0000931148-20-000107.txt : 20200806 0000931148-20-000107.hdr.sgml : 20200806 20200806171941 ACCESSION NUMBER: 0000931148-20-000107 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 77 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200806 DATE AS OF CHANGE: 20200806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAFTECH INTERNATIONAL LTD CENTRAL INDEX KEY: 0000931148 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 272496053 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13888 FILM NUMBER: 201082812 BUSINESS ADDRESS: STREET 1: 982 KEYNOTE CIRCLE CITY: BROOKLYN HEIGHTS STATE: OH ZIP: 44131 BUSINESS PHONE: 2166762000 MAIL ADDRESS: STREET 1: 982 KEYNOTE CIRCLE CITY: BROOKLYN HEIGHTS STATE: OH ZIP: 44131 FORMER COMPANY: FORMER CONFORMED NAME: UCAR INTERNATIONAL INC DATE OF NAME CHANGE: 19941011 10-Q 1 gti-20200630.htm 10-Q gti-20200630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 2020
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
gti-20200630_g1.jpg
GRAFTECH INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
Delaware27-2496053
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
982 Keynote Circle44131
Brooklyn Heights,OH(Zip code)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (216676-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value per shareEAFNew York Stock Exchange

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  ý    No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ý    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,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerEmerging Growth Company
Non-Accelerated FilerSmaller Reporting Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes      No 
As of July 31, 2020, 267,188,547 shares of common stock, par value $0.01 per share, were outstanding.


TABLE OF CONTENTS
 

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 Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 (the "Report") are our own estimates or derived from sources described in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report on Form 10-K") filed on February 21, 2020. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under “Forward-Looking Statements” and “Risk Factors” in this Report and in our Annual Report on Form 10-K. 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.
Forward-Looking Statements
Some of the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” "foresee," “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to” or the negative version of those words or other comparable words. Any forward-looking statements contained in this Report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:
2

the ultimate impact that the COVID-19 pandemic has on our business, results of operations, financial condition and cash flows;
the cyclical nature of our business and the selling prices of our products may lead to periods of reduced profitability and net losses in the future;
the possibility that we may be unable to implement our business strategies, including our ability to secure and maintain longer-term customer contracts, in an effective manner;
the risks and uncertainties associated with litigation, arbitration, and like disputes, including disputes related to contractual commitments;
the possibility that global graphite electrode overcapacity may adversely affect graphite electrode prices;
pricing for graphite electrodes has historically been cyclical and the price of graphite electrodes may continue to decline in the future;
the sensitivity of our business and operating results to economic conditions and the possibility others may not be able to fulfill their obligations to us in a timely fashion or at all;
our dependence on the global steel industry generally and the electric arc furnace steel industry in particular;
the competitiveness of the graphite electrode industry;
our dependence on the supply of petroleum needle coke;
our dependence on supplies of raw materials (in addition to petroleum needle coke) and energy;
the possibility that our manufacturing operations are subject to hazards;
changes in, or more stringent enforcement of, health, safety and environmental regulations applicable to our manufacturing operations and facilities;
the legal, compliance, economic, social and political risks associated with our substantial operations in multiple countries;
the possibility that fluctuation of foreign currency exchange rates could materially harm our financial results;
the possibility that our results of operations could deteriorate if our manufacturing operations were substantially disrupted for an extended period, including as a result of equipment failure, climate change, regulatory issues, natural disasters, public health crises, such as the COVID-19 pandemic, political crises or other catastrophic events;
our dependence on third parties for certain construction, maintenance, engineering, transportation, warehousing and logistics services;
the possibility that we are unable to recruit or retain key management and plant operating personnel or successfully negotiate with the representatives of our employees, including labor unions;
the possibility that we may divest or acquire businesses, which could require significant management attention or disrupt our business;
the sensitivity of goodwill on our balance sheet to changes in the market;
the possibility that we are subject to information technology systems failures, cybersecurity attacks, network disruptions and breaches of data security;
our dependence on protecting our intellectual property;
the possibility that third parties may claim that our products or processes infringe their intellectual property rights;
the possibility that significant changes in our jurisdictional earnings mix or in the tax laws of those jurisdictions could adversely affect our business;
the possibility that our indebtedness could limit our financial and operating activities or that our cash flows may not be sufficient to service our indebtedness;
3

