Flows

for the Six Months Ended June 30, 2008

	Parent (Guarantor of Senior Notes)			Finco (Issuer of Senior Notes)			All Other U.S. Guarantors			Non- Guarantors			Consolidation/ Eliminations			Consolidated
	(Dollars in thousands)
Cash flow from operating activities:
Net income	$	92,338		$	(16,569	)	$	120,486		$	145,609		$	(249,526	)	$	92,338
Adjustments to reconcile net income to net cash used in:
Depreciation and amortization		—			—			2,950			14,466			—			17,416
Deferred income taxes		—			—			606			583			—			1,189
Restructuring charges		—			—			—			342			—			342
Currency losses		—			14,313			—			—			—			14,313
Stock based compensation		2,373			—			—			—			—			2,373
Interest expense		185			2,828			—			—			—			3,013
Other non-cash charges (credits), net		(137,692	)		(278,699	)		40,171			282,970			97,232			3,982
(Increase) decrease in working capital		(305	)		(109,529	)		(25,170	)		(177,387	)		277,389			(35,002	)
Gain on sale of assets		—			—			(18	)		26			—			8
Long-term assets and liabilities		—			—			1,069			1,320			—			2,389
Net cash used in operating activities		(43,101	)		(387,656	)		140,094			267,929			125,095			102,361
Cash flow from investing activities:
Inter-company receivable/payable		—			390,945			—			(265,824	)		(125,121	)		—
Capital expenditures		—			—			(5,484	)		(22,070	)		—			(27,554	)
Proceeds from derivative instruments		—			224			—			—			—			224
Purchase of equity investment		—			—			(134,611	)		—			—			(134,611	)
Proceeds from sale of assets		—			—			—			18			—			18
Increase in restricted cash		—			—			—			(166	)		—			(166	)
Net cash used in investing activities		—			391,169			(140,095	)		(288,042	)		(125,121	)		(162,089	)
Cash flow from financing activities:
Short-term debt borrowings, net		—			12,000			—			2,993			—			14,993
Revolving Facility borrowings		—			155,625			—			—			—			155,625
Revolving Facility reductions		—			(70,810	)		—			—			—			(70,810	)
Long term debt reduction		—			(124,508	)		—			—			—			(124,508	)
Excess tax benefit		12,136			—			—			—			—			12,136
Purchase of treasury shares		(5,323	)		—			—			—			—			(5,323	)
Proceeds from exercise of stock options		36,315			—			—			—			—			36,315
Net cash used in financing activities		43,128			(27,693	)		—			2,993			—			18,428
Net decrease in cash and cash equivalents		27			(24,180	)		—			(17,120	)		(26	)		(41,300	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			122			—			122
Cash and cash equivalents at beginning of period		168			31,021			—			23,670			(118	)		54,741
Cash and cash equivalents at end of period	$	195		$	6,841		$	—		$	6,672		$	(143	)	$	13,563

28

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(16) Income Taxes

The effective tax rates were 31.5% and 23.7% for the six months ended June 30, 2008 and 2007, respectively. The effective tax rates were 31.2% and 19.1% for the three months ended June 30, 2008 and 2007, respectively. The increases in the effective tax rate were primarily due to the shift of income in lower tax jurisdictions, as well as changes in the utilization of attributes and related valuation allowances.

Our cumulative year-to-date unrecognized tax benefits have increased by $1.3 million, which has an unfavorable impact on our effective rate. As of June 30, 2008, we had unrecognized tax benefits of $6.8 million, of which $6.8 million would have a favorable impact on our effective tax rate. It is reasonably possible that a reduction in a range of $2.5 million to $3.0 million of unrecognized tax benefits may occur within 12 months as a result of the expiration of statutes of limitation.

The company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. We are currently under federal audit by the Internal Revenue Service (IRS) for tax year 2004. All U.S. tax years prior to 2004 are closed by statute or have been audited and settled with the domestic tax authorities. We are also currently under audit for tax years 2005-2007 by the French tax authorities. Generally, all tax years beginning after 2002 are still open to examination in our other foreign taxing jurisdictions.

Our tax provision for the six months ended June 30, 2008 and 2007 was primarily for taxes on our international income. We continue to adjust the tax provision rate through the establishment, or release, of a non-cash valuation allowance attributable to several taxing jurisdictions, including foreign tax credit utilization. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” requires us to weigh both positive and negative evidence in determining whether a valuation allowance is required. Positive evidence would include, for example, a strong earnings history, an event that will increase the Company’s taxable income through a continuing reduction in expenses and tax planning strategies indicating an ability to realize deferred tax assets. While the performance of these tax jurisdictions has improved significantly in recent quarters, and our interest expense has been significantly reduced through debt repayment during 2007 and 2008, we have determined that the valuation allowances related to these jurisdictions’ deferred tax assets should continue to be maintained as the balance of significant positive evidence does not yet outweigh the negative evidence in regards to whether or not a valuation allowance is required. However, as we have generated taxable income in 2007 and 2008, this has created a reversal of some of our valuation allowances, thereby reflecting a provision on pretax income in these jurisdictions.

29

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(17) Discontinued Operations

On December 5, 2006, we completed the sale of our 70% equity interest in Carbone Savoie and other assets used in and liabilities related to our former cathode business to Alcan France, for approximately $135.0 million less certain price adjustments and the purchaser’s assumption of liabilities. As a result of this sale, under SFAS No. 144, the cathode business is reflected as a discontinued operation.

In the six months ended June 30, 2007, we recorded a $3.1 million charge, net of tax of $1.6 million, related to the finalization of purchase price adjustments stated in the contract and other transaction related items. Please refer to Note 1 for more information.

(18) Subsequent Event

On July 25, 2008, we and certain of our subsidiaries requested U.S. National Association, as Trustee, to redeem $35.0 million of the outstanding principal amount of the 10¼% Senior Notes due 2012, at 103.417% of the principal amount, plus accrued interest. This redemption is expected to occur in August 2008. After this redemption, $40 million in principal amount of the Senior Notes remains outstanding. In connection with this redemption we expect to incur a $1.1 million loss on the extinguishment of debt, which includes $1.0 million related to the call premium and $0.1 million of charges for accelerated amortization of the debt issuance fees, terminated interest rate swaps and the premium related to the Notes.

30

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Introduction to Part I, Item 2, and Part II, Item 1

Important Terms. We define various terms to simplify the presentation of information in this Report. These terms, which definitions are incorporated herein by reference, are defined in the Annual Report.

Presentation of Financial, Market and Legal Data. We present our financial information on a consolidated basis.

Unless otherwise noted, when we refer to dollars, we mean U.S. dollars.

Unless otherwise specifically noted, market and market share data in this Report are our own estimates or derived from sources described in “Part I – Preliminary Notes – Presentation of Financial, Market and Legal Data” in the Annual Report, which description is incorporated herein by reference. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Forward Looking Statements and Risks” in this Report and “Forward Looking Statements” and “Risk Factors” in the Annual Report. We cannot guarantee the accuracy or completeness of this market and market share data and have not independently verified it. None of the sources has consented to the disclosure or use of data in this Report.

Reference is made to the Annual Report for background information on various risks and contingencies and other matters related to circumstances affecting us and our industry.

Neither any statement made in this Report nor any charge taken by us relating to any legal proceedings constitutes an admission as to any wrongdoing.

Forward Looking Statements and Risks. This Report contains forward looking statements. In addition, we or our representatives have made or may make forward looking statements on telephone or conference calls, by webcasts or emails, in person, in presentations or written materials, or otherwise. These include statements about such matters as: expected future or targeted operational and financial performance; 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 and our ability to pass on such increases in our product prices or surcharges thereon; productivity, business process and operational initiatives, and their impact on us; our position in markets we serve; investments and acquisitions that we have made or may make in the future; employment and contributions of key personnel; employee relations and collective bargaining agreements covering many of our operations; tax rates; capital expenditures and their impact on us; nature and timing of restructuring charges and payments; strategic plans and business projects; regional and global economic and industry market conditions, changes in such conditions and the impact thereof, interest rate management activities; currency rate management activities; financing and deleveraging activities; rationalization, restructuring, realignment, strategic alliance, raw material and supply chain, technology development and collaboration, investment, acquisition, venture, operational, tax, financial and capital projects; legal proceedings, contingencies, and environmental compliance;

31

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

consulting projects; potential offerings, sales and other actions regarding debt or equity securities of us or our subsidiaries; costs, working capital, revenues, business opportunities, debt levels, cash flows, cost savings and reductions, margins, earnings and growth. The words “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to” and similar expressions, or the negatives thereof, identify some of these statements.

Our expectations and targets are not predictors of actual performance and historically our performance has deviated, often significantly, from our expectations and targets. Actual future events and circumstances (including future results and trends) could differ materially, positively or negatively, from those set forth in these statements due to various factors. These factors include:

• the possibility that additions to capacity for producing steel in electric arc furnaces (EAF), increases in overall EAF steel production capacity, and increases or other changes in steel production may not occur or may not occur at the rates that we anticipate or may not be as geographically dispersed as we anticipate;

• possible failure of increased EAF steel production or stable graphite electrode production to result in stable or increased graphite electrode demand, prices or sales volume;

• the possibility that increases in graphite electrode manufacturing capacity, competitive pressures, including growth by producers in developing countries and the mix, distribution, and pricing of their products, specific consumption rates, increases in customer inventory levels, or other changes in the graphite electrode markets may occur, which may impact demand for, prices or unit and dollar volume sales of graphite electrodes and growth or profitability of our graphite electrode business;

• the possibility that, for all of our product lines, capital improvement and expansion in our customers’ operations and increases in demand for their products may not occur or may not occur at the rates that we anticipate;

• the possibility that global consolidation of the world’s steel producers could impact our business or industry;

• the possibility that average graphite electrode revenue per metric ton in the future may be different than current spot or market prices due to changes in product mix, changes in currency exchange rates, changes in competitive market conditions or other factors;

• the possibility that price increases, adjustments or surcharges may not be realized;

32

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GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

• the possibility that increases in prices for our raw materials and the magnitude of such increases, global events that influence energy pricing and availability, increases in our energy needs, or other developments may adversely impact or offset our productivity and cost containment initiatives;

• the possibility that increases in capacity, competitive pressures, or other changes in other markets we serve may occur, which may impact demand for, prices of or unit and dollar volume sales of our other products or growth or of profitability of our other product lines or change our position in such markets;

• the possibility that we will not be able to hire and retain key personnel or to renew or extend our collective bargaining or similar agreements on reasonable terms as they expire or to do so without a work stoppage or strike;

