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 March 31, 2011

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	27-2496053
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    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 April 18, 2011, 145,155,748 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, 2010 and March 31, 2011 (unaudited)	Page 3
Consolidated Statements of Income for the Three Months ended March 31, 2010 and 2011 (unaudited)	Page 4
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2010 and 2011 (unaudited)	Page 5
Notes to Consolidated Financial Statements (unaudited)	Page 6
Introduction to Part I, Item 2, and Part II, Item 1 and Item 1A	Page 24
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Page 42
Item 4. Controls and Procedures	Page 44
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings	Page 45
Item 1A. Risk Factors	Page 45
Item 2. Unregistered Sales of Securities and Use of Proceeds	Page 45
Item 3. Defaults upon Senior Securities	Page 46
Item 4. [Removed and Reserved]	Page 46
Item 5. Other Information	Page 46
Item 6. Exhibits	Page 46
SIGNATURE	Page 47

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, 2010			At March 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents	$	13,096		$	11,248
Accounts and notes receivable, net of allowance for doubtful accounts of $3,892 at December 31, 2010 and $3,996 at March 31, 2011		179,755			203,546
Inventories		340,418			374,788
Prepaid expenses and other current assets		12,615			23,825
Total current assets		545,884			613,407
Property, plant and equipment		1,328,004			1,374,563
Less: accumulated depreciation		635,530			661,703
Net property, plant and equipment		692,474			712,860
Deferred income taxes		6,746			5,936
Goodwill		499,238			499,475
Other assets		168,700			164,511
Restricted cash		141			0
Total assets	$	1,913,183		$	1,996,189
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	69,930		$	52,083
Short-term debt		155			2,645
Accrued income and other taxes		30,019			31,159
Supply chain financing liability		24,959			33,529
Other accrued liabilities		95,580			113,045
Total current liabilities		220,643			232,461
Long-term debt		275,799			296,254
Other long-term obligations		114,728			115,688
Deferred income taxes		72,287			76,558
Contingencies – Note 14
Stockholders’ equity:
Preferred stock, par value $.01, 10,000,000 shares authorized, none issued		0			0
Common stock, par value $.01, 225,000,000 shares authorized, 149,063,197 shares issued at December 31, 2010 and 149,326,185 shares issued at March 31, 2011		1,491			1,493
Additional paid-in capital		1,782,859			1,787,265
Accumulated other comprehensive loss		(235,758	)		(221,388	)
Accumulated deficit		(203,941	)		(176,678	)
Less: cost of common stock held in treasury, 4,081,134 shares at December 31, 2010 and 4,115,544 at March 31, 2011		(113,942	)		(114,526	)
Less: common stock held in employee benefit and compensation trusts, 76,259 shares at December 31, 2010 and 73,098 shares at March 31, 2011		(983	)		(938	)
Total stockholders’ equity		1,229,726			1,275,228
Total liabilities and stockholders’ equity	$	1,913,183		$	1,996,189

See accompanying Notes to Consolidated Financial Statements

3

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended March 31,
	2010			2011
Net sales	$	215,664		$	306,137
Cost of sales		146,370			233,202
Gross profit		69,294			72,935
Research and development		2,435			3,070
Selling and administrative expenses		22,233			32,219
Operating income		44,626			37,646
Equity in losses of non-consolidated affiliate		774			0
Other (income) expense, net		(3,259	)		9
Interest expense		906			4,404
Interest income		(561	)		(129	)
Income before provision for income taxes		46,766			33,362
Provision for income taxes		11,813			6,099
Net income	$	34,953		$	27,263
Basic income per common share:
Net income per share	$	0.29		$	0.19
Weighted average common shares outstanding		120,231			145,098
Diluted income per common share:
Net income per share	$	0.29		$	0.19
Weighted average common shares outstanding		120,957			145,822

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 Three Months Ended March 31,
	2010			2011
Cash flow from operating activities:
Net income	$	34,953		$	27,263
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		10,084			19,779
Deferred income tax (benefit) provision		(8,121	)		3,515
Equity in losses of non-consolidated affiliate		774			0
Post-retirement and pension plan changes		907			907
Currency gains		(5,617	)		(689	)
Stock-based compensation		1,779			2,240
Interest expense		326			2,845
Other charges, net		489			(1,483	)
Increase in working capital*		(13,347	)		(54,551	)
Increase in long-term assets and liabilities		(1,785	)		(919	)
Net cash provided by (used in) operating activities		20,442			(1,093	)
Cash flow from investing activities:
Capital expenditures		(10,764	)		(23,760	)
Proceeds from repayment of loan to non-consolidated affiliate		6,000			0
Proceeds (payments) from derivative instruments		35			(315	)
Net change in restricted cash		77			141
Cash paid for acquisition		0			(6,500	)
Other		109			133
Net cash used in investing activities		(4,543	)		(30,301	)
Cash flow from financing activities:
Short-term debt (reductions) borrowings, net		(1,076	)		2,484
Revolving Facility borrowings		0			67,000
Revolving Facility reductions		0			(49,000	)
Principal payments on long-term debt		(56	)		(87	)
Supply chain financing		24,669			8,570
Proceeds from exercise of stock options		175			770
Purchase of treasury shares		(1,138	)		(584	)
Excess tax benefit from stock-based compensation		669			542
Long-term financing obligations		(281	)		(299	)
Net cash provided by financing activities		22,962			29,396
Net increase (decrease) in cash and cash equivalents		38,861			(1,998	)
Effect of exchange rate changes on cash and cash equivalents		(510	)		150
Cash and cash equivalents at beginning of period		50,181			13,096
Cash and cash equivalents at end of period	$	88,532		$	11,248
* Net change in working capital due to the following components:
(Increase) in current assets:
Accounts and notes receivable, net	$	(7,593	)	$	(17,062	)
Effect of factoring of accounts receivable		(1,115	)		0
Inventories		(21,039	)		(30,471	)
Prepaid expenses and other current assets		(1,133	)		(1,679	)
Restructuring payments		(256	)		0
Increase (decrease) in accounts payables and accruals		17,790			(5,438	)
(Decrease) in interest payable		(1	)		99
Increase in working capital	$	(13,347	)	$	(54,551	)

See accompanying Notes to Consolidated Financial Statements

5

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Organization and Summary of Significant Accounting Policies

A. Organization

GrafTech International Ltd. is one of the world’s largest manufacturers and providers of high quality synthetic and natural graphite and carbon based products. References herein to “GTI,” “we,” “our,” or “us” refer collectively to GrafTech International Ltd. and its subsidiaries. We have five major product categories: graphite electrodes, refractory products, needle coke products, advanced graphite materials and natural graphite, which are reported in the following segments:

Industrial Materials includes graphite electrodes, refractory products, and needle coke products, and primarily serves the steel industry.

Engineered Solutions include advanced graphite materials products for the transportation, solar, and oil and gas exploration industries, as well as natural graphite thermal management products used in electronics.

B. Basis of Presentation

The 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 in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with GAAP have been omitted or condensed. 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, 2010 (the “Annual Report”).

The unaudited consolidated financial statements 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 interim period presented. The results for the three months ended March 31, 2011 are not necessarily indicative of results which may be expected for any other interim period or for the full year.

C. Significant Accounting Policies

Change in Accounting Policy Regarding Pension and Other Postretirement Benefits

In 2011, we elected to change our method of recognizing actuarial gains and losses for our defined benefit pension plans and other postretirement benefit plans. Previously, we recognized the actuarial gains and losses as a component of Stockholders’ Equity on our consolidated balance sheets on an annual basis and amortized them into our operating results to the extent such gains and losses were outside of a corridor. In addition, we used a calculated market-related value of plan assets for purposes of calculating the expected return on plan assets. We have elected to immediately recognize the change in the fair value of plan assets and net actuarial gains and losses annually in the fourth quarter of each year (MTM Adjustment) and whenever a plan is remeasured (e.g. due to a significant curtailment, settlement, etc.). The remaining components of pension and other postretirement benefits expense will be recorded on a quarterly basis (On-going Pension Expense). While our historical policy of recognizing pension and other postretirement benefit expense was considered acceptable, we believe that the new policy is preferable as it eliminates the delay in recognizing gains and losses in our operating results. This change will also improve transparency in our operating results by more quickly recognizing the effects of economic and interest rate conditions on plan obligations and assets.

6

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We have applied these changes retrospectively, adjusting all prior periods.

In 2011, we also elected to change our method of accounting for certain costs included in inventory. We have elected to exclude the inactive portion of our pension and other postretirement benefit costs as a component of inventoriable costs. While our historical policy of including all pension and other postretirement benefit costs as components of inventoriable costs was acceptable, we believe that the new policy is preferable, as it only includes costs that are directly attributable to current inventory production.

Applying this change retrospectively, in connection with the change in accounting for pension and other postretirement benefit costs, did not have a material impact on previously reported inventory and cost of sales in any prior period presented.