the possibility that restrictive covenants in our financing agreements could restrict or limit our operations;
the fact that borrowings under certain of our existing financing agreements subject us to interest rate risk;
the possibility of a lowering or withdrawal of the ratings assigned to our debt;
the possibility that disruptions in the capital and credit markets could adversely affect our results of operations, cash flows and financial condition, or those of our customers and suppliers;
the possibility that highly concentrated ownership of our common stock may prevent minority stockholders from influencing significant corporate decisions;
the possibility that we may not pay cash dividends on our common stock in the future;
the fact that certain of our stockholders have the right to engage or invest in the same or similar businesses as us;
the possibility that the market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets, including by Brookfield (as defined below);
the fact that certain provisions of our Amended and Restated Certificate of Incorporation and our Amended and Restated By-Laws could hinder, delay or prevent a change of control;
the fact that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders; and
our status as a "controlled company" within the meaning of the New York Stock Exchange corporate governance standards, which allows us to qualify for exemptions from certain corporate governance requirements.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements, including the Risk Factors section, that are included in our Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and other filings with the Securities and Exchange Commission ("SEC"). The forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this Report that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
For a more complete discussion of these and other factors, see "Risk Factors" in Part II of this Report and the "Risk Factors" section included in our Annual Report on Form 10-K and other SEC filings.

4

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
As of
June 30,
2020
As of
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$187,656  $80,935  
Accounts and notes receivable, net of allowance for doubtful accounts of
$8,247 as of June 30, 2020 and $5,474 as of December 31, 2019
181,308  247,051  
Inventories312,298  313,648  
Prepaid expenses and other current assets31,711  40,946  
Total current assets712,973  682,580  
Property, plant and equipment749,575  733,417  
Less: accumulated depreciation246,969  220,397  
Net property, plant and equipment502,606  513,020  
Deferred income taxes49,030  55,217  
Goodwill171,117  171,117  
Other assets97,710  104,230  
Total assets$1,533,436  $1,526,164  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$50,862  $78,697  
Short-term debt8,141  141  
Accrued income and other taxes90,453  65,176  
Other accrued liabilities64,563  48,335  
Related party payable - tax receivable agreement16,168  27,857  
Total current liabilities230,187  220,206  
Long-term debt1,704,521  1,812,682  
Other long-term obligations82,821  72,562  
Deferred income taxes48,142  49,773  
Related party payable - tax receivable agreement long-term42,479  62,014  
Contingencies – Note 8
Stockholders’ equity:
Preferred stock, par value $0.01, 300,000,000 shares authorized, none issued
    
Common stock, par value $0.01, 3,000,000,000 shares authorized, 267,188,547
shares issued and outstanding as of June 30, 2020 and 270,485,308
as of December 31, 2019
2,672  2,705  
Additional paid-in capital756,812  765,419  
Accumulated other comprehensive loss(49,442) (7,361) 
Accumulated deficit(1,284,756) (1,451,836) 
Total stockholders’ deficit(574,714) (691,073) 
Total liabilities and stockholders’ equity$1,533,436  $1,526,164  
See accompanying Notes to Condensed Consolidated Financial Statements
5


GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except share data)
(Unaudited)
For the Three Months Ended June 30,For the Six Months
Ended June 30,
 2020201920202019
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales$280,718  $480,390  $599,364  $955,384  
Cost of sales130,600  197,047  269,517  392,571  
Gross profit150,118  283,343  329,847  562,813  
Research and development710  713  1,422  1,350  
Selling and administrative expenses16,001  15,394  30,933  30,620  
Operating profit133,407  267,236  297,492  530,843  
Other expense (income), net311  863  (3,003) 1,330  
Related party Tax Receivable Agreement benefit    (3,346)   
Interest expense20,880  32,969  46,552  66,669  
Interest income(348) (731) (1,489) (1,145) 
Income before provision for income taxes112,564  234,135  258,778  463,989  
Provision for income taxes19,788  37,767  43,734  70,185  
Net income$92,776  $196,368  $215,044  $393,804  
Basic income per common share*:
Net income per share$0.35  $0.68  $0.80  $1.36  
Weighted average common shares outstanding267,249,580  290,565,408  268,233,233  290,562,234  
Diluted income per common share*:
Income per share$0.35  $0.68  $0.80  $1.36  
Weighted average common shares outstanding267,260,395  290,574,153  268,243,997  290,571,132  
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income$92,776  $196,368  $215,044  $393,804  
Other comprehensive income:
Foreign currency translation adjustments, net of tax of
  $1, $(33), $(162) and $(36), respectively
3,630  3,617  (13,538) 78  
Commodity and interest rate derivatives, net of tax of $(2,963), $966, $7,964 and $(5,907), respectively
11,238  (4,081) (28,543) 21,576  
Other comprehensive income (loss), net of tax:14,868  (464) (42,081) 21,654  
Comprehensive income$107,644  $195,904  $172,963  $415,458  
*See Notes 1 and 12
See accompanying Notes to Condensed Consolidated Financial Statements
6