• the possibility of delays in or failure to achieve successful development and commercialization of new or improved engineered solutions or other products or that such products could be subsequently displaced by other products or technologies;

• the possibility that we will fail to develop new customers or applications for our engineered solutions products;

• the possibility of delays in or failure to achieve widespread commercialization of fuel cells which use our natural graphite-based products or that manufacturers of PEM fuel cells may obtain those products from other sources;

• the possibility that our manufacturing capabilities may not be sufficient or that we may experience delays in expanding or fail to expand our manufacturing capacity to meet demand for existing, new or improved products;

• the possibility that the investments and acquisitions that we make or may make in the future may not be successfully integrated into our business or provide the performance or returns expected;

• the possibility that conditions and changes in the financial markets will limit our ability to obtain financing for growth and other initiatives on acceptable terms;

• the possibility that the amount or timing of our anticipated capital expenditures may be limited by our financial resources or financing arrangements or that our ability to complete capital projects may not occur timely enough to adapt to changes in market conditions or changes in regulatory requirements;

• the possibility that we may be unable to protect our intellectual property or may infringe the intellectual property rights of others, resulting in damages, limitations on our ability to produce or sell products or limitations on our ability to prevent others from using that intellectual property to produce or sell products;

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• the occurrence of unanticipated events or circumstances or changing interpretations and enforcement agendas relating to legal proceedings or compliance programs;

• the occurrence of unanticipated events or circumstances or changing interpretations and enforcement agendas relating to health, safety or environmental compliance or remediation obligations or liabilities to third parties or relating to labor relations:

• the possibility that our provision for income taxes and effective income tax rate or cash tax rate may fluctuate significantly due to changes in applicable tax rates, changes in the sources of our income, changes in tax planning, new or changing interpretations in applicable regulations, profitability, estimates of future ability to use foreign tax credits, tax laws, and other factors;

• the possibility of changes in interest or currency exchange rates, in competitive conditions, or in inflation;

• the possibility that our outlook could be significantly impacted by, among other things, changes in interest rates by the U.S. Federal Reserve Board or other central banks, changes in fiscal policies by the U.S. and other governments, developments in the Middle East, North Korea, and other areas of concern, the occurrence of further terrorist acts and developments (including increases in security, insurance, data back-up, energy and transportation and other costs, transportation delays and continuing or increased economic uncertainty and weakness) resulting from terrorist acts and the war on terrorism;

• the possibility that interruption in our major raw material, energy or utility supplies due to, among other things, natural disasters, process interruptions, actions by producers and capacity limitations, may adversely affect our ability to manufacture and supply our products or result in higher costs;

• the possibility of interruptions in production at our facilities due to, among other things, critical equipment failure, which may adversely affect our ability to manufacture and supply our products or result in higher costs;

• the possibility that we may not achieve the earnings or other financial or operational metrics that we provide as guidance from time to time;

• the possibility that the anticipated benefits from organizational and work process redesign, changes in our information systems, or other system changes, including operating efficiencies, production cost savings and improved operational performance, including leveraging infrastructure for greater productivity and contributions to our continued growth, may be delayed or may not occur or may result in unanticipated disruption;

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• the possibility that our disclosure or internal controls may become inadequate because of changes in conditions or personnel, that the degree of compliance with our policies and procedures related to those controls may deteriorate or that those controls may not operate effectively and may not prevent or detect misstatements or errors;

• the possibility that delays may occur in the financial statement closing process due to a change in our internal control environment or personnel;

• the possibility of changes in performance that may affect financial covenant compliance or funds available for borrowing; and

• other risks and uncertainties, including those described elsewhere in this Report or our other SEC filings, as well as future decisions by us.

Occurrence of any of the events or circumstances described above could also have a material adverse effect on our business, financial condition, results of operations, cash flows or the market price of our common stock or the Senior Notes.

No assurance can be given that any future transaction about which forward looking statements may be made will be completed or as to the timing or terms of any such transaction.

All subsequent written and oral forward looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC’s rules, we have no duty to update these statements.

For a more complete discussion of these and other factors, see “Risk Factors” in the Annual Report.

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Item 2. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Global Economic Conditions

We are impacted in varying degrees, both positively and negatively, by fluctuations in global, regional and country economic conditions. Our discussions about market data and global economic conditions below are based on published industry statistics.

Industrial material demand is primarily linked with the global production of steel in an electric arc furnace and, to a lesser extent, with the total production of steel and certain other metals. During the three and six months ended June 30, 2008, we estimate that global steel production and operating rates, excluding China, increased by 3.2% and 3.5%, respectively compared to the same period last year. China’s steel production grew by approximately 10.3% and 9.6%, respectively, during the three and six months ended June 30, 2008, contributing to an estimated global steel production increase of 5.8% and 5.7%, respectively.

Steel production in China and Russia is approximately 89.7% and 81.6% basic oxygen furnace related, respectively. However, these two countries provided some of the highest EAF capacity growth in 2008, due to new startups.

Overall, EAF steel production capacity continues to expand. During the three and six months ended June 30, 2008, EAF steel production increased approximately 4.0% and 3.7%, respectively, compared to the three and six months ended June 30, 2007, due to new EAF start-ups and strong melt rates. Based on the strong first half, we now estimate that EAF production will increase 3-4% during 2008. Graphite electrode demand is expected to increase by approximately 1-2% due to continual improvements in specific consumption.

In 2008, we believe that the overall demand for our engineered solutions will remain at a high level, resulting from continued strength in the energy markets and defense and transportation industries. The continued overall strength of the markets served has kept the demand high for our core products which are used in the industrial and chemical sectors.

Outlook

If global economic conditions in 2008 are stable, we would expect:

• Total company net sales to increase 20 to 22 percent

• The effective tax rate to be approximately 27 to 29 percent

• Capital expenditures to be approximately $70 - 75 million

• Depreciation expense of approximately $34 million; and

• Cash flow from operations to be about $190 million.

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Our outlook could be significantly impacted by, among other things, factors described under “Preliminary Notes – Forward Looking Statements and Risk Factors” in this Report. For a more complete discussion of these and other factors, see “Risk Factors” in the Annual Report.

Results of Operations

Three Months Ended June 30, 2008 as Compared to Three Months Ended June 30, 2007.

Consolidated. Net sales of $319.5 million in the three months ended June 30, 2008 represented a $63.6 million, or 24.9%, increase from net sales of $255.9 million in the three months ended June 30, 2007. Net sales for both of our operating segments increased, primarily due to favorable pricing, along with currency impacts of $15.1 million. High demand for most of our products, together with passing significant raw material cost increases on to our customers, has resulted in increased prices, particularly related to graphite electrodes. Favorable currency exchange rates, particularly related to the euro, have also been a strong driver of our sales increase in the three months ended June 30, 2008 compared to the three months ended June 30, 2007. These increases in sales were offset by a $3.7 million unfavorable sales mix and other items in our industrial materials segment.

Cost of sales of $205.2 million in the three months ended June 30, 2008 represented a $42.0 million, or 25.7%, increase from cost of sales of $163.2 million in the three months ended June 30, 2007. Cost of sales for both segments increased as a result of our higher sales volumes. Further, our businesses, particularly our industrial materials segment, continue to experience significant rising raw material costs. The effects of foreign currency exchange rates have also increased our costs of sales compared to the same period in 2007.

Gross profit of $114.4 million in the three months ended June 30, 2008 represented a $21.7 million, or 23.4%, increase from gross profit of $92.7 million in the three months ended June 30, 2007. Gross margin decreased slightly to 35.8% of net sales, from 36.2% in the three months ended June 30, 2007.

Research and development expenses decreased $0.2 million, or 10%, from $2.0 million in the three months ended June 30, 2007 to $1.8 million in the three months ended June 30, 2008. This decrease was primarily the result of increased State and Federal grant activity related to specific research projects, which offset a portion of our research and development costs.

Selling and administrative expenses decreased to $23.7 million for the three months ended June 30, 2008 compared to $25.5 million for the three months ended June 30, 2007. This decrease was caused primarily by favorable employee related costs for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007. Selling and administrative expenses have remained relatively consistent even with the higher sales due to our continued focus of monitoring and controlling discretionary expenses.

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Restructuring charges were $0.2 million for the three months ended June 30, 2008, compared to a net benefit of $0.1 million in the three months ended June 30, 2007.

Other (income) expense, net was a charge of $7.0 million in the three months ended June 30, 2008 compared to income of $24.3 million in three months ended June 30, 2007. In the three months ended June 30, 2008 we incurred a $9.0 million charge for the Debenture make-whole payment that was made in conjunction with the conversion of the Debentures. The income in the three months ended June 30, 2007 was primarily the result of a $23.9 million gain on the sale of assets, which was driven by the sale of our Caserta, Italy facility. We also incurred a $2.8 million loss on the extinguishment of debt in connection with the redemption of $50 million of our outstanding Senior Notes in the three months ended June 30, 2007.

The following table presents an analysis of interest expense:

	For the Three Months Ended June 30,
	2007			2008
	(Dollars in thousands)
Interest incurred on debt	$	8,693		$	2,999
Amortization of fair value adjustments for terminated hedge instruments		(155	)		(45	)
Amortization of debt issuance costs		809			628
Amortization of premium on Senior Notes		(31	)		(9	)
Amortization of discount on Debentures		168			150
Interest incurred on other items		62			67
Total interest expense	$	9,546		$	3,790

Average debt outstanding (long-term debt and the outstanding Revolver) was $282.1 million in the three months ended June 30, 2008 as compared to $531.4 million in the three months ended June 30, 2007. The average annual interest rate for these instruments, excluding amortization of issuance costs and other similar non-cash charges, was 4.3% in the three months ended June 30, 2008 as compared to 6.4% in the three months ended June 30, 2007. This rate reduction was the result of a decrease in the amount of our 10.25% Senior Notes outstanding during the three months ended June 30, 2008 compared to the three months ended June 30, 2007.

Provision for income taxes was a charge of $24.4 million for the three months ended June 30, 2008 and $15.4 million for the three months ended June 30, 2007. The effective tax rate was 31.2% for the three months ended June 30, 2008 as compared to 19.2% for the three months ended June 30, 2007. The increase in the effective tax rate was primarily due to the shift of income in lower tax jurisdictions as well as changes in the utilization of attributes and related valuation allowances.

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As a result of the matters described above, net income was $53.7 million in the three months ended June 30, 2008 as compared to $65.0 million in the three months ended June 30, 2007.