The impacts of all adjustments made to the financial statements are summarized below (in thousands, except per share amounts):

Consolidated Statement of Income

	For the Three Months Ended March 31, 2010
	Previously Reported		Revised		Effect of Change
Cost of sales	$	147,561	$	146,370	$	(1,191	)
Research and development		2,535		2,435		(100	)
Selling and administrative expense		22,511		22,233		(278	)
Income before provision for income taxes		45,197		46,766		1,569
Provision for income taxes		11,669		11,813		144
Net income		33,528		34,953		1,425
Earnings per share of common stock-basic		0.28		0.29		0.01
Earnings per share of common stock-diluted		0.28		0.29		0.01

Consolidated Balance Sheet

	At December 31, 2010
	Previously Reported			Revised			Effect of Change
Accumulated other comprehensive loss	$	(309,565	)	$	(235,758	)	$	73,807
Retained deficit		(130,134	)		(203,941	)		(73,807	)

7

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Consolidated Statement of Cash Flows

	For the Three Months Ended March 31, 2010
	Previously Reported			Revised			Effect of Change
Net income	$	33,528		$	34,953		$	1,425
Deferred income tax provision		(8,241	)		(8,121	)		120
Postretirement and pension plan changes		2,452			907			(1,545	)

Had these changes not been made in 2011, net income would have been $26.1 million compared to the $27.3 million actually recorded for the three months ended March 31, 2011. Diluted earnings per share would have been $0.18 compared to $0.19.

D. New Accounting Standards

Revenue Recognition

We adopted a new revenue recognition standard that applies to sales arrangements entered into or materially modified in the year beginning January 1, 2011. The guidance:

• Provides principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated and consideration allocated;

• Eliminates the residual method of allocating revenue;

• Requires the allocation of consideration received in a bundled revenue arrangement among the separate deliverables by introducing an estimated selling price method for valuing elements if vendor-specific objective evidence or third-party evidence of a selling price is not available; and

• Expands related disclosure requirements.

The adoption of this standard had no material effect on our consolidated financial statements or on existing revenue recognition policies.

Major Maintenance and Repair Costs

We perform scheduled major maintenance of the storage and processing units at our Seadrift plant (referred to as “overhaul”). Time periods between overhauls vary by unit. We also perform an annual scheduled significant maintenance and repair shutdown of the plant (referred to as “turnaround”).

Costs of overhauls and turnarounds include plant personnel, contract services, materials, and rental equipment. We defer these costs when incurred and use the straight-line method to amortize them over the period of time estimated to lapse until the next scheduled overhaul of the applicable storage or processing unit or over one year for our turnaround. In the three months ended March 31, 2011, we deferred $0.5 million under this policy.

8

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our turnaround is normally scheduled during the spring or early summer of each year. We do not produce needle coke when we perform a turnaround and needle coke inventories may increase prior to the turnaround to minimize its impact on our sales.

(2) Acquisitions

Seadrift Coke L.P. and C/G Electrodes LLC

On November 30, 2010, we acquired from the equity holders of Seadrift Coke L.P. (“Seadrift”) 81.1% of the equity interests of Seadrift that we did not already own and from the equity holders of C/G Electrodes LLC (“St. Marys facility”) 100% of the equity interests of the St. Marys facility. Because Seadrift and the St. Marys facility meet the SEC definition of common control, we have treated the transactions as the acquisition of one business. Seadrift and the St. Marys facility (collectively referred to as the “Acquisitions”) are included in our Consolidated Financial Statements beginning as of December 1, 2010.

Seadrift is one of the largest producers of petroleum-based needle coke in the world and owns the world’s only known stand-alone petroleum-based needle coke plant. Needle coke is the key raw material used to make graphite electrodes, including premium UHP graphite electrodes, which are critical consumables in electric arc furnace (“EAF”) steel production. We believe the acquisition of Seadrift will assure us of a stable supply of a portion the primary raw material in the production of graphite electrodes.

The St. Marys facility is a U.S.-based producer of large diameter premium UHP graphite electrodes used in the EAF steel making process. The St. Marys facility also sells various other graphite-related products, including specialty graphite blocks, granular graphite and partially processed electrodes. The acquisition of the St. Marys facility provides us with a large diameter graphite electrode manufacturing facility in the U.S. which we believe will allow us to respond to customer orders more quickly and reduce freight cost and transit time for North American shipments.

Consideration transferred: The consideration paid to the equity holders of Seadrift consisted of $90.0 million in cash (including working capital adjustments), approximately 12 million shares of GTI common stock and $100 million in aggregate face amount of Senior Subordinated Notes of GTI due 2015. The consideration paid to the equity holders of the St. Marys facility consisted of $159.5 million in cash (including working capital adjustments), approximately 12 million shares of GTI common stock and $100 million in aggregate face amount of Senior Subordinated Notes of GTI due in 2015.

The computation of the fair value of the total consideration at the date of acquisition follows (in thousands, except share price):

GTI common shares issued		24,000
Price per share of GTI common stock	$	19.47
Fair value of consideration attributable to common stock	$	467,280
Fair value of Senior Subordinated Notes		142,597
Cash		249,444
Total consideration paid to equity holders		859,321
Fair value of our previously held 18.9% equity interest in Seadrift		77,342
Total consideration	$	936,663

9

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The volume weighted average price of a share of GTI common stock on November 30, 2010 was used to determine the fair value of the stock issued as consideration in connection with the Acquisitions. The fair value of the non-interest bearing senior subordinated notes was determined using an interest rate of 7%. Accounting guidance required us to remeasure the book value of our previously held 18.9% equity interest in Seadrift at November 30, 2010 to its fair value and recognize the resulting gain of $9.6 million in our 2010 earnings.

Recording of assets acquired and liabilities assumed: The Acquisitions are accounted for using the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations (“ASC 805”). Under the acquisition method, the identifiable assets acquired and the liabilities assumed are assigned a new basis of accounting reflecting their estimated fair values. The information included herein has been prepared based on the preliminary allocation of purchase price using estimates of the fair values and useful lives of assets acquired and liabilities assumed based on the best available information determined with the assistance of independent valuations, quoted market prices and management estimates. The purchase price allocations are subject to further adjustment until all pertinent information regarding the property, plant and equipment, intangible assets, other long-term assets, goodwill, long-term debt, other long-term liabilities, and deferred income tax liabilities are fully evaluated by us and independent valuations are complete.

The following table summarizes the fair values of the identifiable assets acquired and liabilities assumed at the acquisition date (in thousands):

Cash	$	8,240
Accounts receivable		23,079
Inventories		82,665
Property, plant and equipment		280,710
Intangible assets		158,200
Other assets		988
Accounts payable		14,130
Other accrued liabilities		6,830
Debt obligations		1,197
Other long-term liabilities		1,000
Deferred tax liability		83,306
Net identifiable assets acquired		447,419
Goodwill		489,244
Net assets acquired	$	936,663

Intangible assets: The following table is a summary of the fair values of the identifiable intangible assets and their estimated useful lives (dollars in thousands):

	Fair Value		Weighted Average Amortization Period
Customer relationships	$	107,500		13.4 years
Technology and know-how		42,800		8.1 years
Tradenames		7,900		7.7 years
Total intangible assets	$	158,200		11.6 years

10

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Goodwill: Goodwill of approximately $489.2 million was recognized for the Acquisitions and is calculated as the excess of the consideration transferred over the net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the Acquisitions includes:

• the expected synergies and other benefits that we believe will result from combining the operations of Seadrift and the St. Marys facility with the operations of GrafTech;

• any intangible assets that do not qualify for separate recognition such as the assembled workforce; and

• the value of the going-concern element of Seadrift’s and St. Marys facility’s existing businesses (the higher rate of return on the assembled collection of net assets versus acquiring all of the net assets separately).

We have assigned the goodwill to our Industrial Materials segment. Approximately $168.2 million of the goodwill is deductible for federal income tax purposes.

Debt: We repaid $80.6 million of debt and interest rate swaps and assumed an additional $1.2 million of debt. The recorded amount of the debt assumed approximated its fair value. The following is a summary of the third-party debt assumed and not repaid in connection with the close of the Acquisitions (dollars in thousands):

Pennsylvania Industrial Development Authority mortgage note due 2018, interest rate of 3%	$	1,020
Secured promissory note due 2014, interest rate of 6.25%		177
Total debt assumed	$	1,197

Previously held 18.9% equity interest in Seadrift: On June 30, 2008, we acquired 100% of Falcon-Seadrift Holding Corp., now named GrafTech Seadrift Holding Corp. (“GTSD”), which held approximately 18.9% of the equity interests in Seadrift. The substance of the transaction was the acquisition of an asset, the limited partnership units, rather than a business combination. Because the amount we paid for the limited partnership interests exceeded their tax basis accounting guidance required us to recognize a deferred tax liability for this difference and increase our purchase price. We also had a deferred tax asset valuation allowance at the time we acquired the limited partnership units. Accounting guidance required us to reduce the valuation allowance and decrease the purchase price because the deferred tax liability recorded for the purchase was expected to reverse during the same period that our deferred tax assets were expected to reverse.

We accounted for our investment in Seadrift using the equity method of accounting because we had the ability to exercise significant influence, but not exercise control. In 2008 and 2009, we determined that the fair value of our investment was less than our carrying amount and that the losses in value were other than temporary. We recorded non-cash impairments of $34.5 million and $52.8 million in 2008 and 2009, respectively, to recognize these other than temporary losses in value. Summarized financial information for Seadrift, including adjustments for material intervening events, for the three months ended March 31, 2010 was: net sales - $22.8 million; gross profit - $2.9 million; and net loss - $0.9 million.