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Six Months
Ended June 30,
 20202019
Cash flow from operating activities:
Net income$215,044  $393,804  
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization28,833  31,030  
Related party Tax Receivable Agreement benefit(3,346)   
Deferred income tax provision13,990  21,283  
Interest expense3,181  3,176  
Other charges, net(160) 11,158  
Net change in working capital*34,086  (102,549) 
Change in long-term assets and liabilities(3,972) 1,121  
Net cash provided by operating activities287,656  359,023  
Cash flow from investing activities:
Capital expenditures(24,355) (29,199) 
Proceeds from the sale of assets65  82  
Net cash used in investing activities(24,290) (29,117) 
Cash flow from financing activities:
Repurchase of common stock-non-related party (30,099)   
Payment of tax withholdings related to net share settlement of equity awards(71)   
Principal repayments on long-term debt(100,028) (125,000) 
Dividends paid to non-related-party(6,605) (10,387) 
Dividends paid to related-party(18,926) (39,005) 
Net cash used in financing activities(155,729) (174,392) 
Net change in cash and cash equivalents107,637  155,514  
Effect of exchange rate changes on cash and cash equivalents(916) (139) 
Cash and cash equivalents at beginning of period80,935  49,880  
Cash and cash equivalents at end of period$187,656  $205,255  
* Net change in working capital due to changes in the following components:
Accounts and notes receivable, net$58,713  $(65,137) 
Inventories(2,924) (16,099) 
Prepaid expenses and other current assets6,132  3,308  
Income taxes payable25,095  (27,639) 
Accounts payable and accruals(52,876) 2,212  
Interest payable(54) 806  
Net change in working capital$34,086  $(102,549) 

See accompanying Notes to Condensed Consolidated Financial Statements
7

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Dollars in thousands, except share data)
(Unaudited)
Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income(Loss)
Retained Earnings (Accumulated
Deficit)
Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2019270,485,308  $2,705  $765,419  $(7,361) $(1,451,836) $(691,073) 
Comprehensive income (loss):
Net income—  —  —  —  122,268  122,268  
Other comprehensive income (loss):
Commodity and interest rate derivatives income (loss), net of tax of $10,322
—  —  —  (37,577) —  (37,577) 
Commodity derivatives reclassification adjustments, net of tax of $605
—  —  —  (2,204) —  (2,204) 
Foreign currency translation adjustments, net of tax of $(163)
—  —  —  (17,168) —  (17,168) 
   Total other comprehensive loss—  —  —  (56,949) —  (56,949) 
Stock-based compensation29,394  —  405  —  —  405  
Dividends paid to related party
   stockholder ($0.085 per share)
—  —  —  —  (16,933) (16,933) 
Dividends paid to non-related party
   stockholders ($0.085 per share)
—  —  —  —  (5,926) (5,926) 
Common stock repurchased and retired (from non-related party)(3,328,574) (33) (9,700) —  (20,366) (30,099) 
Common stock withheld for taxes on equity award settlement (7,465) —  (21) —  (25) (46) 
Adoption of ASC 326—  —  —  —  (2,026) (2,026) 
Balance as of March 31, 2020267,178,663  $2,672  $756,103  $(64,310) $(1,374,844) $(680,379) 
Comprehensive income (loss):
Net income—  —  —  —  92,776  92,776  
Other comprehensive income (loss):
Commodity and interest rate derivatives income (loss), net of tax of $(3,199)
—  —  —  12,132  —  12,132  
Commodity derivatives reclassification adjustments, net of tax of $236
—  —  —  (894) —  (894) 
Foreign currency translation adjustments, net of tax of $1
—  —  —  3,630  —  3,630  
   Total other comprehensive income—  —  —  14,868  —  14,868  
Stock-based compensation13,017  —  718  —  —  718  
Dividends paid to related party
   stockholder ($0.01 per share)
—  —  —  —  (1,993) (1,993) 
Dividends paid to non-related party
   stockholders ($0.01 per share)
—  —  —  —  (679) (679) 
Common stock withheld for taxes on equity award settlement(3,113) —  (9) —  (16) (25) 
Balance as of June 30, 2020267,188,567  $2,672  $756,812  $(49,442) $(1,284,756) $(574,714) 
8