Segment net sales. The following table represents our net sales by segment for the three months ended June 30, 2007 and 2008:

	For the Three Months Ended June 30,
	2007		2008
	(Dollars in thousands)
Industrial materials	$	220,857	$	275,121
Engineered solutions		35,032		44,417
Total net sales	$	255,889	$	319,538

Our analysis of the percentage change in net sales for industrial materials and engineered solutions is set forth in the following table:

	Volume		Price/Mix		Currency		Other		Net Change
Industrial materials	3	%	17	%	6	%	(1	)%	25	%
Engineered solutions	6	%	15	%	4	%	2	%	27	%

Net sales for the industrial materials segment increased primarily due to a favorable price/mix increase as a result of increased demand, particularly related to our graphite electrode products. Currency rate fluctuations also increased sales, driven by the strengthening of the euro. Sales volume for the segment increased driven by high sales volumes for refractories, as well as slight increases in graphite electrode volumes.

Net sales for engineered solutions increased primarily due to favorable price/mix increases and favorable currency exchange rates, also related to the strengthening of the euro. Volumes for our engineered solutions increased 6% for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. This volume increase was related primarily to higher volumes in our ETM products. During the three months ended June 30, 2008, we also recognized $0.7 million of order cancellation fees related to certain advanced graphite material products.

Segment operating net income. The following table represents our operating income by segment for the three months ended June 30, 2007 and 2008:

	For the Three Months Ended June 30,
	2007		2008
	(Dollars in thousands)
Industrial materials	$	61,439	$	79,646
Engineered solutions		3,892		8,991
Total operating income	$	65,331	$	88,637

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Our analysis of the percentage change in segment operating costs and expenses for industrial materials and engineered solutions is set forth in the following table:

	Operating Costs and Expenses For the Three Months Ended June 30,
	(Percentage of sales)
	2007		2008		Change
Industrial materials	72	%	71	%	(1	)%
Engineered solutions	89	%	80	%	(9	)%

Segment operating costs and expenses as a percentage of sales for industrial materials decreased 1% point in the three months ended June 30, 2008. However, in total, segment operating costs and expenses increased $36.1 million for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. The largest increase in operating expenses was caused by increased raw material costs of $24.4 million. The strengthening of certain currencies, primarily the euro, increased production costs an additional $9.7 million, and net volume increases and other expenses drove costs $3.2 million higher. Selling and administrative and other expenses decreased $1.2 million as a result of our efforts to reduce discretionary expenses.

Segment operating costs and expenses as a percentage of sales for engineered solutions decreased by 9% points to 80%. However, total segment operating costs and expenses increased by $4.3 million. This increase was driven by increased production costs, driven primarily by raw materials, related to our advanced graphite materials products of $1.2 million. Selling and administrative costs did not fluctuate materially even with the increased sales levels, as a result of our continued focus on reducing and controlling selling and administrative expenses.

Six Months Ended June 30, 2008 as Compared to Six Months Ended June 30, 2007.

Consolidated. Net sales of $609.5 million in the six months ended June 30, 2008 represented a $125.4 million, or 25.9%, increase from net sales of $484.1 million in the six months ended June 30, 2007. Net sales for both of our operating segments increased, primarily due to favorable pricing, along with currency impacts of $26.7 million. High demand for most of our products, together with passing on significant raw material cost increases to our

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customers, has resulted in increased prices, particularly related to graphite electrodes. Favorable currency exchange rates, particularly related to the euro, have also been a strong driver of our sales increase in the six months ended June 30, 2008 compared to the six months ended June 30, 2007. These increases in sales were offset by a $3.7 million decrease in sales related to carbon electrodes, as we have completely exited this business.

Cost of sales of $387.1 million in the six months ended June 30, 2008 represented a $71.0 million, or 22.5%, increase from cost of sales of $316.1 million in the six months ended June 30, 2007. Cost of sales rose primarily due to our industrial materials segment. This was driven primarily by increased raw material and production costs for the six months ended June 30, 2008 compared to June 30, 2007, including the effects of foreign currency exchange rates. The total cost of sales for our engineered solutions segment increased slightly due to the effects of foreign currency exchange rates.

Gross profit of $222.5 million in the six months ended June 30, 2008 represented a $54.5 million, or 32.4%, increase from gross profit of $168.0 million in the six months ended June 30, 2007. Gross margin increased to 36.5% of net sales, from 34.7% in the six months ended June 30, 2007 as a result of our increased prices.

Research and development expenses decreased $0.2 million, or 4.7%, from $4.3 million in the six months ended June 30, 2007 to $4.1 million in the six months ended June 30, 2008. This decrease was primarily the result of increased State and Federal grant activity, which offset a portion of our research and development costs.

Selling and administrative expenses were $46.3 million for the six months ended June 30, 2008 compared to $47.9 million for the six months ended June 30, 2007. This decrease was driven by a reduction in employee related benefit costs in the six months ended June 30, 2008 as compared to the six months ended June 30, 2007. Note that selling and administrative expenses have remained relatively stable even with the large growth in sales due to the continued focus of monitoring and controlling discretionary costs.

Restructuring charges decreased $0.4 million to $0.3 million for the six months ended June 30, 2008, as we complete previous restructuring activities.

Other (income) expense, net was a charge of $28.0 million in the six months ended June 30, 2008 compared to income of $14.3 million in six months ended June 30, 2007. The increase was caused primarily by a $14.0 million increase in currency losses. These losses were the result of our euro-denominated inter-company loans between GrafTech Finance and some of our foreign subsidiaries, caused by the negative impact of movements in the euro exchange rate. We also incurred a $9.0 million charge for the Debenture make-whole payment in the six months ended June 30, 2008. During 2008, the gains on the sale of assets decreased by $23.2 million. The large gain seen in the six months ended June 30, 2007 was the result of the sale of our Caserta, Italy facility. These net increases in other expense were offset slightly by a decrease in the loss on extinguishment of debt of $5.6 million in the six months ended June 30, 2008. During the six months ended June 30, 2008, we redeemed $125 million of the outstanding principal of our Senior Notes, compared to $185 million in the six months ended June 30, 2007.

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The following table presents an analysis of interest expense:

	For the Six Months Ended June 30,
	2007			2008
	(Dollars in thousands)
Interest incurred on debt	$	19,442		$	7,831
Amortization of fair value adjustments for terminated hedge instruments		(358	)		(116	)
Amortization of debt issuance costs		1,684			1,324
Amortization of premium on Senior Notes		(69	)		(23	)
Amortization of discount on Debentures		334			320
Interest incurred on other items		224			140
Total interest expense	$	21,257		$	9,476

Average debt outstanding (long-term debt and outstanding Revolver) was $331.3 million in the six months ended June 30, 2008 as compared to $568.9 million in the six months ended June 30, 2007. The average annual interest rate for these instruments, excluding amortization of issuance costs and other similar non-cash charges, was 4.6% in the six months ended June 30, 2008 as compared to 6.7% in the six months ended June 30, 2007. This rate reduction was the result of a decrease in the amount of our 10.25% Senior Notes outstanding during the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

Provision for income taxes was a charge of $42.5 million for the six months ended June 30, 2008 and $25.9 million for the six months ended June 30, 2007. The effective tax rate was 31.5% for the six months ended June 30, 2008 as compared to 23.7% for the six months ended June 30, 2007. The increase in the effective tax rate was primarily due to the shift of income in lower tax jurisdictions as well as changes in the utilization of attributes and related valuation allowances.

The loss from discontinued operations was $3.1 million in the six months ended June 30, 2007.

As a result of the matters described above, net income was $92.3 million in the six months ended June 30, 2008 as compared to $80.3 million in the six months ended June 30, 2007.

Segment net sales. The following table represents our net sales by segment for the six months ended June 30, 2007 and 2008:

	For the Six Months Ended June 30,
	2007		2008
	(Dollars in thousands)
Industrial materials	$	415,370	$	523,410
Engineered solutions		68,750		86,130
Total net sales	$	484,120	$	609,540

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Our analysis of the percentage change in net sales for industrial materials and engineered solutions is set forth in the following table:

	Volume		Price/Mix		Currency		Other		Net Change
Industrial materials	3	%	17	%	6	%	—		26	%
Engineered solutions	5	%	15	%	4	%	1	%	25	%

Net sales for the industrial materials segment increased primarily due to a favorable price/mix increase as a result of increased demand, particularly related to our graphite electrode products. Currency rate fluctuations also increased sales, driven by the strengthening of the euro. Sales volume for the segment increased slightly driven by volume increases for both refractories and graphite electrodes, offset by volume decreases for our former carbon electrode products.

Net sales for engineered solutions increased primarily due to a favorable price / mix increase and favorable currency exchange rates, also related to the strengthening of the euro. Volume in our engineered solutions increased 5% for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. This increase in volume was driven primarily by our ETM products. During the six months ended June 30, 2008, we also recognized $0.7 million related of order cancellation fees related to certain advanced graphite material products.

Segment operating net income. The following table represents our operating income by segment for the six months ended June 30, 2007 and 2008:

	For the Six Months Ended June 30,
	2007		2008
	(Dollars in thousands)
Industrial materials	$	109,556	$	154,311
Engineered solutions		5,551		17,419
Total operating income	$	115,107	$	171,730

Our analysis of the percentage change in segment operating costs and expenses for industrial materials and engineered solutions is set forth in the following table:

	Operating Costs and Expenses For the Six Months Ended June 30,
	(Percentage of sales)
	2007		2008		Change
Industrial materials	74	%	71	%	(3	)%
Engineered solutions	92	%	80	%	(12	)%

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Segment operating costs and expenses as a percentage of sales for industrial materials decreased 3% points in the six months ended June 30, 2008. However, total segment operating costs and expenses increased $63.3 million for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. Operating expenses for this segment increased primarily due to a $42.1 million increase in production costs, related primarily to raw material costs. The strengthening of certain currencies, primarily the euro increased production costs an additional $19.4 million. Selling and administrative and other expenses increased $1.8 million to support our increased sales levels.

Segment operating costs and expenses as a percentage of sales for engineered solutions decreased by 12% points to 80%. However, total segment operating costs and expenses increased by $5.5 million. This increase was caused by production costs of $6.1 million, driven by foreign currency exchange rate fluctuations related to our advanced graphite materials products of $2.4 million and increased raw materials costs. These increases were offset by a decrease in total selling and administrative costs for the segment of $0.6 million as a result of our continued focus on reducing these types of costs.