11

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Loan to Seadrift: In late June 2009 and July 2009, Seadrift entered into agreements to borrow up to $17.0 million from certain of its shareholders, which included up to $8.5 million from us. In early July the shareholder group loaned Seadrift $12.0 million which included $6.0 million from us. Each loan was evidenced by a demand note with an interest rate of 10%.

We recorded our $6.0 million loan at its face amount, which reasonably approximated its present value. Seadrift repaid the total borrowing of $12.0 million on March 31, 2010.

Micron Research Corporation

On February 9, 2011, we purchased substantially all of the assets and assumed certain trade liabilities of Micron Research Corporation (“Micron Research”), a subsidiary of E. Holdings, Inc, for $6.5 million of cash. Micron Research manufactures super fine grain graphite materials and primarily services Electrical Discharge Machining customers. We intend to utilize their technology and capability to service other applications including solar, electronics and medical. The substance of the transaction is the acquisition of a business and we accounted for the transaction following the guidance in ASC 805. Tangible assets acquired and liabilities assumed were recorded at their estimated fair values of $5.0 million and $0.2 million, respectively. The estimated fair values of finite-lived intangible assets acquired of $1.3 million related to technology and know-how and customer relationships are being amortized over their estimated useful lives ranging from 5 to 15 years. Goodwill of $0.4 million represents the excess of the consideration transferred over the net assets acquired and has been assigned to our Engineered Solutions segment.

(3) Stock-Based Compensation

For the three months ended March 31, 2010 and 2011, we recognized stock-based compensation expense totaling $1.8 million and $2.2 million, respectively. A majority of the expense, $1.6 million and $1.9 million, respectively, was recorded as selling and administrative expenses in the Consolidated Statement of Income, with the remaining expenses incurred as cost of sales and research and development. During the three months ended March 31, 2011, selling and administrative expense was reduced by $0.5 million due to the reversal of previously recorded expense as a result of the forfeiture of unvested shares.

At March 31, 2011, the total compensation cost related to non-vested restricted stock, performance shares and stock options not yet recognized was $18.0 million, which will be recognized over the weighted average life of 1.54 years.

12

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock and Performance Shares

Restricted stock and performance share awards activity under the plans for the three months ended March 31, 2011 was:

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding unvested at January 1, 2011		1,338,053		$	15.91
Granted		124,036			23.10
Vested		(125,207	)		15.97
Forfeited/canceled/expired		(110,026	)		16.05
Outstanding unvested at March 31, 2011		1,226,856		$	16.62

Stock Options

Stock option activity under the plans for the three months ended March 31, 2011 was:

	Number of Shares			Weighted- Average Exercise Price
Outstanding at January 1, 2011		1,274,107		$	11.96
Granted		0			0
Forfeited/canceled/expired		(30,168	)		18.34
Exercised		(91,266	)		9.51
Outstanding at March 31, 2011		1,152,673		$	11.99

(4) Earnings per Share

The following table shows the information used in the calculation of our share counts for basic and diluted earnings per share:

	For the Three Months Ended March 31,
	2010		2011
Weighted average common shares outstanding for basic calculation		120,230,559		145,097,769
Add: Effect of stock options and restricted stock		726,645		723,860
Weighted average common shares outstanding for diluted calculation		120,957,204		145,821,629

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 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.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The weighted average common shares outstanding for the diluted calculation excludes consideration of stock options covering 227,000 shares at March 31, 2010 because the exercise prices were greater than the weighted average market price of our common stock for that period.

(5) Segment Reporting

Our businesses are reported in the following reportable segments:

Industrial Materials. Our Industrial Materials segment manufactures and delivers high quality graphite electrodes, refractory products and needle coke 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. Needle coke is a key raw material in the manufacture of the graphite electrodes used in the EAF steel production process.

Engineered Solutions. Engineered Solutions include advanced graphite materials products for the transportation, solar, and oil and gas exploration industries, as well as natural graphite thermal management products used in electronics.

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 net sales.

The following tables summarize financial information concerning our reportable segments:

	For the Three Months Ended March 31,
	2010			2011
	(Dollars in thousands)
Net sales to external customers:
Industrial Materials	$	182,423		$	263,484
Engineered Solutions		33,241			42,653
Total net sales	$	215,664		$	306,137
Segment operating income:
Industrial Materials	$	42,894		$	34,198
Engineered Solutions		1,732			3,448
Total segment operating income		44,626			37,646
Reconciliation of segment operating income to income before provision for income taxes
Equity in losses of non-consolidated affiliate		774			0
Other (income) expense, net		(3,259	)		9
Interest expense		906			4,404
Interest income		(561	)		(129	)
Income before provision for income taxes	$	46,766		$	33,362

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(6) Other (Income) Expense, Net

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

	For the Three Months Ended March 31,
	2010			2011
	(Dollars in thousands)
Currency (gains) losses	$	(3,718	)	$	632
Bank and other financing fees		465			483
Other		(6	)		(1,106	)
Total other (income) expense, net	$	(3,259	)	$	9

The $1.1 million of other income for the three months ended March 31, 2011, includes $0.7 million resulting from the collection an acquired receivable at an amount in excess of its fair value at the acquisition date.

During the second quarter of 2007, we sold land and certain assets related to our former graphite electrode manufacturing facility in Caserta, Italy. The sale agreement provides that, upon completion of certain milestones in the remediation and landfill closure activities, portions of the escrowed amounts shall be paid to us. We recognize returns of funds held in escrow as other income when received. During the three months ended March 31, 2011, we completed all required activities and as such, the final $0.1 million was released from escrow and recognized as income as the restricted cash was released.

(7) Benefit Plans

As discussed in Note 1, Organization and Summary of Significant Accounting Policies, we have changed our method of recognizing actuarial gains and losses for our defined benefit pension plans and other postretirement benefits. This change was effective January 1, 2011 and was applied retrospectively and all prior period amounts have been adjusted accordingly. See Note 1 for further details.

The components of our consolidated net pension cost are set forth in the following table:

	For the Three Months Ended March 31,
	2010			2011
	(Dollars in thousands)
Service cost	$	164		$	164
Interest cost		2,446			2,446
Expected return on plan assets		(2,138	)		(2,138	)
Amortization of prior service cost		13			13
Net Cost	$	485		$	485

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The components of our consolidated net postretirement cost are set forth in the following table:

	For the Three Months Ended March 31,
	2010			2011
	(Dollars in thousands)
Service cost	$	41		$	41
Interest cost		440			440
Amortization of prior service benefit		(48	)		(48	)
Net Cost	$	433		$	433

(8) Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill during the three months ended March 31, 2011 are as follows:

	Total
	(Dollars  in Thousands)
Balance as of December 31, 2010		499,238
Currency translation effect		(175	)
Business acquisition		412
Balance as of March 31, 2011	$	499,475

The following table summarizes intangible assets with determinable useful lives by major category as of December 31, 2010 and March 31, 2011:

	At December 31, 2010							At March 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(Dollars in Thousands)
Patents	$	3,520	$	(1,168	)	$	2,352	$	3,520	$	(1,224	)	$	2,296
Trade name		7,900		(124	)		7,776		7,900		(495	)		7,405
Technological know-how		42,800		(497	)		42,303		43,349		(1,999	)		41,350
Customer –related intangible		107,500		(1,258	)		106,242		108,267		(5,046	)		103,221
Total finite-lived intangible assets	$	161,720	$	(3,047	)	$	158,673	$	163,036	$	(8,764	)	$	154,272

Amortization expense of intangible assets was $0.1 million and $5.7 million in the three months ended March 31, 2010 and 2011, respectively.

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(9) Long-Term Debt and Liquidity

The following table presents our long-term debt:

	At December 31,		At March 31,
	2010		2011
	(Dollars in thousands)
Revolving Facility	$	130,000	$	148,000
Senior Subordinated Notes		143,404		145,850
Other debt		2,395		2,404
Total	$	275,799	$	296,254

Revolving Facility

On April 28, 2010, we successfully completed the refinancing of our principal revolving credit facility (“Revolving Facility”). Borrowers under the Revolving Facility are GrafTech Finance Inc. (“GrafTech Finance”) and GrafTech Switzerland S.A. (“Swissco”), both wholly-owned subsidiaries.

As amended and restated, the credit agreement provides for, among other things, an extension until April 29, 2013 of the maturity of our Revolving Facility in the initial amount of $260 million, additional flexibility for investments and acquisitions and, subject to certain conditions, an “accordion feature” that permits GrafTech Finance and Swissco to establish additional credit facilities thereunder in an aggregate amount, together with our Revolving Facility, of up to $390 million.

The interest rate applicable to the Revolving Facility is, at GrafTech’s option, either LIBOR plus a margin ranging from 2.50% to 3.50% (depending on our total net leverage ratio and/or senior unsecured rating) or, in the case of dollar denominated loans, the alternate base rate plus a margin ranging from 1.50% to 2.50% (depending upon such ratio or rating). The alternate base rate is the highest of (i) the prime rate announced by JP Morgan Chase Bank, N.A., (ii) the federal fund effective rate plus 0.50% and (iii) the London interbank offering rate (as adjusted) for a one-month period plus 1.00%. GrafTech Finance and Swissco pay a per annum fee ranging from 0.375% to 0.750% (depending on such ratio or rating) on the undrawn portion of the commitments under the Revolving Facility.

