GrafTech Reports Fourth Quarter and Full Year 2005 Results

GrafTech International Ltd. (NYSE:GTI) today announcedfinancial results for the fourth quarter and year ended December 31,2005.

2005 Fourth Quarter Highlights

-- Net sales increased seven percent, to $247 million, versus the
fourth quarter of 2004.

-- Gross profit increased approximately 21 percent, to $68
million or 27.6 percent of net sales, as compared to $57
million, or 24.4 percent of net sales, in the fourth quarter
of 2004.

-- EBITDA increased 19 percent to $49 million, before
restructuring and impairment charges and other expense*,
versus an EBITDA of $41 million, before such items*, in the
fourth quarter of 2004.

-- Non-cash U.S. deferred tax valuation allowance net increase of
$150 million resulting in a net loss of $148 million, or
$(1.51) per diluted share, as compared to net income of $9
million, or $0.09 per diluted share, in the 2004 fourth
quarter.

-- Income before special items* was $16 million, or $0.15 per
diluted share, as compared to $12 million, or $0.11 per
diluted share in the 2004 fourth quarter.

-- Free cash flow before antitrust and restructuring payments*
improved $30 million, to a positive $16 million from a
negative $14 million in the 2004 fourth quarter.

2005 Annual Highlights

-- Net sales increased five percent, to $887 million, versus
2004.

-- Graphite electrode average sales revenue per metric ton
increased 13 percent, to $2,846, and graphite electrode
volume decreased 9 percent, to 201.3 thousand metric tons.

-- Electronic thermal management (ETM) net sales increased 58
percent to $19 million.

-- Gross profit increased approximately 11 percent, to $232
million or 26.2 percent of net sales, as compared to $210
million, or 24.7 percent of net sales, in 2004.

-- EBITDA increased 8 percent to $159 million, before
restructuring and impairment charges and other expense*,
versus EBITDA of $148 million, before such items and an
antitrust reserve adjustment*, for 2004.

-- Income before special items* was $44 million, or $0.43 per
diluted share, the same as 2004.

-- Free cash flow before antitrust and restructuring payments*
improved $31 million, to a negative $28 million from a
negative $59 million for 2004.

Craig Shular, chief executive officer of GTI, commented, "In 2005,EAF steel production was virtually flat versus 2004. Although 2005annual EAF steel production was lower than originally expected,graphite electrode customers took their full contracted volumes for2005, which resulted in higher customer electrode inventory levelsgoing into 2006."

* Non-GAAP financial measures. See attached reconciliations.

Synthetic Graphite Segment

(Graphite electrodes, cathodes and advanced graphite materials)

The synthetic graphite segment had net sales of $222 million inthe 2005 fourth quarter as compared to $207 million in the 2004 fourthquarter. The increase was primarily due to higher prices for graphiteelectrodes, partially offset by lower sales volume and the negativeimpact of currency exchange rates. Graphite electrode sales volume was57.9 thousand metric tons in the 2005 fourth quarter as compared to59.9 thousand metric tons in the same period in 2004.

Gross profit for the synthetic graphite segment was $64 million inthe fourth quarter of 2005, 26 percent higher than in the same periodin 2004. The increase in gross profit was primarily due to highergraphite electrode net sales, partially offset by increased productioncosts, mainly from increases in raw material and energy costs. Grossmargin was 28.8 percent in the 2005 fourth quarter as compared to 24.6percent in the 2004 fourth quarter.

Other Segment

(Natural graphite (AET), carbon electrodes and refractories)

Net sales for GTI's other segment was $25 million in both the 2005fourth quarter and the 2004 fourth quarter. A decrease in sales ofcarbon refractory products was largely offset by an increase in ETMsales of approximately $1 million. Gross profit was $4 million, or16.6 percent of net sales, in the 2005 fourth quarter as compared to$6 million, or 22.8 percent of net sales, in the 2004 fourth quarter.The decline was due to the negative effects of changes in product mixand increased energy and other production costs.

ETM Highlights

GTI's Advanced Energy Technology subsidiary was awarded Frost andSullivan's 2005 Award for Excellence in Technology for the successfuldevelopment and commercialization of innovative high tech materials.It also recognizes the overall technical excellence of a company andits commitment to technology innovation.