Effects of Changes in Currency Exchange Rates

We incur costs in dollars and in the currency of each of the six non-U.S. countries in which we have a manufacturing facility, and we sell our products in multiple currencies. In general, our results of operations, cash flows and financial condition are affected by changes in currency exchange rates affecting these currencies relative to the dollar and, to a limited extent, each other.

Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic changes, which have significantly impacted currency exchange rates. We cannot predict changes in currency exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales, cost of sales or net income. We cannot assure you that we would be able to mitigate any adverse effects of such changes.

During the six months ended June 30, 2008, the average exchange rate of the Brazilian real, the euro and the Mexican Peso increased about 20.3%, 15.2% and 3.2%, respectively, when compared to the average exchange rate for the same period in 2007. During the six months ended June 30, 2008, the average exchange rate for the South African rand decreased about 6.4% when compared to the average rate for the six months ended June 30, 2007.

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In the case of net sales of industrial materials, the impact of these events was an increase of about $23.9 million in the six months ended June 30, 2008 as compared to the same period in 2007. In the case of cost of sales of industrial materials, the impact of these events was an increase of about $18.3 million in the six months ended June 30, 2008 as compared to the same period in 2007.

We have non-dollar-denominated intercompany loans between our GrafTech Finance, Inc. subsidiary (“Finco”) and some of our foreign subsidiaries. At June 30, 2008, the aggregate principal amount of these loans was $529.3 million. These loans are subject to remeasurement gains and losses due to changes in currency exchange rates. A portion of these loans are deemed to be essentially permanent and, as a result, remeasurement gains and losses on these loans are recorded in accumulated other comprehensive loss in the stockholders’ equity section of the Consolidated Balance Sheets. The balance of these loans is deemed to be temporary and, as a result, remeasurement gains and losses on these loans are recorded as currency gains / losses in other income / expense, net, on the Consolidated Statements of Operations. In the three and six months ended June 30, 2007, we had a net total of $2.8 million and $1.3 million, respectively, of currency gains, primarily due to the remeasurement of intercompany loans and the effect of transaction losses related to foreign subsidiaries which use the dollar as their functional currency. In the three and six months ended June 30, 2008, we had a net total of $2.8 million of currency gains and $12.7 million of currency losses, respectively, due to the remeasurement of intercompany loans related to foreign subsidiaries which use the dollar as their functional currency. These losses were primarily driven by changes in the euro. To manage certain exposures to specific financial market risks caused by changes in currency exchange rates, we may use various financial instruments as described under “Item 3–Quantitative and Qualitative Disclosures about Market Risk.”

Liquidity and Capital Resources

Our sources of funds have consisted principally of invested capital, cash flow from operations and debt and equity financings. Our uses of those funds (other than for operations) have consisted principally of capital expenditures, investments, payment of restructuring costs, pension and post-retirement contributions, debt reduction payments and other obligations.

At June 30, 2008, we had short-term debt of $16.4 million, long-term debt of $161.4 million, cash and cash equivalents of $13.6 million and a stockholders’ equity of $506.0 million.

As part of our cash management activities, we periodically factor or discount (by selling) certain accounts receivable to third parties. In the six months ended June 30, 2008, certain subsidiaries sold receivables at a cost lower than the cost to borrow a comparable amount for a comparable period under the Revolving Facility. Proceeds of the sale of receivables were used to reduce debt and to fund operating activities. If we had not sold receivables, our accounts receivable and our debt would have been about $0.3 million higher at December 31, 2007 and

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about $23.8 million higher at June 30, 2008. All receivables sold during 2007 and the 2008 were sold without recourse, and no amount of accounts receivable sold remained on the Consolidated Balance Sheets at December 31, 2007 and June 30, 2008.

We use cash and cash equivalents, cash flow from operations, funds from factoring arrangements and funds available under the Revolving Facility (subject to continued compliance with the financial covenants and representations under the Revolving Facility), as well as cash flow from operations as our primary sources of liquidity. The Revolving Facility provides for maximum borrowings of up to $215.0 million. At June 30, 2008, $106.7 million was available (after consideration of outstanding revolving and swingline loans of $97.0 million and outstanding letters of credit of $11.3 million). It is possible that our future ability to borrow under the Revolving Facility may effectively be less because of the impact of additional borrowings upon our compliance with the maximum net senior secured debt leverage ratio permitted or minimum interest coverage ratio required under the Revolving Facility. The Revolving Facility matures in July 2010.

Our business strategies have continued to improve the amount and speed of cash generated from operations under current economic conditions. Improvements in cash flow from operations resulting from these strategies are being partially offset by associated cash implementation costs while they are being implemented.

At June 30, 2008, we were in compliance with all financial and other covenants contained in the Senior Notes and the Revolving Facility, as applicable. Based on expected operating results and expected cash flows, we expect to be in compliance with these covenants for the next twelve months. If we were to believe that we would not continue to comply with these covenants, we would seek an appropriate waiver or amendment from the lenders thereunder. We cannot assure you that we would be able to obtain such waiver or amendment on acceptable terms or at all.

At June 30, 2008, the Revolving Facility had an effective interest rate of 4.3% and our $74.8 million principal amount of Senior Notes had a fixed rate of 10.25%. Also at June 30, 2008, 58% (or $101 million) of our total debt consists of variable rate obligations.

At December 31, 2007, the Revolving Facility had an effective interest rate of 6.2%, our $199.6 million principal amount of Senior Notes had a fixed rate of 10.25% and our $225.0 million principal amount and Debentures (which were redeemed during the three months ended June 30, 2008) had a fixed rate of 1.625%.

We may in the future implement interest rate management initiatives to seek to minimize interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations as described under “Item 3–Quantitative and Qualitative Disclosures about Market Risk” in this Report.

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Cash Flow and Plans to Manage Liquidity. Our business strategies include efforts to enhance our capital structure by further reducing our gross obligations. Our efforts include leveraging our global manufacturing network by driving higher utilization rates and more productivity from our existing assets, accelerating commercialization initiatives across all of our businesses and realizing other global efficiencies.

Typically, our cash flow from operations fluctuates significantly between quarters due to various factors. These factors include customer order patterns, fluctuations in working capital requirements, and other factors, including our incentive compensation program payout in the second quarter of 2008.

We expect cash flow from operations to be positively impacted by reduced interest expense of approximately $20 million on an annual basis related to our reduced debt position. We expect our cash flow from operations to be negatively impacted by higher raw material prices, higher energy costs, higher accounts receivable balances as a result of favorable pricing for industrial materials, the payment of certain international taxes and planned pension and post retirement contributions.

Our debt and other obligations could have a material impact on our liquidity. Cash flow from operations services payment of our debt and other obligations, thereby reducing funds available to us for other purposes. Our debt and obligations make us more vulnerable to economic downturns in the event that these obligations are greater or timing of payment is sooner than expected.

In order to seek to minimize our credit risks, at times we have reduced our sales of, or refused to sell (except for cash on delivery), graphite electrodes and other products to some customers. Our unrecovered trade receivables worldwide were only 0.1% of global net sales during the last 3 years. We cannot assure you that we will not be materially adversely affected by accounts receivable losses in the future. In addition, we have historically factored a portion of our accounts receivable and used the proceeds to reduce debt.

We may from time to time and at any time repurchase Senior Notes in open market or privately negotiated transactions, opportunistically on terms that we believe to be favorable. In the six months ended June 30, 2008 we redeemed $125 million of our Senior Notes. Also, on July 25, 2008, we called for the redemption of an additional $35 million of our Senior Notes.

In December 2007, our Board of Directors approved a share repurchase program authorizing the purchase of up to 3 million shares of our common stock. Share repurchases may take place from time to time in the open market, or through privately negotiated transactions, as market conditions warrant. We intend to fund any such share repurchases from available cash and cash flows. These share repurchases may be suspended or discontinued at any time.

We occasionally enter into natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure, as described under “Quantitative and Qualitative Disclosure about Market Risks” in this Report. At June 30, 2008, there were no such contracts outstanding.

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PART I (CONT’D)

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Cash Flow Provided by Operating Activities. Cash flow provided by operating activities was $102.4 million in the six months ended June 30, 2008 as compared to $53.8 million in the six months ended June 30, 2007, an increase of $48.6 million.

Cash provided by net income, after adding back the effect of non-cash items, was $135.0 million for the six months ended June 30, 2008. Non-cash items included $17.4 million of depreciation and amortization, $0.3 million of restructuring charges, $14.3 million of foreign currency losses, primarily from inter-company loans, $3.0 million in interest expense, a $1.2 million change in deferred income taxes, $2.4 million of stock based compensation expense and $4.0 million net of other items. Changes in working capital used cash flow of $35.0 million for the six months ended June 30, 2008, due primarily to a $24.4 million increase in accounts receivable, including the effects of factoring, driven by higher sales in the six months ended June 30, 2008. Other working capital uses of cash were a $5.6 million increase in inventories, a $1.0 million increase in prepaid assets, $0.8 million of restructuring payments, and a $6.5 million decrease in interest payable. These uses of cash were offset slightly by a $3.3 million increase in accounts payable and accrued expenses.

In the six months ended June 30, 2007, net income after adding back the effect from non-cash items, amounted to $103.9 million, including the loss from discontinued operations of $3.1 million. The non-cash expenses consisted of depreciation and amortization of $16.2 million and restructuring charges of $0.7 million, deferred income taxes of $3.6 million, and other credits of $0.1 million. Net cash used by working capital of $20.8 million primarily consisted of a increase in inventories of $7.1 million, the final $5.4 million antitrust payment, $4.5 million of restructuring payments, an $13.4 million decrease in accounts payable and accruals, and a decrease in interest payable of $7.1 million. These increases in working capital were offset by a decrease in accounts receivable of $15.8 million, including the effect of factoring of $22.5 million and a decrease in prepaid and other current assets of $0.9 million. Also affecting cash flows from operations for the six months ended June 30, 2007 was an increase in post retirement obligations of $1.7 million and long-term assets and liabilities of $4.0 million, and $23.7 million related to the gain on the sale of fixed assets (primarily our Caserta, Italy facility).

Cash Flow Provided by Investing Activities. Cash flow used in investing activities was $162.1 million in the six months ended June 30, 2008 compared to a source of cash of $1.2 million in the six months ended June 30, 2007.

In the six months ended June 30, 2008, we used a net $134.6 million of cash to purchase our equity investment of Seadrift Coke LP. Capital expenditures used an additional $27.6 million of cash.