Issued
Shares of
Common
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income(Loss)
Retained Earnings (Accumulated
Deficit)
Total
Stockholders’
Equity (Deficit)
Balance as of December 31, 2018290,537,612  $2,905  $819,622  $(5,800) $(1,893,496) $(1,076,769) 
Comprehensive income (loss):
Net income—  —  —  —  197,436  197,436  
Other comprehensive income (loss):
Commodity derivatives foreign currency derivatives income (loss), net of tax of $(7,295)
—  —  —  27,113  —  27,113  
Commodity derivatives reclassification adjustments, net of tax of $392
—  —  —  (1,456) —  (1,456) 
Foreign currency translation adjustments, net of tax $(3)
—  —  —  (3,539) —  (3,539) 
   Total other comprehensive income—  —  —  22,118  —  22,118  
Stock-based compensation293  293  
Dividends paid to related party
   stockholder ($0.085 per share)
—  —  —  —  (19,502) (19,502) 
Dividends paid to non-related party stockholders ($0.085 per share)
—  —  —  —  (5,194) (5,194) 
Balance as of March 31, 2019290,537,612  $2,905  $819,915  $16,318  $(1,720,756) $(881,618) 
Comprehensive income (loss):
Net income—  —  —  —  196,368  196,368  
Other comprehensive income (loss):
Commodity derivatives income (loss), net of tax of $603
—  —  —  (2,472) —  (2,472) 
Commodity derivatives reclassification adjustments, net of tax of $393
—  —  —  (1,609) —  (1,609) 
Foreign currency translation adjustments, net of tax of $(33)
—  —  —  3,617  —  3,617  
   Total other comprehensive (loss)—  —  —  (464) —  (464) 
Stock-based compensation570  570  
Dividends paid to related party
   stockholder ($0.085 per share)
—  —  —  —  (19,503) (19,503) 
Dividends paid to non-related party
   stockholders ($0.085 per share)
—  —  —  —  (5,191) (5,191) 
Balance as of June 30, 2019290,537,612  $2,905  $820,485  $15,854  $(1,549,082) $(709,838) 

9

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(1)Organization and Summary of Significant Accounting Policies
A. Organization
GrafTech International Ltd. (the “Company”) is a leading manufacturer of high quality graphite electrode products essential to the production of electric arc furnace steel and other ferrous and non-ferrous metals. References herein to "GrafTech," “we,” “our,” or “us” refer collectively to GrafTech International Ltd. and its subsidiaries.
On August 15, 2015, we became an indirect wholly owned subsidiary of Brookfield Asset Management Inc. (together with its affiliates "Brookfield"). In April 2018, we completed our initial public offering ("IPO") of 38,097,525 shares of our common stock held by Brookfield at a price of $15.00 per share. We did not receive any proceeds related to the IPO. Our common stock is listed on the NYSE under the symbol “EAF.” Brookfield owned approximately 75% of our outstanding common stock as of June 30, 2020. On July 22, 2020, Brookfield distributed a portion of its GrafTech common stock to the owners in the Brookfield consortium, resulting in the reduction in Brookfield's ownership of outstanding shares of GrafTech common stock to 65%.
The Company’s only reportable segment, Industrial Materials, is comprised of our two major product categories: graphite electrodes and petroleum needle coke products. Petroleum needle coke is a key raw material used in the production of graphite electrodes. The Company's vision is to provide highly engineered graphite electrode services, solutions and products to Electric Arc Furnace operators.
B. Basis of Presentation
The interim condensed 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”). The December 31, 2019 financial position data included herein was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 ("Annual Report on Form 10-K"), filed on February 21, 2020, but does not include all disclosures required by GAAP in audited financial statements. These interim condensed 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.
The unaudited condensed 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, comprehensive income and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.
C. New Accounting Standards
Recently Adopted Accounting Standards
In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). This guidance was issued to simplify the accounting for goodwill impairment. The guidance removes the second step of the goodwill impairment test, which requires that a hypothetical purchase price allocation be performed to determine the amount of impairment, if any. Under this new guidance, a goodwill impairment charge will be based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU No. 2017-04 is effective beginning January 1, 2020 with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted ASU No. 2017-04 on January 1, 2020, with no impact to our financial position, results of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326), which introduces the Current Expected Credit Losses ("CECL") accounting model. CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk. CECL utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. ASU No. 2016-13 was effective for the Company on January 1, 2020. The adoption of ASU No. 2016-13 resulted in a cumulative-effect adjustment of $2.0 million included as an adjustment to accounts receivable reserve and to retained earnings on January 1, 2020.
10

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Accounting Standards Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This pronouncement contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 can be elected for both interim and annual periods from March 12, 2020 through December 31, 2022. We plan to adopt ASU 2020-04 as of January 1, 2021. The adoption of ASU 2020-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application of Topic 740 and simplify the accounting for income taxes. This pronouncement removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020, with early adoption permitted. The Company is currently evaluating the effects of this on our financial position, results of operations or cash flows.