During the 2005 fourth quarter, GTI's ETM solutions were approvedfor use in three new applications, including the first approval foruse of its eGRAF(R) SpreaderShield(TM) natural graphite family ofmaterials in a smart phone application. Smart phones are a growingsegment of the new generation cell phone market, capitalizing on thegrowing trend of convergence of multiple functions in cell phones.

GTI also received its first approval for the use of its ETMmaterials in a micro projector application, and its second approval inthe ruggedized laptop segment, during the 2005 fourth quarter. Mr.Shular stated, "Efficient thermal management in electronic devices isa major challenge for manufacturers. Our ETM materials and solutionsaddress this challenge, and at the same time enable electronic devicemanufacturers to capitalize on the growing trend of miniaturizationand increased power in a more cost efficient manner."

Corporate

Selling, general and administrative and research and developmentexpenses were $29 million in the 2005 fourth quarter as compared to$25 million in the 2004 fourth quarter. The increase was primarily dueto a $1 million increase in research and development expense tosupport growth in the company's ETM product line, and a $2 millionincrease in administrative expense, including $1 million of expenserelated to restricted stock granted to GTI employees during 2005 aspart of the company's long term incentive program. The company expectsto recognize about $3.3 million of restricted stock expense in 2006related to that grant. The company realized an increase of $1 millionof other administrative expense.

Other expense, net, was $4 million in the 2005 fourth quarter,primarily as a result of the negative impact of changes in currencyexchange rates on the company's euro-denominated inter-company loans.

During the 2005 fourth quarter, GTI recorded a net restructuringcharge of $9 million related to its previously announced productivityand cost savings program. The company also recorded a $3 millioncharge related to the impairment of its long-lived carbon electrodefixed assets in Columbia, Tennessee. The company's carbon electrodeproduct line is facing significant production cost increases andpricing pressure. Given the recent performance of, and outlook for,its carbon electrode product line, GTI has been exploring strategicalternatives for this product line. The company now expects tocompletely exit these operations over the next 12 months. GTI expectsto record closure expenses of approximately $2 million in 2006 and $3million in 2007. 2005 net sales of carbon electrodes were $36 million,with slightly negative earnings before interest and taxes. GTI hasproduced carbon electrodes in Columbia, Tennessee for almost 70 years.Carbon electrodes are used primarily in the production of siliconmetal, which is used in the manufacture of aluminum.

Interest expense was $14 million in the 2005 fourth quarter ascompared to $12 million in the 2004 fourth quarter, primarily due tohigher interest rates and higher average borrowings.

Provision for income tax expense was $166 million in 2005 ascompared to $46 million in 2004. GTI recorded a $150 million netnon-cash charge in the 2005 fourth quarter to increase the valuationallowance against its U.S. deferred income tax assets. An increase tothe valuation allowance was determined to be appropriate in accordancewith Statement of Financial Accounting Standards No. 109. Thisadjustment does not affect the company's ability to utilize thedeferred income tax assets to reduce future income taxes of its U.S.tax paying companies, and does not impact any existing financialcovenants or any other provisions of GTI's existing credit or debtagreements. The majority of these tax assets represent existing andestimated excess foreign tax credits that have extensive remaininguseful lives. Of the existing excess foreign tax credit carryforwards, none will expire prior to the end of 2010; specifically, $1million will expire at the end of 2010, $17 million in 2011, $37million in 2012, $2 million in 2013 and $9 million in 2015. Theremaining U.S. deferred tax assets primarily represent temporarydifferences or other actual and estimated credits that ultimately havea life in excess of ten years.

The effective income tax rate in 2005, excluding the adjustmentdescribed above and other special charges, was 38 percent. GTIestimates an effective 2006 book income tax rate of 37 to 40 percentand an effective 2006 cash income tax rate of 32 to 35 percent.

Free cash flow before antitrust and restructuring payments* was$16 million in the 2005 fourth quarter, an increase of $31 millionfrom the 2004 fourth quarter, primarily due to improved cash flow fromoperations. The company paid $2 million of restructuring and $5million of antitrust related payments in the 2005 fourth quarter.