In the six months ended June 30, 2007, investing activities provided cash of $1.2 million. This was driven by the proceeds from the sale of assets, specifically the sale of our Caserta, Italy facility, of $24.7 million, offset by capital expenditures of $20.2 million and $2.8 million dollars of purchase price adjustments made related to the 2006 sale of our former cathodes business.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Cash Flow Used in Financing Activities. Cash flow provided by financing activities was $18.4 million in the six months ended June 30, 2008 compared to a use of cash of $171.2 million in the six months ended June 30, 2007.

During the six months ended June 30, 2008, we redeemed $125 million of our Senior Notes, and borrowed a net $84.8 million under the Revolving Facility, primarily to fund our equity investment purchase. Other short-term borrowings were $15.0 million, which related primarily to bank overdrafts at our international locations and short-term borrowings under our revolving credit facilities. We used these borrowings primarily to fund working capital requirements and for capital expenditures. The excess tax benefit from stock-based compensation was $12.1 million for the six months ended June, 2008. We also purchased $5.3 million of treasury shares during the six months ended June 30, 2008. These uses of cash were offset by proceeds from the exercise of stock options of $36.3 million.

During the six months ended June 30, 2007, we repaid $184.8 million in long-term debt obligations. Net revolver borrowings were $0.6 million, and short term borrowings were $0.5 million. Proceeds from the exercise of stock options provided an additional $12.3 million of cash.

Restrictions on Dividends and Stock Repurchases

A description of the restrictions on our ability to pay dividends and our ability to repurchase common stock is set forth under “Item 5 – Dividend Policies and Restrictions” in the Annual Report and such description is incorporated herein by reference. Such description contains all of the information required with respect thereto.

Recent Accounting Pronouncements

A description of recent accounting pronouncements is set forth under “New Accounting Standards” in Note 2 to the Notes to the Consolidated Financial Statements contained in this Report, and such description is incorporated herein by reference. Such description contains all of the information required with respect thereto.

Description of Our Financing Structure

A description of the Revolving Facility and the Senior Notes is set forth under “Long-Term Debt and Liquidity” in the Annual Report, and such description is incorporated herein by reference.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Proceedings Against Us

We are involved in various investigations, lawsuits, claims demands, environmental compliance programs and other legal proceedings arising out of or incidental to the conduct of our business. While it is not possible to determine the ultimate disposition of each of them, we do not believe that their ultimate disposition will have a material adverse effect on our financial position, results of operations or cash flows.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks primarily from changes in interest rates, currency exchange rates, and commercial energy rates. We, from time to time, routinely enter into various transactions that have been authorized according to documented policies and procedures to manage these well-defined risks. These transactions relate primarily to financial instruments described below. Since the counterparties, if any, to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not use financial instruments for trading purposes.

Our exposure to changes in interest rates results primarily from floating rate long-term debt tied to LIBOR or euro LIBOR. Our exposure to changes in currency exchange rates results primarily from:

• sales made by our subsidiaries in currencies other than local currencies;

• raw material purchases made by our foreign subsidiaries in currencies other than local currencies; and

• investments in and intercompany loans to our foreign subsidiaries and our share of the earnings of those subsidiaries, to the extent denominated in currencies other than the dollar.

Our exposure to changes in energy costs results primarily from the purchase of natural gas and electricity for use in our manufacturing operations.

Interest Rate Risk Management. We periodically implement interest rate management initiatives to seek to minimize our interest expense and optimize the risk in our portfolio of fixed and variable interest rate obligations.

When we sell a fair value swap, the gain or loss is amortized as a credit or charge to interest expense over the remaining term of the Senior Notes. When we effectively reduce the outstanding principal amount of the Senior Notes (through debt-for-equity exchanges, repurchases or otherwise), the related portion of such credit or charge is accelerated and recorded in the period in which such reduction occurs.

We periodically enter into agreements with financial institutions that are intended to limit, or cap, our exposure to incurrence of additional interest expense due to increases in variable interest rates. These instruments effectively cap our interest rate exposure.

Currency Rate Management. We enter into foreign currency instruments from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures, net, relating to euro-denominated debt and identifiable foreign currency receivables, payables and commitments held by our foreign and domestic subsidiaries. Forward exchange contracts are agreements to

51

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

exchange different currencies at a specified future date and at a specified rate. Purchased foreign currency options are instruments which give the holder the right, but not the obligation, to exchange different currencies at a specified rate at a specified date or over a range of specified dates. The result is the creation of a range in which a best and worst price is defined, while minimizing option cost. Forward exchange contracts and purchased currency options are carried at market value. As of December 31, 2007 and June 30, 2008, there were no outstanding contracts.

Commercial Energy Rate Management. We periodically enter into natural gas derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas cost exposure. There were no outstanding contracts at June 30, 2008. We are required to provide cash collateral to certain counterparties to the extent that the fair market value of the natural gas derivative contracts exceeds a specific threshold. At June 30, 2008, we were not required to provide any cash collateral.

Sensitivity Analysis. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates, and interest rates on results of operations for the six months ended June 30, 2008. Based on this analysis, a hypothetical 10% weakening or strengthening in the dollar across all other currencies would have changed our reported gross margin for the six months ended June 30, 2008 by about $8.5 million. Based on this analysis, a hypothetical increase in interest rates of 100 basis points would have increased our interest expense by a nominal amount for the six months ended June 30, 2008, as our debt was primarily fixed rate debt for the six months ended June 30, 2008.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Management is responsible for establishing and maintaining adequate disclosure controls and procedures at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a reporting company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by it in the reports that it files under the Exchange Act is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2008. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective at the reasonable assurance level as of June 30, 2008.

Changes in Internal Controls over Financial Reporting. There have been no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2008 that materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

53

PART II. OTHER INFORMATION

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 1. Legal Proceedings

The information required in response to this Item is set forth under “Contingencies” in Note 13 to the Notes to Consolidated Financial Statements contained in this Report, and such description is incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In December 2007, we announced that our Board of Directors had approved a share repurchase program authorizing the purchase of up to 3 million shares of our common stock. Purchases may take place from time to time in the open market, or through privately negotiated transactions, as market conditions warrant. During the six months ended June 30, 2008, we repurchased 194,295 shares under this program at an average price of $21.83.

In addition to the above repurchase program, we occasionally purchase or withhold vested restricted stock shares from employees to cover withholding taxes. During the six months ended June 30, 2008, we purchased or withheld 68,520 shares at an average price of $16.37.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, through January 31, 2008	3,872	$	16.58	0	3,000,000
February 1, through February 29, 2008	0	$	0.00	0	3,000,000
March 1, through March 31, 2008	61,078	$	16.02	0	3,000,000
April 1, through April 30, 2008	0	$	0.00	0	3,000,000
May 1, through May 31, 2008	194,295	$	21.83	194,295	2,805,705
June 1, through June 30, 2008	3,570	$	22.12	0	2,805,705

Item 4. Submission of Matters to a Vote of Security Holders

On May 20, 2008, GTI held its annual meeting of stockholders in Parma, Ohio.

At the meeting, the stockholders elected directors, and the shares present at the meeting were voted for or withheld from each nominee, as follows:

Name of Director	Number of Shares Cast For	Number of Shares Withheld
Mary B. Cranston	93,430,875	966,788
Harold E. Layman	93,423,821	973,842
Ferrell P. McClean	81,516,117	12,881,546
Michael C. Nahl	89,447,097	4,950,566
Frank A. Riddick III	91,354,218	3,043,445
Craig S. Shular	92,050,983	2,346,680

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PART II (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 6. Exhibits

The exhibits listed in the following table have been filed as part of this Report.

Exhibit Number	Description of Exhibit
10.1	Stock Purchase and Sale Agreement, dated as of June 30, 2008, by and among Falcon Mezzanine Partners, LP and GrafTech International Holdings Inc. (confidential treatment requested as to certain portions which are omitted and filed separately with the SEC).
10.2	Termination and Release Agreement, dated June 30, 2008, between Gary R. Whitaker and GrafTech International Holdings Inc.
31.1	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer, President and Chairman of the Board.
31.2	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Mark R. Widmar, Vice President and Chief Financial Officer.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Craig S. Shular, Chief Executive Officer, President and Chairman of the Board.
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark R. Widmar, Vice President and Chief Financial Officer.

55

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	GRAFTECH INTERNATIONAL LTD.
Date: July 29, 2008	By:	/s/ Mark R. Widmar
		Mark R. Widmar Vice President and Chief Financial Officer (Principal Accounting Officer)

56

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
10.1	Stock Purchase and Sale Agreement, dated as of June 30, 2008, by and among Falcon Mezzanine Partners, LP and GrafTech International Holdings Inc. (confidential treatment requested as to certain portions which are omitted and filed separately with the SEC).
10.2	Termination and Release Agreement, dated June 30, 2008, between Gary R. Whitaker and GrafTech International Holdings Inc.
31.1	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer, President and Chairman of the Board.
31.2	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Mark R. Widmar, Vice President and Chief Financial Officer.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Craig S. Shular, Chief Executive Officer, President and Chairman of the Board.
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Mark R. Widmar, Vice President and Chief Financial Officer.

57

EX-10.1

Exhibit 10.1

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED BASED ON A

REQUEST FOR CONFIDENTIAL TREATMENT

OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH THE

SECURITIES AND EXCHANGE COMMISSION

STOCK PURCHASE AND SALE AGREEMENT

This STOCK PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated as of June 30, 2008 by and among Falcon Mezzanine Partners, LP, a Delaware limited partnership (the “Seller”), and GrafTech International Holdings Inc., a Delaware corporation (the “Buyer”).

WHEREAS, the Seller owns 1,000 shares (the “Company Shares”) of common stock, $0.01 par value per share, of Falcon-Seadrift Holding Corp. (the “Company”);

WHEREAS, the Company is a single purpose entity formed to hold 18,500 limited partnership units (the “Units”) in Seadrift Coke L.P. (the “Partnership”); and

WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, all of the Company Shares on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements, and upon the terms and subject to the conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1 PURCHASE AND SALE OF COMPANY SHARES; CLOSING

Section 1.1. Purchase and Sale of Company Shares. Subject to the terms and conditions set forth in this Agreement and in reliance on the representations, warranties, covenants and agreements contained herein, at the Closing (as defined below), the Seller agrees to sell to the Buyer, and the Buyer agrees to purchase from the Seller, the Company Shares in consideration of One Hundred Thirty Five Million Dollars ($135,000,000) (the “Purchase Price”).