The financial covenants require us to maintain a minimum interest coverage ratio of 1.75 to 1.00 and a maximum net senior secured leverage ratio of 2.25 to 1.00, subject to adjustment for certain events. The Revolving Facility also contains a number of covenants that restrict certain corporate activities including annual capital expenditures and the payment of dividends and repurchases of our common stock. At March 31, 2011, we were in compliance with all financial and other covenants contained in the Revolving Facility, as applicable.

Senior Subordinated Notes

On November 30, 2010, in connection with the Acquisitions, we issued Senior Subordinated Notes for an aggregate total face amount of $200 million. These Senior Subordinated Notes are non-interest bearing and mature in 2015, see Note 2, “Acquisitions”. Because the promissory notes are non-interest bearing, we were required to record them at their present value (determined using an interest rate of 7%). The difference between the face amount of the promissory notes and their present value is recorded as debt discount. The debt discount will be amortized using the interest method, over the life of the promissory notes. The loan balance, net of unamortized discount, was $145.9 million at March 31, 2011.

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PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other Debt

On September 30, 2009, our Spanish subsidiary received a $1.8 million economic stimulus loan from the Ministry of Industry, Government of Spain. The loan is non-interest bearing and matures in October 2024. Repayment in 10 annual installments commences in October 2015. Because the loan is non-interest bearing, we were required to record the loan at its present value (determined using an interest rate of 4.33%). The difference between the proceeds received and the present value of debt is recorded as debt discount and deferred expense. The discount is amortized to income using the interest method; the deferred charge is amortized using the same basis and over the same period as the capital projects are depreciated. The loan balance, net of unamortized discount, was $1.2 million at March 31, 2011.

Also included in other debt is a mortgage note due 2018, payable to the Pennsylvania Industrial Development Authority. The mortgage requires monthly payments of $12 thousand including interest at 3% and is collateralized by our St. Marys facility. The balance of this debt was $1.0 million at March 31, 2011.

(10) Inventories

Inventories are comprised of the following:

	At December 31, 2010			At March 31, 2011
	(Dollars in thousands)
Inventories:
Raw materials and supplies	$	118,691		$	153,969
Work in process		160,368			166,889
Finished goods		64,075			57,464
		343,134			378,322
Reserves		(2,716	)		(3,534	)
	$	340,418		$	374,788

We recognize abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) as current period charges. We are required to allocate fixed production overheads to the costs of conversion based on normal capacity of the production facilities. The unabsorbed costs were attributable to adjustments of fixed production overheads to the costs of conversion based on normal capacity versus actual levels, due to production levels at certain facilities being below normal capacity for the quarters ended March 31, 2010 and 2011. Costs in excess of normal absorption at December 31, 2010 and March 31, 2011 were $1.4 million and $1.8 million, respectively.

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(11) Interest Expense

The following table presents an analysis of interest expense:

	For the Three Months Ended March 31,
	2010		2011
	(Dollars in thousands)
Interest incurred on debt	$	139	$	1,203
Amortization of discount on Senior Subordinated Notes		0		2,446
Amortization of debt issuance costs		326		387
Supply Chain Financing mark-up		410		360
Interest incurred on other items		31		8
Total interest expense	$	906	$	4,404

(12) Other Comprehensive Income

Other comprehensive income consisted of the following:

	For the Three Months Ended March 31,
	2010			2011
	(Dollars in thousands)
Net Income	$	34,953		$	27,263
Other comprehensive (loss) income:
Foreign currency translation adjustments		(17,831	)		8,839
Commodities and foreign currency derivatives, net of tax $181 and $3,907, respectively		107			5,531
Total comprehensive income	$	17,229		$	41,633

(13) Supply Chain Financing

We are party to a supply chain financing arrangement with a third party. Under this arrangement, we essentially assign our rights to purchase needle coke from our supplier to the financing party. The financing party purchases the product from our supplier under the standard payment terms and then immediately resells it to us under longer payment terms. The financing party pays the supplier the purchase price for the product and then we pay the financing party. Our payment to the financing party for this needle coke includes a mark up (the “Mark-Up”). The Mark-Up is a premium expressed as a percentage of the purchase price. The Mark-Up is subject to quarterly reviews. This arrangement helps us to maintain a balanced cash conversion cycle between inventory payments and the collection of receivables. Based on the terms of the arrangement, the total amount that we owe to the financing party may not exceed $49.3 million at any point in time.

19

PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We record the inventory once title and risk of loss transfers from the supplier to the financing party. The amount recorded as a liability to the financing party was $25.0 million and $33.5 million at December 31, 2010 and March 31, 2011, respectively.

For the three months ended March 31, 2010 and 2011, the financing party invoiced us $51.2 million and $48.5 million, respectively, for purchases of inventory under this arrangement. We recognized a Mark-Up of $0.4 million, as interest expense, in each of the three months periods ended March 31, 2010 and 2011.

(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.

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 $2.7 million at December 31, 2010 and $2.2 million at March 31, 2011. The following table presents the activity in this accrual for the three months ended March 31, 2011 (dollars in thousands):

Balance at January 1, 2011	$	2,653
Product warranty adjustments		(400	)
Payments and settlements		(64	)
Balance at March 31, 2011	$	2,189

(15) Income Taxes

We compute an estimated annual effective tax rate on a quarterly basis, considering ordinary income and related income tax expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. These items may include the cumulative effect of changes in tax laws or rates, impairment charges, adjustments to prior period uncertain tax positions, or adjustments to our valuation allowance due to changes in judgment of the realizability of deferred tax assets.

The provision for income taxes for the three months ended March 31, 2010 was tax expense of $11.8 million on pretax income of $46.8 million as compared to tax expense of $6.1 million on pretax income of $33.4 million for the three months ended March 31, 2011. The effective tax rates were 25.3% and 18.3% for the three months ended March 31, 2010 and 2011, respectively. The decrease in the effective tax rate is primarily due to jurisdictional mix of income, prior year adjustments to uncertain tax positions and changes in the utilization of attributes and related valuation allowances.

20

PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Our cumulative year-to-date unrecognized tax benefits have not materially changed from the prior period. As of March 31, 2011, we had unrecognized tax benefits of $13.8 million, which would have a favorable impact on our effective tax rate. It is reasonably possible that a reduction of unrecognized tax benefits in a range of $1.5 million to $2.5 million may occur within 12 months as a result of settlements and the expiration of statutes of limitation.

We file income tax returns in the U.S. federal and state jurisdictions and various non-U.S. jurisdictions. All U.S. tax years prior to 2008 are closed by statute or have been audited and settled with the U.S. tax authorities. We are under audit in Italy for our 2006 tax year. All other non-U.S. jurisdictions are still open to examination beginning after 2005.

We continue to adjust the tax provision rate through the establishment, or release, of non-cash valuation allowances attributable to the U.S. and certain non-U.S. taxing jurisdictions, including U.S. foreign tax credit utilization. We weigh both positive and negative evidence in determining whether a valuation allowance is required. Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets. The balance of significant positive evidence does not yet outweigh the negative evidence in regards to whether or not a valuation allowance is required.

(16) Derivative Instruments

We use derivative instruments as part of our overall foreign currency and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows and to minimize commodity price volatility. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the US Dollar.

Certain of our derivative contracts contain provisions that require us to provide collateral. Since the counterparties 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, despite the current worldwide economic situation. We do not anticipate nonperformance by any of the counter-parties to our instruments.

Foreign currency derivatives

We enter into foreign currency derivatives 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 such as foreign currency denominated debt, sales, receivables, payables, and purchases. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. There was no ineffectiveness on these contracts during the three months ended March 31, 2011.

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PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In 2010 and 2011, we entered into foreign forward currency derivatives denominated in the Mexican peso, Brazilian real, euro and Japanese yen. These derivatives were entered into to protect the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates between the US dollar and the Mexican peso, Brazilian real, euro and Japanese yen. As of March 31, 2011, we had outstanding Mexican peso, Brazilian real, euro, and Japanese yen currency contracts, with aggregate notional amounts of $149.7 million. The foreign currency derivatives outstanding as of March 31, 2011 have several maturity dates ranging from April 2011 to December 2011.

Commodity derivative contracts

We periodically enter into derivative contracts for certain refined oil products and natural gas. These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. There was no ineffectiveness on these contracts during the three months ended March 31, 2011. As of March 31, 2011, we had outstanding derivative swap contracts for refined oil products and natural gas with aggregate notional amounts of $94.8 million and $1.3 million respectively. These contracts have maturity dates ranging from April 2011 to May 2012.