Outlook

Mr. Shular commented on the outlook stating, "GTI expects globaleconomic conditions to remain relatively stable in 2006, with globalEAF steel production growth of approximately three percent. On thecost front, significant price increases in petroleum based rawmaterials and energy are expected to continue to put pressure on ourcosts. To combat these cost pressures, we have secured firm pricingfor 70 to 75 percent of our graphite electrode production costs. Weanticipate holding graphite electrode production cost increases to the10 to 12 percent range."

Consistent with prior years, GTI expects graphite electrode volumein the first quarter of 2006 to be the lowest quarter of the year withanticipated volume of approximately 40 thousand metric tons. The lowvolume quarter is due to customers taking full contract volumes in the2005 fourth quarter at lower 2005 prices, contributing to a build oftheir graphite electrode inventories at year end 2005. Graphiteelectrode volume is expected to recover in the second quarter of 2006,resulting in graphite electrode sales volume for the first half of2006 that is expected to be similar to the first half of 2005.

For 2006, GTI expects:

-- Relatively stable global and regional economic conditions;

-- Net sales of graphite electrodes to increase about 15 percent;

-- Net sales of ETM products of $30 million;

-- Graphite electrode sales volume of about 210 to 215 thousand metric tons;

-- Graphite electrode production cost increase of about 10 to 12 percent;

-- Non-graphite electrode gross profit growth of about $6 to $8 million;

-- Combined selling, general and administrative and research and development expenses to be about $108 to $110 million;

-- Net interest expense to increase to about $58 million, due to higher average interest rates and higher average borrowings;

-- The effective book tax rate to be between 37 percent and 40 percent;

-- Capital expenditures to be approximately $45 million;

-- Depreciation expense of approximately $40 million;

-- Restructuring costs to be largely offset by asset sales;

-- Free cash flow before antitrust and restructuring payments* to be about $10 million.

* Non-GAAP financial measures. See attached reconciliations.

In conjunction with this earnings release, you are invited tolisten to our earnings call being held today at 11:00 a.m. EST. Thedial-in number is 800-218-8862 for domestic and 303-275-2170 forinternational. The conference call will be recorded and a replay willbe available for 72 hours following the call by dialing 800-405-2236for domestic and 303-590-3000 for international, pass code 11052941#.If you are unable to listen to the call or replay, the call will bearchived and available for replay within two days of the originalbroadcast on our website at www.graftech.com under the InvestorRelations section.

GrafTech International Ltd. is one of the world's largestmanufacturers and providers of high quality synthetic and naturalgraphite and carbon based products and technical and research anddevelopment services, with customers in 80 countries engaged in themanufacture of steel, aluminum, silicon metal, automotive products andelectronics. We manufacture graphite electrodes and cathodes, productsessential to the production of electric arc furnace steel andaluminum. We also manufacture thermal management, fuel cell and otherspecialty graphite and carbon products for, and provide services to,the electronics, power generation, semiconductor, transportation,petrochemical and other metals markets. We operate 13 state of the artmanufacturing facilities strategically located on four continents.GRAFCELL(R), GRAFOIL(R), and eGRAF(R) are our registered trademarks.For additional information on GrafTech International, call302-778-8227 or visit our website at www.graftech.com. For additionalinformation on our subsidiary, Advanced Energy Technology Inc., call216-529-3777 or visit our website at www.graftechaet.com.