Section 1.2. Closing. Subject to the terms and conditions set forth in this Agreement, the closing (the “Closing”) of the purchase and sale of the Company Shares and the other transactions contemplated by this Agreement shall be held at the offices of Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178-0002 at 2:00 pm New York time, on the date hereof, or at such other time or such other place as the Buyer and the Seller may mutually determine. At the Closing, the Seller will deliver herewith to the Buyer (i) an original share

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

certificate evidencing the Company Shares, which shares will be free and clear of all liens, charges and encumbrances other than Permitted Liens, (ii) a share transfer power executed in blank, (iii) signed letters of resignation from each of the Company’s officers and directors and from the Company’s designated director of Seadrift Coke, LLC, the general partner of the Partnership (the “GP LLC”), and (iv) a mutual release by such officers and directors in favor of the Company. At the Closing, the Buyer will deliver herewith to the Seller as full payment for the Company Shares an amount equal to the Purchase Price by wire transfer of immediately available funds to an account designated in writing by the Seller, as well as a mutual release by the Company and the Buyer in favor of the resigning officers and directors.

Section 1.3. Bank Account. Immediately following to the Closing, the Seller shall cause all amounts contained in the Bank Account (as defined below) to be transferred to Buyer by wire transfer of immediately available funds to an account designated in writing by the Buyer. Promptly following the Closing, the Seller shall initiate steps to close the Bank Account. The parties agree that the Persons with signatory authority in respect of the Bank Account immediately prior to Closing will retain such authority following the Closing for the sole purpose of closing the Bank Account as contemplated above. The parties agree to cooperate after the Closing to give effect to the foregoing.

SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER

In order to induce the Buyer to enter into this Agreement, the Seller makes to the Buyer the representations and warranties contained in this Section 2. References in this Section 2 to the “Seller’s Knowledge” means, with respect to a particular matter, the actual knowledge of such matter of *, without any obligation on the part thereof to make any inquiry in respect of such matter.

Section 2.1. Organization; Authority.

(a) The Seller is a limited partnership validly existing and in good standing under the laws of the State of Delaware. This Agreement and all instruments executed and delivered by the Seller pursuant hereto are valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, from time to time in effect, and by equitable limitations on the availability of specific remedies and by principles of equity. The Seller has full right, authority, power and capacity to enter into this Agreement and all instruments executed and delivered by the Seller pursuant hereto and to carry out the transactions contemplated hereby and thereby.

(b) The Company is a corporation validly existing and in good standing under the laws of the State of Delaware, with full corporate authority to carry out its business as presently conducted, and has not engaged in any business activities other than acquiring and holding the Units, entering into the Equity Documents, and matters incidental to the foregoing.

2

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Section 2.2. Capitalization.

(a) The authorized and issued capital of the Company consists of 1,000 shares of common stock, par value $0.01 per share, all of which are duly issued, fully paid and non-assessable, owned of record and beneficially by the Seller, free and clear of all liens other than Permitted Liens. There are no outstanding rights to purchase shares of capital stock of the Company.

(b) The Company solely owns of record and beneficially the Units, free and clear of all liens other than Permitted Liens, and, based solely on materials provided by or on behalf of the Partnership, the Units comprise 18.915962%, on a fully diluted basis, of the equity interests in the Partnership as of the Closing.

Section 2.3. No Additional Interests. Neither the Seller nor any of its Affiliates hold or own any other interests or rights in or with respect to the Partnership (other than the Seller’s rights and interests as a creditor in respect of the Notes, the Note and Unit Purchase Agreement and related agreements and instruments).

Section 2.4. Assets and Liabilities; Distributions. The Company has no assets or Liabilities of any kind, other than cash in the Bank Account, the Tax Credits, the Units and related contractual rights and obligations under the Equity Documents, contractual rights and obligations under the limited liability company agreement of the GP LLC to the extent that the Company is a third-party beneficiary of such agreement, 2008 Tax Distributions related to the Units, and 2008 Tax Liabilities. To the Seller’s Knowledge, no distributions have been made by the Partnership in respect of operations during the period beginning on January 1, 2008 and ending on the date of Closing (other than tax distributions).

Section 2.5. Equity Documents. The Seller has provided to the Buyer complete and accurate copies of each of the Equity Documents. Each of the Equity Documents was duly executed and delivered by the Seller or the Company, as applicable, and, to the Seller’s Knowledge, the other parties thereto, and the Seller has not agreed in writing to any waiver or modification to any of the Equity Documents and, to the Seller’s Knowledge, no Person is in material breach under or has granted any oral waiver of or modification to any of the Equity Documents.

Section 2.6. Corporate Records. The Seller has provided to the Buyer complete and accurate copies of the Company’s certificate of incorporation, bylaws and, to the Seller’s Knowledge, minutes of all board and stockholder meetings (or written consents in lieu thereof).

Section 2.7. No Conflicts; Third Party Consents. To the Seller’s Knowledge, the execution and delivery of this Agreement and the performance of the transactions hereunder do not (i) result in any violation of law applicable to the Seller or the Company or (ii) result in any violation of a contract of the Seller. To the Seller’s Knowledge, the Seller is in compliance with applicable law in respect of the Company. To the Seller’s Knowledge, no consent of a third party is necessary to consummate the transactions contemplated hereunder on the part of the Company or the Seller.

3

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Section 2.8. Financial Statements; Tax Returns. The Company has not prepared any independent financial statements. The Seller has provided to the Buyer complete copies of the tax returns of the Company for the tax periods ending on December 31, 2005, 2006 and 2007, and the evidence of outgoing wire transfers with respect to the 2008 estimated tax payments made by the Company through the Closing, and, to the Seller’s Knowledge, and with respect to 2008 taxes through the Closing Date, based solely on the information provided to the Seller by the Partnership and the GP LLC, (i) such tax returns have been timely filed, (ii) the unpaid tax liabilities of the Company from the period from January 1, 2008 through the Closing do not exceed the amount of cash in the Bank Account at Closing (including the amounts to be transferred to the Buyer pursuant to Section 1.3 hereof) plus the Tax Credits and tax distributions receivable from the Partnership after the Closing for the period through the Closing, and (iii) no tax audit of the Company is pending or threatened.

Section 2.9. Deposit Accounts. The Company has no deposit accounts except for that deposit account described on Schedule 2.9 hereto (the “Bank Account”), which Bank Account shall be closed following the Closing as contemplated in Section 1.3 hereof.

Section 2.10. Officers and Directors. The names and titles of the officers and directors of the Company and the Company’s designee on the board of the GP LLC as of immediately prior to Closing are set forth on Schedule 2.10 hereto.

Section 2.11. Broker Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

Section 2.12. No Other Representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2, THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED, AND EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS SECTION 2, THE BUYER IS PURCHASING THE COMPANY SHARES ON AN “AS-IS, WHERE-IS” BASIS. FOR THE AVOIDANCE OF DOUBT, THE SELLER MAKES NO REPRESENTATION OR WARRANTY IN RESPECT OF THE PARTNERSHIP, ITS AFFILIATES, OR THE PARTNERSHIP’S BUSINESS OR ANY OF THE PARTNERSHIP’S ASSETS OR LIABILITIES.

SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER

In order to induce the Seller to enter into this Agreement, the Buyer makes to the Seller the representations and warranties contained in this Section 3.

4

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Section 3.1. Organization; Authority.

(a) The Buyer is a corporation validly existing and in good standing under the laws of the State of Delaware, with full corporate authority to carry out its business as presently conducted.

(b) This Agreement and all instruments executed and delivered by the Buyer pursuant hereto are valid and binding obligations of the Buyer enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, from time to time in effect, and by equitable limitations on the availability of specific remedies and by principles of equity. The Buyer has full right, authority, power and capacity to enter into this Agreement and all instruments executed and delivered by the Buyer pursuant hereto and to carry out the transactions contemplated hereby and thereby.

Section 3.2. No Conflicts; Third Party Consents. To the Buyer’s knowledge, the execution and delivery of this Agreement and the performance of the transactions hereunder do not (i) result in any violation of any law applicable to Buyer, (ii) violate any contract to which the Buyer is a party, or (iii) result in any violation of the Buyer’s charter, by-laws or other governing documents, each as currently in effect. To the Buyer’s knowledge, no consent of a third party is necessary to consummate the transactions contemplated hereunder on the part of the Buyer. The Buyer is not engaged in, and does not control any Person engaged in, the “Business” (as such term is defined in the Partnership Agreement).

Section 3.3. Accredited Investor; Investment Purpose. The Buyer has evaluated the merits and risks of purchasing the Company Shares on the terms set forth in this Agreement on its own and without reliance upon the Seller, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of such purchase, is aware of and has considered the financial risks and financial hazards of purchasing the Company Shares on the terms set forth in this Agreement and is able to bear the economic risks of purchasing the Company Shares, including the possibility of complete loss with respect thereto. The Buyer has had access to such information regarding the business and finances of the Company and such other matters with respect to the Company as a reasonable person would consider in evaluating the transactions contemplated hereby, including, in particular, all information necessary to determine the fair market value of the Company Shares. The Buyer acknowledges that the Company Shares and the Units are restricted securities and are subject to the terms, conditions and restrictions set forth in the Equity Documents. The Buyer is an “accredited investor” as such term is defined in Rule 501 of Regulation D, and is purchasing the Company Shares for investment and not with a view toward distribution other than in compliance with the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.

Section 3.4. Broker Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement, other than Goldman, Sachs & Co.

5

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Section 3.5. No Reliance; Disclaimer. THE BUYER ACKNOWLEDGES THAT THE REPRESENTATIONS AND WARRANTIES OF THE SELLER EXPRESSLY CONTAINED IN THIS AGREEMENT CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE SELLER TO THE BUYER IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE BUYER ACKNOWLEDGES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES ARE SPECIFICALLY DISCLAIMED AND MAY NOT BE RELIED UPON OR SERVE AS A BASIS FOR A CLAIM AGAINST THE SELLER.

SECTION 4 COVENANTS

Section 4.1. Corporate Records and Notices. The Seller hereby agrees to use commercially reasonable efforts to deliver to the Buyer following the Closing all board materials of the Company and reports and all formal notices under the Equity Documents (but excluding any materials related to the Notes and any informal or internal communications (including electronic communications)) received by the Seller from or on behalf of the Partnership or the Partnership’s general partner, and which are currently in the Seller’s possession.