The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Consolidated Balance Sheets. At December 31, 2010 and March 31, 2011, the fair values of our derivatives and their respective balance sheet locations are presented in the following table:

	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
	(Dollars in Thousands)
As of December 31, 2010
Derivatives designated as cash flow hedges:
Foreign currency derivatives	Other receivables	$	1,226	Other payables	$	390
Commodity derivative contracts	Other current assets		803	Other current liabilities		225
Total fair value		$	2,029		$	615
As of March 31, 2011
Derivatives designated as cash flow hedges:
Foreign currency derivatives	Other receivables	$	2,351	Other payables	$	2,107
Commodity derivative contracts	Other current assets		11,065	Other current liabilities		2,367
Total fair value		$	13,416		$	4,474
As of December 31, 2010
Derivatives designated as fair value hedges:
Foreign currency derivatives	Other receivables	$	0	Other payables	$	0
Total fair value		$	0		$	0
As of March 31, 2011
Derivatives designated as fair value hedges:
Foreign currency derivatives	Other receivables	$	70	Other payables	$	101
Total fair value		$	70		$	101

22

PART I (CONT’D)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The location and amount of realized (gains) losses on derivatives are recognized in the Statement of Income when the hedged item impacts earnings and are as follows for the three months ended March 31, 2010 and 2011:

		Amount of (Gain)/Loss Recognized (Effective Portion)
Three Months ended March 31,	Location of (Gain)/Loss Reclassified from Other Comprehensive Income (Effective Portion)	2010			2011
		(Dollars in Thousands)
Derivatives designated as cash flow hedges:
Foreign currency derivatives	Cost of goods sold/Other (income) expense / Revenue	$	(64	)	$	872
Commodity forward derivatives	Cost of goods sold / Revenue	$	29		$	238

Our foreign currency and commodity derivatives are treated as hedges under ASC 815, Derivatives and Hedging and are required to be measured at fair value on a recurring basis. With respect to the inputs used to determine the fair value, we use observable, quoted rates that are determined by active markets and, therefore, classify the contracts as “Level 2” in accordance with the definition in ASC 820, Fair Value Measurements and Disclosures.

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PART I (CONT’D)

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(Unaudited)

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 “Part I – Preliminary Notes – Important Terms” of 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 competitors’ or customers’ operations and the utilization rates of that capacity; 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 or decreases therein, our ability to pass on any such increases in our product prices or surcharges thereon, or customer or market demand to reduce our prices due to such decreases; changes in customer order patterns due to changes in economic conditions; productivity, business process and operational initiatives, and their impact on us; our position in markets we serve; financing and refinancing activities; investments and acquisitions that we have made or may make in the future and the performance of the businesses underlying such acquisitions and investments; 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, the timing and magnitude of changes in such conditions and the impact thereof; interest rate management activities; currency rate management activities; 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 including any regulatory initiatives with respect to greenhouse gas emissions which may be proposed; consulting projects; potential offerings, sales and other actions regarding debt or equity securities of us or our subsidiaries; and 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,” “positioned to” and similar expressions, or the negatives thereof, identify some of these statements.

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(Unaudited)

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 EAF steel, 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 disbursed as we anticipate;

• the possibility that increases or decreases in graphite electrode manufacturing capacity (including growth by producers in developing countries), competitive pressures (including changes in, and the mix, distribution, and pricing of, their products), reduction in specific consumption rates, increases or decreases 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 electrodes business;

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

• the possibility that a determination by the U.S. government that we have failed to comply with one or more export controls or trade sanctions to which we are subject with respect to products exported from the United States or otherwise subject to U.S. jurisdictions could result in civil or criminal penalties, including imposition of significant fines, denial or export privileges and loss of revenues from certain customers;

• 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 or the demand for their products may decline, which may affect their demand for the products we sell or supply to them;

• the possibility that continued global consolidation of the world’s largest 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 or that price decreases may occur;

• the possibility that current challenging economic conditions and economic demand reduction may continue to impact our revenues and costs;

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PART I (CONT’D)

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(Unaudited)

• the possibility that decreases in prices for energy and raw materials may lead to downward pressure on prices for our products and delays in customer orders for our products as customers anticipate possible future lower prices;

• 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 current economic disruptions may result in idling or permanent closing of blast furnace capacity or delay of blast furnace capacity additions or replacements which may affect demand and prices for our refractory products;

• the possibility that economic, political and other risks with operating globally, including national and international conflicts, terrorist acts, political and economic instability, civil unrest, and natural or nuclear calamities might interfere with our supply chains, customers or activities in a particular location;

• the possibility that reductions in customers’ production, increases in competitors’ 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 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, including at our Clarksburg, West Virginia facility where its primary collective bargaining agreement with the United Steelworkers (“USW”) has expired by its terms in June 2010. Our Clarksburg facility manufactures specialty graphite products. Our bargaining unit team members have continued to work without a contract. We continue to meet and negotiate in good faith with the USW. To date there has been no disruption to our operations or ability to meet delivery targets as a result of the negotiations. While we have positive expectations that there will not be a work stoppage, there is the possibility of a work stoppage or other disruption in our Clarksburg operations. We have developed plans to address potential contingencies. However, there is the possibility that any work stoppage or disruption could adversely impact our specialties graphite business;

• the potential unpredictability of litigation pending in Brazil involving disputes arising out of the interpretation of certain collectively bargained wage increase provisions applicable in 1989 and 1990 to employers (including our subsidiary in Brazil) in the Bahia region of Brazil. While the most recent ruling by the Supreme Court of Brazil has held that such provisions are not enforceable, and thus employers are not liable for the wage increases claimed on behalf of employees, further proceedings are pending seeking to reverse that ruling. While we cannot predict the outcome of the pending proceedings, if the wage increase provisions are declared enforceable, claims could be filed against our Brazilian subsidiary which could become substantial;

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

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(Unaudited)

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

• 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 challenging conditions or changes in the capital markets will limit our ability to obtain financing for growth and other initiatives, on acceptable terms or at all;

• the possibility that conditions or changes in the global equity markets may have a material impact on our future pension funding obligations and liabilities on our balance sheet;

• 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 the actual outcome of uncertainties associated with assumptions and estimates using judgment when applying critical accounting policies and preparing financial statements may have a material impact on our results of operations or financial position;

• 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;

• 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 new or expanded regulatory initiatives with respect to greenhouse gas emissions, if implemented, could have an impact on our facilities, increase the capital intensive nature of our business, and add to our costs of production of our products;

• 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 or laws, changes in the sources of our income, changes in tax planning, new or changing interpretations of applicable regulations, or changes in profitability, estimates of future ability to use foreign tax credits, and other factors;

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

• the possibility that our outlook could be significantly impacted by, among other things, changes in United States or other monetary or fiscal policies or regulations in response to the capital markets crisis and its impact on global economic conditions, developments in North Africa, 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;

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(Unaudited)

• the possibility that our outlook could be significantly impacted by changes in demand as a result of the effect on customers of the volatility in global credit and equity markets;

• the possibility that interruption in our major raw material, energy or utility supplies due to, among other things, natural or nuclear 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;

• 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.

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 Part I, Item 1A of our 2010 Annual Report on Form 10-K.

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(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Global Economic Conditions and Outlook

We are impacted in varying degrees, both positively and negatively, as global, regional or country conditions fluctuate. Our discussions about market data and global economic conditions below are based on or derived from published industry accounts and statistics.

Based on current International Monetary Fund (IMF) projections and other global economic forecasts, world output is projected to expand an average of 4.5 percent in 2011. However, degrees of growth will continue to vary in both advanced and emerging economies. IMF recently lowered economic forecasts slightly for the United States and several other large, developed economies, while reiterating its forecast for stronger growth in emerging economies given robust internal demand. Geopolitical uncertainty and rising commodity prices, specifically oil, have elevated risk to the stability of the global economic recovery.

Global steel operating rates continued to rise in the first quarter of 2011, due to the improving global economic situation, lower steel inventories, and slowly improving demand from key steel end-markets, such as automotive, construction, and appliances.

Based on published reports, global steel capacity utilization was approximately 82% for the three months ended March 31, 2011, an increase of 2.9 percentage points compared to the same period last year. The United States steel industry operated at approximately 74% for the three months ended March 31, 2011 compared to 68% utilization for the three months ended March 31, 2010. For the United States, this is an increase of 6.3 percentage points.

Industrial materials 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 months ended March 31, 2011, global steel production, excluding China, increased by 9% compared to the same period last year. China’s steel production increased by an estimated 9% during the three months ended March 31, 2011, contributing to global steel production increase of 9%. Based on industry projections, the total steel production for the second quarter 2011 will be approximately 377 million metric tons, an increase of approximately 4% compared to the same period last year and slightly higher than the first quarter of 2011.

EAF steel production has followed a similar trend as overall steel production. During the three months ended March 31, 2011, estimated EAF steel production, excluding China, increased by 11% compared to the same period last year. China’s estimated EAF steel production increased by 9% during the three months ended March 31, 2011, contributing to an estimated global EAF steel production increase of 11%. EAF steel production for the second quarter of 2011 will be approximately 109 million metric tons, an estimated increase of approximately 5% compared to the same period last year and slightly higher than the first quarter of 2011.

Generally, changes in graphite electrode demand have tracked changes in EAF steel production. We continue to expect 2011 results to benefit from improved volumes in our graphite electrode business; however, this impact will be partially offset due to pressure on average graphite electrode selling prices.