NOTE ON FORWARD-LOOKING STATEMENTS: This news release and relateddiscussions may contain forward-looking statements about such mattersas: economic conditions; production and sales of products thatincorporate or are produced using our products; prices and sales ofand demand for our products; strategic plans and business projects;asset sales; deleveraging activities; operational and financialperformance; costs; working capital; revenues; debt levels; cashflows; cost savings and reductions; margins; earnings and growth. Wehave no duty to update these statements. Actual future events,circumstances, performance and trends could differ materially fromthose set forth in these statements due to various factors, including:changes in economic conditions or product end market conditions;non-occurrence of anticipated EAF steel production capacity additions;graphite electrode manufacturing capacity increases; failure ofincreased EAF steel production or stable graphite electrode productionto result in stable or increased graphite electrode demand, prices orsales volumes; economic or technological developments adverselyaffecting growth of graphite cathodes in aluminum smelting;non-occurrence of anticipated aluminum smelting capacity additions;increased cathode production by competitors; failure of increasedaluminum production or stable cathode production to result in stableor increased cathode demand, prices or sales volume; differencesbetween actual graphite electrode prices and spot or announced prices;consolidation of steel and aluminum producers; absence of successfuldevelopment and commercialization of new or improved products orsubsequent displacement thereof by other products or technologies; toexpand manufacturing capacity to meet growth in demand, if any;inability to protect our intellectual property rights or infringementof intellectual property rights of others; unanticipated developmentsin antitrust investigations or lawsuits or other litigation;non-realization of price increases or adjustments; non-realization ofanticipated benefits from organizational changes and restructurings;significant changes in our provision for income taxes and effectiveincome tax rate; unanticipated developments relating to health, safetyor environmental compliance or remediation obligations or liabilitiesto third parties, labor relations, raw materials or energy; changes inmarket prices of our securities that affect deleveraging plans;changes in interest or currency exchange rates, competitive conditionsor inflation; changes in appropriation of government funds or failureto satisfy conditions to government grants; changes in performancethat affect financial covenant compliance or funds available forborrowing; failure to achieve earnings or other estimates; businessinterruptions adversely affecting our ability to supply our products;possible changes in preliminary reported financial information inconnection with completion of the year-end audit process; and otherrisks and uncertainties, including those detailed in our SEC filings,as well as future decisions by us. This news release does notconstitute an offer or solicitation as to any securities. Referencesto street or analyst earnings estimates mean those published by FirstCall.

GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
(Unaudited)


At December 31,
---------------------
2004 2005
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 23,484 $ 5,968
Accounts and notes receivable, net of allowance
for doubtful accounts of $4,001 at December
31, 2004 and $3,132 at December 31, 2005 205,981 184,580
Inventories 225,104 255,038
Prepaid expenses and other current assets 24,883 14,101
---------- ----------
Total current assets 479,452 459,687
---------- ----------

Property, plant and equipment 1,131,220 1,086,393
Less: accumulated depreciation 752,768 724,196
---------- ----------
Net property, plant and equipment 378,452 362,197
Deferred income taxes 152,539 12,103
Goodwill 22,895 20,319
Other assets 34,480 32,514
---------- ----------
Total assets $1,067,818 $ 886,820
========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable $ 85,889 $ 92,192
Short-term debt 644 405
Accrued income and other taxes 38,162 24,826
Other accrued liabilities 98,802 96,990
---------- ----------
Total current liabilities 223,497 214,413
---------- ----------
Long-term debt:
Principal value 655,242 694,893
Fair value adjustments for hedge instruments 14,593 7,404
Unamortized bond premium 1,611 1,446
---------- ----------
Total long-term debt 671,446 703,743
---------- ----------
Other long-term obligations 149,462 107,704
Deferred income taxes 46,259 43,669
Commitments & contingencies -- --
Minority stockholders' equity in consolidated
entities 30,126 26,868
Stockholders' deficit:
Preferred stock, par value $.01, 10,000,000
shares authorized,
none issued -- --
Common stock, par value $.01, 150,000,000
shares authorized, 100,520,240 shares issued
at December 31, 2004 and, 100,821,434 shares
issued at December 31, 2005 1,017 1,023
Additional paid-in capital 941,075 944,581
Accumulated other comprehensive loss (276,465) (311,429)
Accumulated deficit (626,307) (751,487)
Less: cost of common stock held in treasury,
2,451,035 shares at December 31, 2004 and
2,455,466 shares at December 31, 2005 (85,583) (85,621)
Less: common stock held in employee benefit
and compensation trusts, 522,732 shares at
December 31, 2004 and 518,301 shares at
December 31, 2005 (6,709) (6,644)
---------- ----------
Total stockholders' deficit (52,972) (209,577)
---------- ----------
Total liabilities and stockholders' deficit $1,067,818 $ 886,820
========== ==========





GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)



For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2004 2005 2004 2005
--------- ---------- --------- ----------

Net sales $231,889 $ 247,263 $847,701 $886,699
Cost of sales 175,263 179,025 638,186 654,342
--------- ---------- --------- ----------
Gross profit 56,626 68,238 209,515 232,357