Section 4.2. Further Assurances. Each of the Seller and the Buyer from time to time after the Closing at the request of the other party hereto and without further consideration shall take such other action as a party may reasonably request to fully implement the provisions of this Agreement. Without limiting the foregoing, upon the reasonable request by the Buyer and at reasonable times following reasonable notice, and only to the extent reasonably necessary, the Seller shall use commercially reasonable efforts to make available its officers and employees who are responsible for its investment in the Company to discuss and answer questions regarding the Seller’s investment in the Company or the Company’s assets or liabilities (including discussions to assist the Buyer in the Buyer’s preparation of any financial statements for the Company), except to the extent that the Seller is advised by its counsel that providing such information may have an adverse effect on the Seller. The Seller’s obligations pursuant to the preceding sentence will terminate upon completion of the Buyer’s 2010 audit. The Buyer shall reimburse the Seller for its out-of-pocket costs and expenses related to the foregoing. Each of the Seller and the Buyer shall use commercially reasonable efforts to assist and cooperate with one another and any tax authorities with respect to any tax filings, tax audits or other tax matters relating to the Company and for any periods prior to the Closing.

Section 4.3. Confidentiality.

(a) Except as required under applicable law, neither the Seller nor the Buyer shall disclose to any Person the existence of or the terms of this Agreement or the transactions contemplated hereunder without the prior written consent of the other party, except that a party may disclose the terms of this Agreement to any professional advisor or representative and their respective Affiliates and limited partners, so long as such party

6

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

is subject to similar restrictions. Except as required under applicable law, each party hereto shall obtain the consent of the other in connection with any press release or other public disclosure regarding the transactions contemplated hereby, prior to any such release or disclosure. Notwithstanding the foregoing, (i) the parties acknowledge and agree that the parties shall be permitted to disclose the existence of this Agreement to the Partnership, (ii) if the Buyer determines, after consultation with legal counsel, that the Buyer is required under applicable securities laws to file this Agreement with the Securities and Exchange Commission, such disclosure is permitted hereunder, and (iii) in the event either party otherwise is required by law to disclose such information, such party will provide the other party with prompt notice of such requirement so the non-disclosing party may seek an appropriate protective order and failing the entry of such protective order, the disclosing party may disclose only such information as determined by independent legal counsel is required and will exercise reasonable efforts to maintain the assurance that confidential treatment will be accorded such information; provided, however, that the disclosing party will use its best efforts not to disclose the name of or other identifying information concerning the non-disclosing party.

(b) For a period of two (2) years following the Closing, the Seller will use commercially reasonable efforts to comply with the terms of Section 9.11 of the Note and Unit Purchase Agreement as though it remained a “Purchaser” (as defined in the Note and Unit Purchase Agreement) thereunder.

Section 4.4. Resignation as Agent. The Seller agrees to resign as “Agent” under the Note and Unit Purchase Agreement promptly following the Closing. Following such resignation, the Buyer agrees to take such action as the Seller may reasonably request from time to time to preserve and enforce the Seller’s rights as a Purchaser and creditor in respect of the Notes, the Note and Unit Purchase Agreement and related agreements and instruments, and the Seller shall reimburse the Buyer for its out-of-pocket costs and expenses related to the foregoing. Subject to the foregoing sentence, for the avoidance of doubt, the Seller shall not be responsible for any fees or expenses of the Agent following the Closing.

SECTION 5 GENERAL PROVISIONS

Section 5.1. Certain Definitions. For purposes of this Agreement:

(a) An “Affiliate” of any Person means, with respect to such Person, any other Person which directly or indirectly controls, is controlled by or is under common control with the Person specified, and control means the possession directly or indirectly of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

(b) “Equity Documents” shall mean, collectively, the Note and Unit Purchase Agreement, the Voting Agreement, the Registration Rights Agreement, the Put Agreement and the Partnership Agreement.

7

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

(c) “Liabilities” shall mean any liabilities, obligations, assessments, costs, expenses, expenditures, charges, fees, penalties or fines, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated.

(d) “Notes” means those certain promissory notes issued pursuant to the Note and Unit Purchase Agreement.

(e) “Note and Unit Purchase Agreement” means that certain Note and Unit Purchase Agreement dated as of April 29, 2005 by and among the Partnership, the Seller, the Company and other parties thereto, as amended by that certain First Amendment to Note and Unit Purchase Agreement dated on or about December 16, 2005, that certain Second Amendment to Note and Unit Purchase Agreement dated on or about March 6 ,2006, and that certain Third Amendment to Note and Unit Purchase Agreement dated on or about June 29, 2006.

(f) “Partnership Agreement” means that certain First Amended and Restated Agreement of Limited Partnership of the Partnership.

(g) “Permitted Liens” means any and all liens, charges and encumbrances under the Equity Documents and applicable securities laws, those created or imposed by the Buyer, and liens for taxes not yet due and payable.

(h) “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.

(i) “Put Agreement” means that certain Put Agreement dated as of April 29, 2005 by and between the Partnership and the Company.

(j) “Registration Rights Agreement” means that certain Registration Rights Agreement dated as of April 29, 2005 by and among the Partnership, the Company, and other parties thereto.

(k) “Tax Credits” means the overpayments by the Company in respect of the taxable year ending December 31, 2007 in the amount of (i) with respect to *, *, and (ii) with respect to *, *.

(l) “Voting Agreement” means that certain Voting Agreement dated as of April 29, 2005 by and among the GP LLC, Jordanmill Ventures LLC, and the Company.

(m) “2008 Tax Distributions” means the distributions made by the Partnership to the Company in the aggregate amount of $* in respect of *.

8

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

(n) “2008 Tax Liabilities” means the tax liabilities of the Company for the period from January 1, 2008 through immediately prior to the Closing, based upon a hypothetical closing of the books of the Partnership immediately prior to the Closing.

Section 5.2. Certain Taxes. The Buyer shall bear responsibility for any transfer, sale and use taxes in connection with the transactions contemplated hereunder. The Seller shall bear responsibility for any capital gains taxes or other taxes incurred by the Seller in connection with the transactions contemplated hereunder.

Section 5.3. Entire Agreement; Severability. This Agreement (including the Schedules and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. If any term, condition or other provision of this Agreement is found to be invalid, illegal or incapable of being enforced by virtue of any rule of law, public policy or court determination, all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect.

Section 5.4. Survival; Liability.

(a) All representations and warranties contained herein, (i) shall survive until the second (2^nd) anniversary of the date of the Closing (except with respect to fraud claims with respect to this Agreement), after which date they shall expire and have no further force or effect, and (ii) shall bind the parties’ successors, heirs and assigns (including, without limitation, any successor by way of acquisition, merger or otherwise), whether so expressed or not, and, except as otherwise provided, all such representations and warranties, covenants and agreements contained herein shall inure to the benefit of the parties (subject to Section 5.8 below) and their respective successors, heirs and assigns, whether so expressed or not.

(b) In no event shall the Seller’s liability with respect to any breach of its representations, warranties or covenants made hereunder or any other claim in respect of the transactions contemplated hereunder exceed the Purchase Price.

Section 5.5. Counterparts. This Agreement may be executed in one or more facsimile counterparts, all of which will be considered one and the same agreement.

Section 5.6. Amendments. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by the Buyer and the Seller, or in the case of a waiver, the party waiving compliance.

Section 5.7. Governing Law. THE VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW RULE THAT WOULD CAUSE THE APPLICATION OF

9

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

THE LAWS OF ANY JURISDICTION OTHER THAN THE INTERNAL LAWS OF THE STATE OF NEW YORK TO THE RIGHTS AND DUTIES OF THE BUYER OR THE SELLER). Each party agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach hereof shall be commenced and prosecuted in a court in the State of New York sitting in the Borough of Manhattan. Each party consents and submits to the non-exclusive personal jurisdiction of any court in the State of New York sitting in the Borough of Manhattan in respect of any such proceeding. Each party consents to service of process upon it with respect to any such proceeding by any means by which notices may be transmitted hereunder or by any other means permitted by applicable laws and rules. Each party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of New York and any claim that it may now or hereafter have that any such proceeding in any court in the State of New York has been brought in an inconvenient forum. EACH PARTY WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.

Section 5.8. Assignment. This Agreement may not be assigned or delegated by either party without the prior written consent of the other party. This Agreement and the obligations of the parties hereunder shall be binding upon and enforceable by, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns, and no others. A lien on the rights of a party under this Agreement created by a customary collateral security arrangement under a credit facility shall not be deemed a violation of this Section 5.8 and shall not require such prior consent.

Section 5.9. Third Party Beneficiaries. Except as expressly provided in this Agreement, each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any Person other than the parties hereto.

Section 5.10. Expenses.

(a) Except as expressly provided for hereunder, each party hereto shall bear its own costs and expenses (including legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Buyer shall bear responsibility for all fees and expenses in connection with its engagement of Goldman, Sachs & Co.

(b) The prevailing party in any dispute under this Agreement shall be entitled to reimbursement from the other party of its costs and expenses in respect of the enforcement of the provisions hereof in any claim or action, but only to the extent that a court of competent jurisdiction has determined that such party has prevailed in its enforcement of such claim or action or the parties have settled or agreed to a resolution of such claim or action, including the payment of such costs and expenses.

Section 5.11. Notices. All notices, requests, claims, demands and other communications under this Agreement will be in writing and will be deemed given if delivered personally, sent by overnight courier (providing proof of delivery), or via facsimile to the parties at the following addresses (or at such other address for a party as specified by like notice):

(a) if to the Seller, to:

Falcon Mezzanine Partners, LP

21 Custom House Street

10^th Floor

Boston, MA 02110

Attention: William Kennedy

Telecopy: (617) 412-2799

10

GRAFTECH INTERNATIONAL LTD. HAS CLAIMED CONFIDENTIAL

TREATMENT OF PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH

RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934

With a copy to (which shall not constitute effective notice):

Proskauer Rose LLP

One International Place

23^rd Floor

Boston, MA 02110

Attn: Steven M. Ellis, Esq.

Telecopy: (617) 526-9899

(b) if to the Buyer, to:

GrafTech International Holdings Inc.

12900 Snow Road

Parma, OH 44130

Attention: Erick Asmussen

Telecopy: (216) 676-2526

With a copy to (which shall not constitute effective notice):

Kelley Drye & Warren LLP

400 Atlantic Street

Stamford, CT 06901

Attention: M. Ridgway Barker

Telecopy: (203) 327-2669

[Remainder of page intentionally left blank]

11

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase and Sale Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

SELLER:
FALCON MEZZANINE PARTNERS, LP
By: Falcon Mezzanine Investments, LLC, its general partner
By:	/S/ Eric Y. Rogoff
Name:	Eric Y. Rogoff
Title:	Vice President
BUYER:
GRAFTECH INTERNATIONAL HOLDINGS INC.
By:	/S/ Erick Asmussen
Name:	Erick Asmussen
Title:	Attorney-in-Fact

[Signature page to Stock Purchase and Sale Agreement]

Schedule 2.9

Account Number: *

Contact: *

Authorized signatories with respect to the Bank Account are *, * and *.