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(Unaudited)

If in 2011 the IMF projections and other economic forecasts described above were to materialize, we would then expect the following results:

• Earnings before interest, taxes, depreciation and amortization would be in the range of $285 million to $315 million, calculated as Operating Income of $200 million to $230 million, plus depreciation and amortization of approximately $85 million;

• Overhead expense (selling and administrative and research and development expenses) would be in the range of $145 million to $155 million;

• Capital expenditures would be approximately $135 million to $150 million;

• Depreciation and amortization expense would be approximately $85 million;

• The effective tax rate would be in the range of 22 percent to 24 percent;

• Cash flow from operations would be in the range of $185 million to $215 million.

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

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(Unaudited)

Results of Operations and Segment Review

Three Months Ended March 31, 2010 as Compared to Three Months Ended March 31, 2011.

The tables presented in our period-over-period comparisons summarize our consolidated statements of income and illustrate key financial indicators used to assess the consolidated financial results. Financial information is presented for the three months ended March 31, 2010 and 2011. Throughout our MD&A, changes that are less than 5% or less than $1.0 million, are deemed to be not meaningful and are designated as “NM”.

(in thousands, except per share data and % change)

	For the
	Three Months Ended
	March 31,						Increase			%
	2010			2011			(Decrease)			Change
Net sales	$	215,664		$	306,137		$	90,473			42
Cost of sales		146,370			233,202			86,832			59
Gross profit		69,294			72,935			3,641			5
Research and development		2,435			3,070			635			NM
Selling and administrative expenses		22,233			32,219			9,986			45
Operating income		44,626			37,646			(6,980	)		(16	)
Equity in losses of non-consolidated affiliate		774			0			(774	)		NM
Other (income) expense, net		(3,259	)		9			3,268			(100	)
Interest expense		906			4,404			3,498			386
Interest income		(561	)		(129	)		(432	)		NM
Income before provision for income taxes		46,766			33,362			(13,404	)		(29	)
Provision for income taxes		11,813			6,099			(5,714	)		(48	)
Net income	$	34,953		$	27,263		$	(7,690	)		(22	)
Basic income per common share:	$	0.29		$	0.19		$	(0.10	)
Diluted income per common share:	$	0.29		$	0.19		$	(0.10	)

Net sales. We experienced higher sales for both of our operating segments as a result of the global economic recovery. Our acquisitions of Seadrift, the St. Marys facility, and Micron Research resulted in $65.4 million of additional sales in the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Excluding sales from acquisitions, net sales increased $25.1 million, due primarily to volume increases.

Net sales, by operating segment for the three months ended March 31, 2010 and 2011 were:

(in thousands, except per % change)

	For the
	Three Months Ended
	March 31,				Increase		%
	2010		2011		(Decrease)		Change
Industrial Materials	$	182,423	$	263,484	$	81,061		44
Engineered Solutions		33,241		42,653		9,412		28
Total net sales	$	215,664	$	306,137	$	90,473		42

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(Unaudited)

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			Net Change
Industrial Materials		54	%		(9	%)		0	%		45	%
Engineered Solutions		27	%		1	%		0	%		28	%

Net sales. Net sales for our Industrial Materials segment increased significantly in the three months ended March 31, 2011 compared to the three months ended March 31, 2010 due to higher graphite electrode sales volume, including increases due to the St. Marys facility acquisition, as well as additional sales related to the addition of our acquired needle coke and related by-products business to this segment. These acquisitions resulted in $65.0 million in additional sales. Graphite electrode demand continued to recover in 2011, however, this demand increase was offset partially by a decline in the average selling price of approximately 7%.

Our Engineered Solutions segment saw increased sales due to higher volumes in the three months ended March 31, 2011 compared to the three months ended March 31, 2010, particularly related to solar applications and natural graphite products for use in electronics.

Cost of sales. For the three months ended March 31, 2011, we experienced increases in cost of sales of $66.9 million as a result of increased sales volumes, primarily resulting from our acquisitions, and the $6.2 million impact of purchase accounting adjustments. Our Industrial Materials segment was further negatively impacted by changes in foreign currency, which increased costs by an additional $5.8 million. Input costs related to needle coke increased approximately $10.5 million.

Needle coke is the primary raw material in the manufacture of graphite electrodes. Although we now purchase a portion of our needle coke requirements from Seadrift, our production in the first quarter of 2011 primarily used needle coke purchased primarily from third party suppliers in 2010, prior to the Seadrift acquisition. Higher needle coke costs have increased our cost of goods sold in the three months ended March 31, 2011 when compared to the same period in 2010. Our profitability depends on our ability to pass this increased cost to customers.

Selling and administrative expenses. Increased sales drove higher sales commissions during the three months ended March 31, 2011 compared to the three months ended March 31, 2010. The sales and administrative expenses related to the employees of our acquired businesses increased sales and administrative expense $4.5 million in the three months ended March 31, 2011 compared to the three months ended March 31, 2010. The amortization of acquired intangibles resulted in $4.2 million of expense in the three months ended March 31, 2011.

Equity in losses of non-consolidated affiliate. During the period ended March 31, 2010 our equity in losses of our non-consolidated affiliate was $0.8 million. On November 30, 2010, we acquired from the equity holders of Seadrift 81.1% of the equity interests of Seadrift that we did not already own, and Seadrift is now included in our consolidated results of operations.

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(Unaudited)

Interest expense. Interest expense increased $3.5 million in the three months ended March 31, 2011 compared to the three months ended March 31, 2010 due to the amortization of the discount on the Senior Subordinated Notes issued as part of the acquisitions of Seadrift and the St. Marys facility, as well as increased interest due to higher borrowings under our Revolving Facility, done primarily to fund the our acquisitions.

Other (income) expense, net. Other (income) expense, net represented income of $3.3 million for the three months ended March 31, 2010, compared to expense of $0.1 million for the three months ended March 31, 2011. The primary driver of this change is remeasurement of non-dollar denominated inter-company loan. For the three months ended March 31, 2010, currency gains totaled $3.7 million, compared to currency losses of $0.6 million for the three months ended March 31, 2011. During the three months ended March 31, 2011, we also recorded other income of $0.7 million resulting from the collection of an acquired account receivable at an amount in excess of its estimated fair value at the acquisition date, as well as the release of the final $0.1 million escrow balance related to our Caserta, Italy sale.

Segment operating income. Corporate expenses are allocated to segments based on each segment’s percentage of consolidated sales. The following table represents our operating income by segment for the three months ended March 31, 2010 and 2011:

	For the
	Three Months Ended
	March 31,
	2010		2011
	(Dollars in thousands)
Industrial Materials	$	42,894	$	34,198
Engineered Solutions		1,732		3,448
Total segment operating income	$	44,626	$	37,646

The percentage relationship of operating expenses, to sales for Industrial Materials and Engineered Solutions is set forth in the following table:

	For the Three Months Ended
	March 31,
	(Percentage of sales)
	2010			2011			Change
Industrial Materials		76	%		87	%		11	%
Engineered Solutions		95	%		92	%		(3	%)

Segment operating costs and expenses as a percentage of sales for Industrial Materials increased 11 percentage points to 87% in the three months ended March 31, 2011. The total operating costs and expenses increased $89.8 million from the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. The increase in total operating costs was a result of volume increases of $61.2 million, due in part to increased volumes as a result of our acquisitions as well as unfavorable currency increases of $5.8 million. Input costs related to needle coke increased $10.5 million in the three months ended March 31, 2011 as compared to the same period in 2010.

Segment operating costs and expenses as a percentage of sales for Engineered Solutions remained relatively flat at 92% for the three months ended March 31, 2011. In total, operating costs increased $7.7 million as a result of higher volumes.

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(Unaudited)

Provision for income taxes. The provision for income taxes for the three months ended March 31, 2010 was a tax expense of $11.8 million on pretax income of $46.8 million as compared to tax expense of $6.1 million on pretax income of $33.4 million for the three months ended March 31, 2011. The effective tax rates were 25.2% and 18.3% for the three months ended March 31, 2010 and 2011, respectively. The decrease in the effective tax rate is primarily due to jurisdictional mix of income, prior year adjustments to uncertain tax positions and changes in the utilization of attributes and related valuation allowances.

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(Unaudited)

Effects of Changes in Currency Exchange Rates

When the currencies of non-U.S. countries in which we have a manufacturing facility decline (or increase) in value relative to the U.S. dollar, this has the effect of reducing (or increasing) the U.S. dollar equivalent cost of sales and other expenses with respect to those facilities. In certain countries where we have manufacturing facilities, and in certain instances where we price our products for sale in export markets, we sell in currencies other than the dollar. Accordingly, when these currencies increase (or decline) in value relative to the dollar, this has the effect of increasing (or reducing) net sales. The result of these effects is to increase (or decrease) operating profit and net income.

Many of the non-U.S. countries in which we have a manufacturing facility have been subject to significant economic and political 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.

During the three months ended March 31, 2011, the average exchange rate for the Brazilian real, Mexican peso, South African rand and Japanese yen increased about 8.1%, 5.9%, 7.3% and 10.3% respectively, when compared to their respective average exchange rates for the three months ended March 31, 2010. During the three months ended March 31, 2011 the euro decreased 1.1%, when compared to its average exchange rate for the three months ended March 31, 2010.