Research and development 1,979 2,340 8,040 9,437
Selling, administrative and
other expenses 22,708 26,400 89,369 100,439
Other (income) expense, net 3,094 4,109 21,189 18,020
Restructuring charges (1,825) 9,335 (548) 9,729
Impairment loss on long-lived
and other assets - 2,904 - 2,904
Antitrust investigations and
related lawsuits and claims - - (10,901) -
Interest expense 11,765 14,299 39,178 52,716
Interest income (309) (704) (1,161) (1,200)
--------- ---------- --------- ----------
37,412 58,683 145,166 192,045
--------- ---------- --------- ----------

Income from continuing
operations before provision
for income tax and minority
stockholders' share of
income 19,214 9,555 64,349 40,312
Provision for income taxes 9,895 157,337 46,310 165,813
--------- ---------- --------- ----------
Net income of consolidated
entities before minority
stockholders' share of
income 9,319 (147,782) 18,039 (125,501)
Less: Minority stockholders'
share of income (loss) 459 182 998 (321)
--------- ---------- --------- ----------

Net income $ 8,860 $(147,964) $ 17,041 $(125,180)
========= ========== ========= ==========

Basic income (loss) per
common share:

Net income (loss) per
share $ 0.09 $ (1.51) $ 0.18 $ (1.28)
========= ========== ========= ==========

Weighted average common
shares outstanding (in
thousands) 97,523 97,808 96,548 97,689
========= ========== ========= ==========

* Diluted income (loss) per
common share:

Net income (loss) per
share $ 0.09 $ (1.51) $ 0.17 $ (1.28)
========= ========== ========= ==========

Weighted average common
shares outstanding (in
thousands) 98,718 97,808 98,150 97,689
========= ========== ========= ==========

* Diluted income (loss) per share includes the effect of the company's
contingently convertible debt on an "as converted basis" for all
periods presented in accordance with Emerging Issue Task Force Issue
04-8, "The Effect of Contingent Convertible Debt on Diluted Earnings
Per Share" which was effective for reporting periods ending after
December 15, 2004. The shares underlying our debenture were excluded
from the if-converted method for the three months and year ended
December 31, 2004 and the three months and year ended December 31,
2005, as the effect would be anti-dilutive.






GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

Three Months Twelve Months
Ended Ended
December 31, December 31,
-------------------- ----------------------
2004 2005 2004 2005
-------- ----------- ---------- -----------
Cash flow from operating
activities:
Net income (loss) $ 8,860 $( 147,964) $ 17,041 $( 125,180)
Non-cash charges
(credits) to net
income (loss):
Depreciation and
amortization 9,255 9,317 35,459 36,926
Deferred income taxes - 149,625 26,582 154,819
Change in antitrust
reserve - - 1,260 (119)
Restructuring charges (1,825) 9,335 (548) 9,729
Impairment - 2,904 - 2,904
Loss on exchange of
common stock for
senior notes - - 5,682 -
Interest expense 364 281 (2,159) 1,596
Post retirement plan
changes, net (1,759) (3,131) (10,341) (14,000)
Gain on sale of
assets - (210) (2,847) (748)
Fair value
adjustments on
interest rate caps 503 6 3,827 652
Make whole
adjustment (mark (1,630) 144 (2,475) (2,702)
to market)
Other non-cash
charges (credits) (12,537) 2,368 1,143 16,904

Working capital * 25,176 10,296 (167,068) (59,902)
Increase Long-term
assets and liabilities (17,252) (3,045) (37,822) (10,923)
-------- ----------- ---------- -----------
Cash flow from (used
for) operating
activities 9,155 29,926 (132,266) 9,956
-------- ----------- ---------- -----------

Investing
Capital expenditures (28,049) (11,873) (59,117) (48,071)
Patent capitalization 199 (231) (298) (797)
Cost of interest rate
swap** - (6,109) - (14,800)
Purchase/sale of
derivative instruments (1,393) 117 (2,486) 1,913
Proceeds from sale of
assets 94 550 5,591 1,374
-------- ----------- ---------- -----------
Cash flow used for
investing (29,149) (17,546) (56,310) (60,381)
-------- ----------- ---------- -----------