(2)Revenue from Contracts with Customers
Disaggregation of Revenue
The following table provides information about disaggregated revenue by type of product and contract for the three and six months ended months ended June 30, 2020 and 2019:
For the Three Months Ended June 30,For the Six Months
Ended June 30,
2020201920202019
(Dollars in thousands)
Graphite Electrodes - Three-to-five-year take-or-pay contracts$245,010  $377,605  $521,389  $773,645  
Graphite Electrodes - Short-term agreements and spot sales30,111  76,249  60,929  123,545  
By-products and other5,597  26,536  17,046  58,194  
Total Revenues$280,718  $480,390  $599,364  $955,384  
The Graphite Electrodes revenue categories include only graphite electrodes manufactured by GrafTech. The revenue category “By-products and Other” includes re-sales of low-grade electrodes purchased from third party suppliers, which represent a minimal contribution to our profitability.
Contract Balances
Receivables, net of allowances for doubtful accounts, were $181.3 million as of June 30, 2020 and $247.1 million as of December 31, 2019. Accounts receivables are recorded when the right to consideration becomes unconditional. Payment terms on invoices range from 30 to 120 days depending on the customary business practices of the jurisdictions in which we do business.
Certain short-term and longer-term sales contracts require up-front payments prior to the Company’s fulfillment of any performance obligation. These contract liabilities are recorded as current or long-term deferred revenue, depending on the lag between the pre-payment and the expected delivery of the related products. Additionally, under ASC 606, deferred revenue originates from contracts where the allocation of the transaction price to the performance obligations based on their relative stand-alone selling prices results in the timing of revenue recognition being different from the timing of the invoicing. In this case, deferred revenue is amortized into revenue based on the transaction price allocated to the remaining performance obligations.
Current deferred revenue is included in "Other accrued liabilities" and long-term deferred revenue is included in "Other long-term obligations" on the Condensed Consolidated Balance Sheets.
The following table provides information about deferred revenue from contracts with customers (in thousands):
11

PART I (CONT'D)
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Current deferred revenueLong-Term deferred revenue
(Dollars in thousands)
Balance as of December 31, 2019$11,776  $3,858  
Increases due to cash received 9,691    
Revenue recognized (2,327)   
Foreign currency impact(870)   
Balance as of June 30, 2020$18,270  $3,858  

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2019, under its long-term take-or-pay contracts, the Company expected to record revenues of $1,251 million for 2020. We now estimate that our long-term contract revenue in 2020 will be in the range of $950 million to $1,100 million. We recorded $521 million in the first six months and we expect to record approximately $430 million to $580 million for the remainder of 2020. The decreased expectation for 2020 includes the impact of the force majeure notices associated with the COVID-19 induced shutdowns of customers’ facilities as well as non-performance by certain other customers struggling with the impact of reduced steel demand. We expect that some of this decrease in 2020 long-term contract revenue will be recovered in future years.

Our contractual revenue for future years is $1,210 million for 2021, $1,144 million for 2022 and $49 million for 2023 and thereafter. The majority of the long-term take-or-pay contracts are defined as pre-determined fixed annual volume contracts while a small portion are defined with a specified volume range. For the year 2021 and beyond, the contractual revenue amounts above are based upon the mid-point of the volume range for those contracts with specified ranges. The actual revenue realized from these contracted volumes may vary in timing and total due to the credit risk associated with certain customers facing financial challenges, non-performance on contracts, as well as customer demand related to contracted volume ranges.
(3)Retirement Plans and Postretirement Benefits
The components of our consolidated net pension costs are set forth in the following table:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020201920202019
 (Dollars in thousands)
Service cost$618  $575  $1,240  $1,150  
Interest cost1,032  1,316  2,065  2,632  
Expected return on plan assets(1,282) (1,338) (2,566) (2,676) 
Net cost$368  $553  $739  $1,106  
The components of our consolidated net postretirement costs are set forth in the following table: 
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020201920202019
 (Dollars in thousands)
Interest cost$174  $239  365  481  
Net cost$174  $239  $365  $481