For net sales of Industrial Materials, the impact of changes in the average exchange rates for the period was a decrease of $0.2 million in the three months ended March 31, 2011. For the cost of Industrial Materials, the impact of these events was an increase of $5.8 million in the three months ended March 31, 2011.

As part of our cash management, we also have intercompany loans between our subsidiaries. These loans are 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 Income. Our Switzerland location is party to many of these loans. Effective January 1, 2011, the functional currency of this location was switched to the U.S. dollar, as the majority of these loans and the purchases made are denominated in the U.S. dollar. This change minimizes our exposure to exchange rate changes related to our intercompany loans.

We had a net total currency gain of $3.7 million in the three months ended March 31, 2010 as compared to a net total currency loss of $0.6 million in the three months ended March 31, 2011, primarily due to the remeasurement of intercompany loans and the effect of transaction gains and losses on intercompany activities.

We have in the past and may in the future use various financial instruments to manage certain exposures to specific financial market risks caused by changes in currency exchange rates, as described under “Part I, Item 3–Quantitative and Qualitative Disclosures about Market Risk”.

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(Unaudited)

Liquidity and Capital Resources

Global capital markets have been, and may continue to be, disrupted and volatile. The cost and availability of funding has been and may continue to be adversely affected by illiquid credit markets. We believe that we have adequate liquidity, including availability under our Revolving Facility, to meet all of our present operating needs. Continued turbulence in the U.S. and international financial markets, however, could adversely affect the cost and availability of financing to us in the future.

Our financing obligations are as follows:

	At December 31, 2010		At March 31, 2011
	(Dollars in thousands)
Short-term debt	$	155	$	2,645
Supply chain financing liability		24,959		33,529
Total current financing liabilities		25,114		36,174
Long-term debt		275,799		296,254
Total financing liabilities	$	300,913	$	332,428

At March 31, 2011, we had cash and cash equivalents of $11.2 million, long-term debt of $296.3 million and stockholders' equity of $1,275.2 million. We also have $103.8 million available through our Revolving Facility. As part of our cash management activities, we manage accounts receivable credit risk, collections, and accounts payable vendor terms to maximize our free cash at any given time and minimize accounts receivable losses.

We have an accounts receivable factoring arrangement in place that provides additional working capital liquidity of up to $25.0 million. We did not sell any receivables under this arrangement during the three months ended March 31, 2010 or 2011.

Our sources of funds have consisted principally of cash flow from operations, debt including our Revolving Facility, equity financings, and supply chain financings. Our uses of those funds (other than for operations) have consisted principally of capital expenditures, payment of pension and post-retirement contributions, debt reductions, purchases of treasury shares and other obligations. As of March 31, 2011, we have several future obligations accrued that will utilize a significant amount of such funds. These obligations include our employee incentive compensation payout of approximately $16.8 million, which was during the second quarter of 2011.

Lower sales volumes for our products and reduced credit quality of our customers may limit the amount of receivables that we sell in the future. The receivables facility automatically renewed for a one year period on June 30, 2010 and it automatically renews each year thereafter unless a termination notice is sent by either party 30 days prior to the applicable June 30.

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(Unaudited)

We are party to a supply chain financing arrangement with a third party that provides additional working capital liquidity of up to $50 million. Under this arrangement, we essentially assigned our rights to purchase needle coke from our supplier to the financing party. The financing party purchases the product from our supplier under the standard payment terms and then immediately resells it to us under longer payment terms. The financing party pays the supplier the purchase price for the product and then we pay the financing party. Our payment to the financing party for this needle coke includes a mark up (the “Mark-Up”). For the first three months of 2011 the Mark-Up was based on 2 month LIBOR plus a margin of 2.5%. The Mark-Up is subject to quarterly reviews. In effect, we have a longer period of time to pay the financing party than by purchasing directly from the supplier which helps us maintain a balanced cash conversion cycle between inventory payments and the collection of receivables. During the three months ended March 31, 2011, the financing party invoiced us $48.5 million and we had net borrowings of $8.6 million for purchases of inventory under this arrangement, including a Mark-Up of $0.4 million.

In the event that operating cash flow, the sales of receivables and the financing of needle coke purchases fail to provide sufficient liquidity to meet our business needs, including capital expenditures, any such shortfall would be made up by borrowings under our Revolving Facility.

We use cash and cash equivalents, cash flow from operations, funds from receivable and payable factoring arrangements, supply chain financing, and funds available under the Revolving Facility (subject to continued compliance with the financial covenants and representations under the Revolving Facility) as our primary sources of liquidity. The Revolving Facility is secured, and provides for maximum borrowings of up to $260 million including a letters of credit sub-facility of up to $35 million and, subject to certain conditions (including a maximum senior secured leverage ratio test), an accordion feature that permits GrafTech Finance to establish additional credit facilities thereunder in an aggregate amount, together with the Revolving Facility, of up to $390 million. The Revolving Facility matures in April 2013.

At March 31, 2011, we had outstanding borrowings drawn from the Revolving Facility of $150.5 million, and $103.8 million was available (after consideration of outstanding letters of credit of $5.7 million). It is possible that our future ability to borrow under the Revolving Facility will 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 interest rate applicable to the Revolving Facility is, at GrafTech's option, either LIBOR plus a margin ranging from 2.50% to 3.50% (depending on our total net leverage ratio and/or senior unsecured rating) or, in the case of dollar denominated loans, the alternate base rate plus a margin ranging from 1.50% to 2.50% (depending upon such ratio or rating). The alternate base rate is the highest of (i) the prime rate announced by JP Morgan Chase Bank, N.A., (ii) the federal fund effective rate plus 0.50% and (iii) the London interbank offering rate (as adjusted) for a one-month interest period plus 1.00%. GrafTech Finance and Swissco pay a per annum fee ranging from 0.375% to 0.750% (depending on such ratio or rating) on the undrawn portion of the commitments under the Revolving Facility.

At March 31, 2011, we were in compliance with all financial and other covenants contained in the Revolving Facility, as applicable. These covenants include maintaining an interest coverage ratio of at least 1.75 to 1.00 and a maximum net senior secured leverage ratio of 2.25 to 1.00, subject to adjustment based on a rolling average of the prior four quarters. Based on expected operating results and expected cash flows, we expect to be in compliance with these covenants through maturity of our Revolving Facility. 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.

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(Unaudited)

At March 31, 2011, approximately 50% of our debt consists of fixed rate or zero interest rate obligations compared to 53% at December 31, 2010.

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.

Certain of our obligations could have a material impact on our liquidity. Cash flow from operations and from financing activities services payment of our obligations, including our incentive compensation program payout in the second quarter of 2011, thereby reducing funds available to us for other purposes. Although we currently have $103.8 million of additional borrowing capacity under the Revolving Facility, continued improvement, or another downturn, in the global economy may require increased borrowings under our Revolving Facility, particularly if our accounts receivable and supply chain financing arrangements are terminated. An improving economy, while resulting in improved results of operations and cash flows, could require significant cash requirements to purchase inventories and pay other obligations as accounts receivable increase. A downturn could significantly negatively impact our results of operations and cash flows, which, coupled with increased borrowings, could negatively impact our credit ratings, our ability to comply with debt covenants, our ability to secure additional financing and the cost of such financing, if available.

Based on expected operating results and expected cash flows, we expect to be in compliance with our existing financial covenants in 2011. However, we cannot predict whether additional or more restrictive covenants, if any, may result from a new credit arrangement or our ability to comply therewith.

In order to seek to minimize our credit risks, we limit our sales of, or refuse to sell (except for cash on delivery or under letters of credit), our products to some customers and potential customers. In the current economic environment, our customers may experience liquidity shortages or difficulties in obtaining credit, including letters of credit. Our unrecovered trade receivables worldwide have not been material during the last 3 years individually or in the aggregate. 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. Our ability to factor accounts receivable in the future may be limited by reduced credit ratings of customers or by a reduction in the amount permitted to be financed under the arrangement.

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.

Related Party Transactions. In late June and early July 2009, our then non-consolidated affiliate, Seadrift Coke L.P. (“Seadrift”), entered into agreements to borrow up to $17.0 million from certain of its shareholders, which included GrafTech. We agreed to loan up to $8.5 million and on July 2, 2009, we loaned Seadrift $6.0 million.

38

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

The Demand Notes were repaid in full with interest on March 31, 2010 and the obligation to make any further loans or advances ceased and terminated.

We have not engaged in or been a party to any other material transactions with affiliates or related parties except for transactions with our current or former subsidiaries and compensatory transactions with directors and officers (including employee benefits, stock option and restricted stock grants, compensation deferral, executive employee loans and stock purchases).

Cash Flows.

The following is a discussion of our cash flow activities:

	For the
	Three Months Ended
	March 31,
	2010			2011
	(Dollars in millions)
Cash flow provided by (used in):
Operating activities	$	20.4		$	(1.1	)
Investing activities		(4.5	)		(30.3	)
Financing activities		23.0			29.4

Operating Activities

Cash flow from operating activities represents cash receipts and cash disbursements related to all our activities other than to investing and financing activities. Operating cash flow is derived by adjusting net income for:

• Non-cash items such as depreciation and amortization; post retirement obligations, severance and pension plan changes; stock-based compensation charges

• Gains and losses attributed to investing and financing activities such as gains and losses on the sale of assets and unrealized currency transaction gains

• Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations

The net impact of the changes in working capital (operating assets and liabilities), which are discussed in more detail below, include the impact of changes in: receivables, inventories, prepaid expenses, accounts payable, accrued liabilities, interest payable, and payments of other current liabilities.