Financing
Cash received from
exercise of stock
options 341 - 7,843 -
Short-term debt 17 (1,151) (780) (86)
Long-term revolving
credit facility
borrowings - 48,648 - 171,138
Long-term revolving
credit facility
(reductions) - (59,410) - (131,562)
Long-term debt
borrowings - 306 225,000 306
Long-term debt
reductions (15,324) (338) (44,571) (338)
Financing costs - (474) (7,355) (5,241)
Premium on purchase
of senior notes (3,531) - (3,531) -
-------- ----------- ---------- -----------
Cash flow from (used
for) financing (18,497) (12,419) 176,606 34,217
-------- ----------- ---------- -----------

Changes in cash and cash
equivalents (38,491) (39) (11,970) (16,208)
Currency translation
effect on cash 657 195 1,448 (1,308)
Cash and cash equivalents-
beginning of period 61,318 5,812 34,006 23,484
-------- ----------- ---------- -----------
Cash and cash
equivalents-end of
period $23,484 $ 5,968 $ 23,484 $ 5,968
======== =========== ========== ===========

Supplemental cash flow
information:
Net cash paid during
the year for:
Interest expense 758 (68) 39,052 43,547
======== =========== ========== ===========
Income taxes - 4,483 11,967 28,183
======== =========== ========== ===========

Non-cash operating,
investing, and financing
activities:
Exchange of common
stock for senior notes - - 35,000 -
-------- ----------- ---------- -----------
Common stock issued to
employee benefit 353 392 1,572 1,622
-------- ----------- ---------- -----------

* Net changes in working
capital by component:
Accounts receivable (10,385) (23,934) (21,642) (2,174)
Effect of factoring
of accounts receivable - 8,508 (44,658) 13,095
Inventories 378 (3,551) (6,276) (45,430)
Prepaid expenses and
other current assets 360 3 (1,018) (1,018)
Antitrust
investigations and
related lawsuits and
claims (3,273) (4,500) (83,480) (16,900)
Increase (decrease) in
payables and accruals 40,047 35,694 6,859 (805)
Restructuring payments (1,951) (1,924) (16,853) (6,670)
-------- ----------- ---------- -----------
Working capital $25,176 $ 10,296 $(167,068) $ (59,902)
======== =========== ========== ===========

** The company has revised its consolidated statement of cash flows to
attribute cash flows associated with interest rate swaps to cash flow
used for investing from cash flow used for financing activities.




GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
SEGMENT DATA SUMMARY
(Dollars in thousands)
(Unaudited)


Q4 Year Q4 Year
2004 2004 2005 2005
--------- --------- --------- ---------
NET SALES:
----------
Synthetic Graphite $206,738 $752,436 $222,412 $784,148
Other 25,152 95,265 24,850 102,551
--------- --------- --------- ---------
Total $231,890 $847,701 $247,262 $886,699

GROSS PROFIT:
-------------
Synthetic Graphite $50,900 $186,854 $64,126 $210,928
Other 5,726 22,661 4,113 21,429
--------- --------- --------- ---------
Total $56,626 $209,515 $68,239 $232,357

GROSS PROFIT MARGIN:
--------------------
Synthetic Graphite 24.6% 24.8% 28.8% 26.9%
Other 22.8% 23.8% 16.6% 20.9%
--------- --------- --------- ---------
Total 24.4% 24.7% 27.6% 26.2%
--------- --------- --------- ---------




RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)


Net Income and Earnings Per Share Reconciliation
------------------------------------------------

Three Months Three Months
Ended Ended
December December
31, 2004 31, 2005
------------ ------------
Net income (loss) of $0.09 and ($1.51) per
diluted share, respectively $8,860 $(147,964)
Adjustments, net of tax:
Restructuring and impairment (1,792) 8,652
Antitrust reserve adjustment 28 -
Special non-cash tax charge 2,786 152,643
------------ ------------
Income after adjustments $9,882 $13,331
------------ ------------
Plus: Other (income) expense, net, net of
tax 1,840 2,547
------------ ------------
Income after adjustments and other (income)
expense, net $11,722 $15,878
------------ ------------
Less: Interest benefit from accelerated
amortization of gains on interest rate
swaps, net of tax (772) -
------------ ------------
Income before restructuring, impairment,
gain on sale of discontinued operations,
antitrust reserve adjustment, special tax
charge, other (income) expense, net and
interest benefit from accelerated
amortization of gains on interest rate
swaps of $0.11 and $0.15 per diluted share,
respectively $10,950 $15,878
============ ============





RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)

Net Income and Earnings Per Share Reconciliation
------------------------------------------------

Year ended Year Ended
December December
31, 2004 31, 2005
------------ ------------
Net income of $0.17 and ($1.28) per diluted
share, respectively $17,041 $(125,180)
Adjustments, net of tax:
Restructuring and impairment (802) 8,968
Antitrust reserve adjustment (11,359) -
Special non-cash tax charge 28,236 149,116
------------ ------------
Income after adjustments $33,116 $32,904
------------ ------------
Plus: Other (income) expense, net, net of
tax 13,526 11,272
------------ ------------
Income after adjustments and other (income)
expense, net $46,642 $44,176
------------ ------------
Less: Interest benefit, net, from
accelerated amortization of gains on
interest rate swaps, net of tax (2,850) -
------------ ------------
Income before restructuring, impairment,
antitrust reserve adjustment, other
(income) expense, net, and interest benefit
from accelerated amortization of gains on
interest rate swaps of $0.43 and $0.43 per
diluted share, respectively $43,792 $44,176
============ ============

The non-GAAP earnings per diluted share include 13.6 millionshares underlying our contingently convertible debt and excludeapproximately $5 million ($3 million after tax) of convertibledebenture interest expense.

NOTE ON RECONCILIATION OF EARNINGS DATA: Income (loss) excludingthe items mentioned above is a non-GAAP financial measure that GTIcalculates according to the schedule above, using GAAP amounts fromthe Consolidated Financial Statements. GTI believes that the excludeditems are not primarily related to core operational activities. GTIbelieves that income (loss) excluding items that are not primarilyrelated to core operational activities is generally viewed asproviding useful information regarding a company's operatingprofitability. Management uses income (loss) excluding these items aswell as other financial measures in connection with itsdecision-making activities. Income (loss) excluding these items shouldnot be considered in isolation or as a substitute for net income(loss), income (loss) from continuing operations or other consolidatedincome data prepared in accordance with GAAP. GTI's method forcalculating income (loss) excluding these items may not be comparableto methods used by other companies.

NOTE ON RECONCILIATION OF EARNINGS, EBITDA, CASH FROM OPERATIONS,FREE CASH FLOW AND NET DEBT GUIDANCE DATA: Earnings, EBITDA, cash fromoperations, free cash flow and net debt guidance is provided on a GAAPbasis assuming that changes in interest rates will be the same ascurrent market expectations of future LIBOR rates, assuming no changein currency exchange rates and excluding other (income) expense, net.GTI does not forecast changes in currency exchange rates. Changes inthese rates can affect such items as net sales and cost of sales (ineach case as translated into dollars) and other (income) expense, net,due to among other things, re-measurement of currency gains and losseson intercompany loans or mark-to-market adjustments on interest rateswaps and caps. To the extent that an item, that would be excluded,has been recorded in a prior period and that prior period is includedin a forecast period, the recorded item is reflected for the entireforecast period at the same amount at which it was recorded in theprior period. In addition, such guidance is subject to the risks anduncertainties described under the Note on Forward-Looking Statements.

In the 2004 fourth quarter, the Emerging Issues Task Force reacheda final consensus that the diluted effect of contingently convertibledebt must be considered in calculating dilutive earnings per shareregardless of whether the triggering contingency has been satisfied.For GTI, this accounting change results in the addition of 13.6million common shares to the shares outstanding. Accordingly, dilutedper share earnings outlook for 2006 is based upon 112.6 millionweighted average shares outstanding for the full year. Note that thediluted earnings per share outlook also excludes the interest expenseon the contingently convertible debt of $5 million ($3 million aftertax) in accordance with accounting literature effective December 15,2004.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)

EBITDA Reconciliation
---------------------
Q4 2004 2004 Year Q4 2005 2005 Year
-------- --------- ---------- ----------
Net income (loss) $8,860 $17,041 $(147,964) $(125,180)