Schedule 2.10

Name	Position with the Company
*
Name	Position with Seadrift Coke, LLC
*

EX-10.2

Exhibit 10.2

TERMINATION AND RELEASE AGREEMENT

Gary R. Whitaker (“Employee”) and GrafTech International Holdings Inc., its successors, assigns, parents, subsidiaries, divisions, affiliates, officers, directors, employees, agents and representatives (collectively, “Employer”) hereby knowingly and voluntarily agree to enter into this Settlement and Release Agreement (“Agreement”) made this 30^th day of June 2008, in order to resolve all outstanding issues and set forth all the obligations between the parties arising out of Employee’s employment and separation from employment with Employer.

NOW, THEREFORE, Employee and Employer, in consideration of the mutual promises and covenants contained herein, agree as follows:

First: Employee’s employment with Employer will terminate effective June 30, 2008. During the notice period, Employee agrees to continue the performance of his duties and responsibilities in a professional manner and to cooperate in the transition of such duties and responsibilities.

Second: In consideration for entering into this Agreement, Employer will pay Employee his regular monthly base salary ($24,153.75), less applicable payroll deductions and in accordance with Employer’s regular payroll practices, through December 31, 2008. In addition, Employer shall pay to Employee all outstanding accrued vacation for 2008. Employee will retain right to 21,999 unvested shares as restricted stock; 6,666 shares will time vest as of May 1, 2009 and 15,333 shares will performance vest on February 28, 2009, provided the Company meets its targets for vesting under the Long Term Incentive Plan, if not, then 10,000 shares will time vest on February 26, 2010, in accordance with the time vesting provisions applicable to restricted stock granted on October 23, 2006 and the balance of 5,333 shares will be canceled.

Third: Employee acknowledges that he has been advised that he may continue health insurance benefits pursuant to COBRA and that he will receive additional information regarding COBRA under separate cover. Further, Employer agrees that provided Employee elects to continue coverage under COBRA the premium payments for such coverage will be the same as if he were an active employee until the earlier of December 31, 2008, or the date on which Employee becomes enrolled in comparable medical coverage under another group plan. Thereafter, all premium payments will be the responsibility of Employee.

Fourth: Employer will provide outplacement service through Lee Hecht Harrison for a period of twelve (12) months following the date of termination of employment.

Fifth: All obligations under this Agreement shall commence after this Agreement has been executed and the seven (7) day revocation period provided for herein has expired. Benefits under this Agreement will be revoked if Employee terminates employment prior to June 30, 2008, or if Employee fails to cooperate with the transition of his duties and responsibilities during the notice period.

Sixth: Upon termination, Employee will return all Employer-owned or leased property, documents, records and other information of any type whatsoever concerning or relating to the business and affairs of Employer or any successor.

Seventh: Employee acknowledges that he is not entitled to any other benefits, payments or wages, except as set forth in this Agreement. This Agreement supersedes any and all previous agreements and plans, whether written or oral, between Employee and Employer.

Eighth: Employee agrees that acceptance of this Agreement constitutes a complete, voluntary and knowing waiver of any claims that may be legally waived, asserted or non-asserted, that Employee may have against Employer arising out of his employment and termination of employment (other than Employee’s vested rights under Employer’s pension plan), including any claims Employee may have under applicable state laws for torts, contracts or employment agreements or under any federal, state, or local statute, regulation, rule, ordinance or order which covers or purports to cover or relates to any aspect of employment, including, but not limited to, discrimination based on race, sex, age, religion, national origin, sexual orientation, physical, medical or mental condition, or marital status under, among other statutes, Title VII of the Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, the Americans with Disabilities Act as amended, the Rehabilitation Act of 1973, the Age Discrimination in Employment Act as amended, the Older Workers Benefit Protection Act, the Sarbanes-Oxley Act, the Ohio Civil Rights Act, and any other federal, state or local civil rights, disability, discrimination, retaliation or labor law, or any theory of contract or tort law.

Ninth: As a material inducement to Employer to enter into this Agreement, Employee hereby irrevocably and unconditionally releases, acquits and forever discharges Employer, and its direct and indirect partners, shareholders, affiliated corporations or entities, and each of Employer’s and such shareholders’ directors, officers, employees, representatives, attorneys and all persons acting by, through, under or in concert with any of them (collectively, “Releasees”), or any of them, from any and all charges, complaints, claims, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known or unknown, which Employee now has, owns, holds or claims to have, own or hold, from the beginning of time until the date hereof, arising out of or in any manner relating to all events or circumstances in any way related to Employee’s employment with Employer or the separation of that employment against each of the Releasees.

Tenth: Nothing in this Agreement, including the payment of any sum by the Employer, constitutes an admission by the Employer of any legal wrong prohibited by local, state, and federal law, contract, or tort, rule or regulation in connection with the employment and termination of Employee’s employment.

Eleventh: In the course of his employment with Employer prior to the date hereof, Employee may have had access to confidential and proprietary information and records, data and other trade secrets of Employer (“Confidential Information”). Confidential Information shall include, without limitation, the following types of information or material, both existing and contemplated, regarding Employer or its subsidiary or affiliated companies: corporate information, including plans, strategies, policies, resolutions and any litigation or negotiations; marketing information, including strategies, pricing, methods, customers, prospects or market research data; financial information, including cost and performance data, debt arrangement, equity structure, investors and holdings; operational information,

2

including trade secrets and technical information; and personnel information, including personnel lists, resumes, personnel data, organizational structure, compensation structure and performance evaluations. Employee shall not directly or indirectly disclose Confidential Information to any person or entity or use any Confidential Information in any way. For purposes of this paragraph, Confidential Information does not include any publicly available information or any information, artwork, prints, patents or other rights that Employee had or owned prior or subsequent to employment with Employer, or personal information specifically related to the Employee such as his own employment salary, compensation, positions held, performance, accomplishments and resume.

Twelfth: Employee acknowledges that the terms of this Agreement and all discussions relating to it are confidential and agrees that he will not divulge the terms of this Agreement to any third party, except his immediate family, financial advisor, attorney or as required by court order, provided that any person to whom disclosure is made is advised of the non-disclosure provisions of this Agreement and agrees to keep the existence and terms of this Agreement confidential, unless otherwise ordered by a court.

Thirteenth: This Agreement shall be construed under Ohio law, without regard to conflicts of laws principles, and any actions relating thereto must be brought within the State of Ohio. If any provision or clause of this Agreement is held to be invalid by a court of competent jurisdiction, then such provision or clause shall be severed herefrom without affecting any other provision or clause of this Agreement, the balance of which shall remain in full force and effect.

Fourteenth: This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements of the parties, whether oral or written. No provision of this Agreement may be modified, except by a written instrument duly signed and acknowledged by the parties hereto.

Fifteenth: Employee agrees not to volunteer to directly or indirectly take, support, encourage or participate in any action or attempted action which in any way would damage the reputation of Employer, its parent, direct and indirect shareholders, affiliated corporations or entities, and each of Employer’s and such shareholders’ directors, officers and employees. Employer agrees not to volunteer to directly or indirectly take, support, encourage or participate in any action or attempted action which in any way would damage the reputation of Employee.

Sixteenth: Employee agrees that he will cooperate as reasonably necessary consistent with his business obligations in any legal disputes and/or proceedings and/or business matters relating to issues and/or incidents which took place during his term of employment. Such cooperation may include appearances in court or discovery proceedings. Employee’s reasonable out-of-pocket expenses including but not limited to other lost wages or business income incurred in connection therewith shall be borne by the Employer.

Seventeenth: Employee represents and warrants that he has not commenced or caused to be commenced any civil action against the Employer and agrees that he will not cause such civil action to be commenced in the future for any matter within the scope of this Agreement. Civil action does not include administrative proceedings or government investigations.

3

Eighteenth: By this Agreement, Employee intends and agrees to remove himself from consideration for future employment with the Employer. Employee agrees that he will not at any time in the future seek employment, reemployment or reinstatement with the Employer, and hereby waives any right that may accrue from any rejection of any such application for employment that he may make notwithstanding this provision.

Nineteenth: The provisions of the Age Discrimination in Employment Act provide that the Employer advise you to consult with an attorney before signing this Agreement. That is, of course, entirely your decision. The law also requires that you be given at least 21 days to consider signing this Agreement. Lastly, the law provides that if you sign this Agreement, you will have seven (7) days to revoke it. If not revoked in writing by you before that seven-day period expires, the Agreement will become effective.

Twenty-First: Employee agrees to provide consulting services to the Company through December 31, 2008 to help ensure an orderly transition of responsibilities. Details of the consulting arrangement to be provided in a separate agreement.

PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. To signify the parties’ agreement to the terms of this Agreement, the parties have executed this Agreement on the date set forth opposite their signatures which appear below.

Date: 6/30/08	/s/ Gary R. Whitaker
	Employee
	GRAFTECH INTERNATIONAL HOLDINGS INC.
Date: 6/30/08	By:	C.S. Shular

4

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Craig S. Shular, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of GrafTech International Ltd. (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

By:	/s/ Craig S. Shular
	Craig S. Shular Chief Executive Officer, President, and Chairman of the Board (Principal Executive Officer) July 29, 2008

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Mark Widmar, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of GrafTech International Ltd. (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

By:	/s/ Mark R. Widmar
	Mark R. Widmar Vice President & Chief Financial Officer (Principal Accounting Officer) July 29, 2008

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Quarterly Report of GrafTech International Ltd. (the “Corporation”) on Form 10-Q for the quarter ended June 30, 2008, as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.

In connection with the Report, I, Craig S. Shular, Chief Executive Officer and President of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request.

By:	/s/ Craig S. Shular
	Craig S. Shular Chief Executive Officer, President, and Chairman of the Board (Principal Executive Officer) July 29, 2008

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with the rules and regulations of the Securities and Exchange Commission, the following Certification shall not be deemed to be filed with the Commission under the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, notwithstanding any general incorporation by reference of the Quarterly Report of GrafTech International Ltd. (the “Corporation”) on Form 10-Q for the quarter ended June 30, 2008, as filed with the Commission on the date hereof (the “Report”), into any other document filed with the Commission.

In connection with the Report, I, Mark Widmar, Vice President and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Commission or its staff upon request.

By:	/s/ Mark R. Widmar
	Mark R. Widmar Vice President & Chief Financial Officer (Principal Accounting Officer) July 29, 2008