We continue to attempt to maximize our operating cash flows by continuing to improve those working capital items that are most directly affected by changes in sales volume, such as accounts receivable, inventories and accounts payable.

During the three months ended March 31, 2010, changes in working capital resulted in a net use of funds of $13.3 million which was impacted by:

• cash outflows of $7.6 million from the increase in accounts receivable, net of the cash inflows of factoring of $1.1 million, which are due primarily to increased sales for the period and the limited use of factoring;

39

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

• cash outflows for inventories of $21.0 million primarily due to the increased sales volume; and

• net cash inflows of $17.8 million from an increase in accounts payable and accruals through normal operations and inventory purchases.

During the three months ended March 31, 2011, changes in working capital resulted in a net use of funds of $54.6 million which was impacted by:

• cash outflows of $17.1 million from the increase in accounts receivable, which are due primarily to increased sales for the period;

• cash outflows for inventories of $30.5 million primarily due to higher raw material purchase volumes, at increased prices, needed to satisfy the growing sales volumes; and

• net cash outflows of $5.4 million from a decrease in accounts payable and accruals through normal operations.

Investing Activities.

Net cash used in investing activities was $4.5 million during the three months ended March 31, 2010 and included capital expenditures of $10.8 million, which was offset by proceeds received on our loan to our non-consolidated affiliate of $6.0 million.

Net cash used in investing activities was $30.3 million during the three months ended March 31, 2011 and included capital expenditures of $23.8 million, as well as a payment of $6.5 million related to the acquisition of the net assets of Micron Research Corporation.

Financing Activities.

Net cash flow provided by financing activities was $23.0 million during the three months ended March 31, 2010 and included net borrowings under our supply chain financing arrangement of $24.7 million, offset by purchases of treasury shares of $1.1 million and reductions in other short-term debt arrangements of $1.1 million.

Net cash flow provided by financing activities was $29.4 million during the three months ended March 31, 2011 and included net borrowings of $18.0 million under our Revolving Facility, net borrowings under our supply chain financing arrangement of $8.6 million, and proceeds of $2.5 from short-term debt arrangements.

40

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

Restrictions on Dividends and Stock Repurchases

A description of the restriction 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

We discuss recently adopted accounting standards on page 6 in Note 1, “Interim Financial Presentation and New Accounting Standards” of Notes to the Consolidated Financial Statements.

Description of Our Financing Structure

We discuss our financing structure in more detail on page 17 in Note 9, “Long-Term Debt and Liquidity” of Notes to the Consolidated Financial Statements.

41

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks primarily from changes in interest rates, currency exchange rates, energy commodity 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.

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

The outstanding foreign currency derivatives at December 31, 2010 and March 31, 2011 represented a net unrealized gain of $0.8 million and $0.2 million, respectively.

Energy Commodity Management. We periodically enter into commodity derivative contracts and short duration fixed rate purchase contracts to effectively fix some or all of our natural gas, and refined oil product exposure. The outstanding contracts at December 31, 2010 and March 31, 2011 represented a net unrealized gain of $0.6 million $8.7 million, respectively.

Interest Rate Risk Management. We periodically implement interest rate management initiatives to seek to minimize our interest expense and the risk in our portfolio of fixed and variable interest rate obligations. We currently do not have any such contracts outstanding.

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.

42

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

Sensitivity Analysis. We used a sensitivity analysis to assess the potential effect of changes in currency exchange rates on gross margin and changes in interest rates on interest expense. 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 three months ended March 31, 2011 by approximately $1.7 million. Based on this analysis, a hypothetical increase in interest rates of 1,000 basis points (10%) would have increased our interest expense by $3.8 million for the for the three months ended March 31, 2011.

43

PART I (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

(Unaudited)

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 Acting Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011. Based on that evaluation, our Chief Executive Officer and Acting Chief Financial Officer has concluded that these controls and procedures are effective at the reasonable assurance level as of March 31, 2011.

Changes in Internal Controls over Financial Reporting. We acquired Seadrift and St. Marys during the fourth quarter of 2010. We have extended the Section 404 compliance program under the Sarbanes-Oxley Act and the applicable rules and regulations under the Act to include Seadrift and St. Marys. We will report on the Assessment of the effectiveness of internal controls over financial reporting for the combined operations at December 31, 2011. There have been no other changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2011 that materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

44

PART II. OTHER INFORMATION

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 1. Legal Proceedings

The information required by this Item is set forth on page 20 in Note 14, “Contingencies” of Notes to Consolidated Financial Statements and is incorporated herein by reference.

Item 1A. Risk Factors

Risks related to our defined benefit pension plans may adversely impact our results of operations and cash flow.

Significant changes in actual investment return on pension assets, discount rates, and other factors could adversely affect our results of operations and pension contributions in future periods. U.S. generally accepted accounting principles require that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial markets and interest rates, which may change based on economic conditions. Funding requirements for our U.S. pension plans may become more significant. However, the ultimate amounts to be contributed are dependent upon, among other things, interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations. For a discussion regarding the significant assumptions used to estimate pension expense, including discount rate and the expected long-term rate of return on plan assets see Note 12 in our 2010 Annual Report on Form 10-K.

For a more complete discussion of these and other factors, see "Risk Factors," in Part I, Item 1A of our 2010 Annual Report on Form 10-K.

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. In addition to the repurchase program, we occasionally purchase or withhold vested restricted stock shares from employees as payment for the withholding taxes due upon the vesting or payment of stock awards.

Period	Total Number of Shares Purchased*		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 through January 31, 2011		307	$	19.78		0		2,051,905
February 1 through February 28, 2011		28,894		20.01		0		2,051,905
March 1 through March 31, 2011		5,209		20.63		0		2,051,905

* Including purchases of vested restricted stock shares from employees as payment for the withholding taxes due upon the vesting or payment of stock awards.

45

PART II (CONT’D)

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES

Item 3. Defaults upon Senior Securities

None.

Item 4. [Removed and Reserved.]

Item 5. Other Information.

None.

Item 6. Exhibits

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

Exhibit Number	Description of Exhibit
18.1	Letter on Change in Accounting Principle
31.1	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer, President, Chairman of the Board and Acting Chief Financial Officer (Principal Executive Officer)
31.2	Certification pursuant to Rule 13a-14(a) under the Exchange Act by Craig S. Shular, Chief Executive Officer, President, Chairman of the Board and Acting Chief Financial Officer (Principal Accounting Officer)
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Craig S. Shular, Chief Executive Officer, President, Chairman of the Board and Acting Chief Financial Officer. (Principal Executive Officer)
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Craig S. Shular, Chief Executive Officer, President, Chairman of the Board and Acting Chief Financial Officer (Principal Accounting Officer)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

46

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: April 27, 2011	By:	/s/    Craig S. Shular
		Craig S. Shular Chief Executive Officer, President, Chairman of the Board and Acting Chief Financial Officer (Principal Executive Officer) (Principal Accounting Officer)

47

EX-18.1

EXHIBIT 18.1

March 27, 2010

Board of Directors of

GrafTech International Ltd.

12900 Snow Road

Parma, Ohio 44130

Dear Directors:

We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K.

We have been provided a copy of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2011. Note 1 therein describes a change in the method of accounting for pension and other postretirement benefit costs to recognize actuarial gains and losses immediately in the income statement and to use fair value as the market-related value of plan assets. Additionally, Note 1 describes a change in the method of accounting for inventory to exclude net pension and other postretirement benefit costs related to inactive participants from the inventory cost basis. It should be understood that the preferability of one acceptable method of accounting over another for recognition of actuarial gains and losses on defined benefit pension and other postretirement benefit plans, for the determination of the market-related value of plan assets and for the treatment of net pension and other postretirement benefit costs related to inactive participants in inventory has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that these changes in accounting principle are preferable. Based on our reading of management’s stated reasons and justification for these changes in accounting principle in the Form 10-Q, and our discussions with management as to their judgment about the relevant business planning factors relating to the changes, we concur with management that such changes represents, in the Company’s circumstances, the adoption of a preferable accounting principle in conformity with Accounting Standards Codification 250, Accounting Changes and Error Corrections.

We have not audited any financial statements of the Company as of any date or for any period subsequent to December 31, 2010. Accordingly, our comments are subject to change upon completion of an audit of the financial statements covering the period of the accounting change.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

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, Chairman of the Board and Acting Chief Financial Officer (Principal Executive Officer) April 27, 2011

EX-31.2

EXHIBIT 31.2

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, Chairman of the Board and Acting Chief Financial Officer (Principal Accounting Officer) April 27, 2011

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 March 31, 2011, 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, President of the Corporation and Acting Chief Financial Officer, 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, Chairman of the Board and Acting Chief Financial Officer (Principal Executive Officer) April 27, 2011

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 March 31, 2011, 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, President of the Corporation and Acting Chief Financial Officer, 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, Chairman of the Board and Acting Chief Financial Officer (Principal Accounting Officer) April 27, 2011