Add back:
---------
Minority stockholders' share
of income 459 998 182 (321)
Provision for (benefit from)
income taxes 9,895 46,310 157,337 165,813
Interest expense 11,765 39,178 14,299 52,716
Interest income (309) (1,161) (704) (1,200)
Depreciation and amortization 9,255 35,459 9,317 36,926
-------- --------- ---------- ----------
EBITDA $39,925 $137,825 $32,467 $128,754
Antitrust investigations and
related lawsuits and claims - (10,901) - -
Restructuring & impairment
losses on long-lived and
other assets (1,825) (548) 12,239 12,633
Other (income) expense, net,
included above 3,094 21,189 4,109 18,020
-------- --------- ---------- ----------
EBITDA before anti-trust
related charges,
restructuring and impairment
charges and other (income)
expense, net $41,194 $147,565 $48,815 $159,407
======== ========= ========== ==========
EBITDA before anti-trust
related charges,
restructuring and
impairment charges and
other (income) expense,
net, as a percent
of net sales 17.8% 17.4% 19.7% 18.0%
======== ========= ========== ==========





RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in millions, except per share data)
(Unaudited)

Reconciliation of Cash From Operations to Free Cash Flow
--------------------------------------------------------

Q4 2004 2004 Year Q4 2005 2005 Year
Cash flow provided by (used
for) operating activities $9,155 $(132,266) $29,926 $9,956
Less:
Change in accounts receivable
factoring - (44,658) 8,508 13,095
Capital expenditures 28,049 59,117 11,873 48,071
---------- ---------- -------- ---------
Free Cash Flow (18,894) (146,725) 9,545 (51,210)
---------- ---------- -------- ---------
Add back legacy payments
Antitrust investigations and
related lawsuits and claims,
net 3,273 71,317 4,500 16,900
Restructuring payments 1,951 16,853 1,924 6,670
---------- ---------- -------- ---------
Free Cash Flow before legacy
payments $(13,670) $(58,555) $15,969 $(27,640)
---------- ---------- -------- ---------

NOTE ON EBITDA, CASH FROM OPERATIONS AND FREE CASH FLOWRECONCILIATIONS: EBITDA, cash from operations and free cash flow arenon-GAAP financial measures that GTI currently calculates according tothe schedule above, using GAAP amounts from the Consolidated FinancialStatements. GTI believes that such non-GAAP financial measures aregenerally accepted as providing useful information regarding acompany's ability to incur and service debt and the productivity andcash generation potential of its ongoing businesses. Management usessuch non-GAAP financial measures as well as other financial measuresin connection with its decision-making activities. Such non-GAAPfinancial measures should not be considered in isolation or as asubstitute for net income (loss), cash flows from continuingoperations or other consolidated income or cash flow data prepared inaccordance with GAAP. GTI's method for calculating such non-GAAPfinancial measures may not be comparable to methods used by othercompanies and is not the same as the method for calculating EBITDAunder its senior secured revolving credit facility or its seniornotes.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
GRAFTECH INTERNATIONAL LTD. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)

Net Debt Reconciliation
-----------------------

12/31/04 12/31/05
Long-term debt $671,446 $703,743
Short-term debt 644 405
------------ -----------
Total debt $672,090 $704,148
Less:
Fair value adjustments for hedge instruments 14,593 7,404
Unamortized bond premium 1,611 1,446
Cash and cash equivalents 23,484 5,968
------------ -----------
Net debt $632,402 $689,330
============ ===========

NOTE ON NET DEBT RECONCILIATION: Net debt is a non-GAAP financialmeasure that GTI calculates according to the schedule above, usingGAAP amounts from the Consolidated Financial Statements. GTI excludesthe unamortized bond premium from its sale of $150 million aggregateprincipal amount of additional senior notes in May 2002 at a price of104.5% of principal amount. The premium received in excess ofprincipal amount is amortized to reduce interest expense over the termof the senior notes. GTI also excludes the fair value adjustments forhedge instruments, which includes interest rate swaps that have beenmarked-to-market and realized gains or (losses) on interest rateswaps. Realized gains on interest rates swaps (terminated hedgeinstruments) currently represent an increase to long-term debt on theConsolidated Balance Sheet of $7 million and will be amortized intothe Consolidated Statement of Operations as a reduction to interestexpense over the remaining life of the senior notes. GTI believes thatnet debt is generally accepted as providing useful informationregarding a company's indebtedness. Management believes net debtprovides meaningful information to investors to assist them to analyzeleverage. Management uses net debt as well as other financial measuresin connection with its decision-making activities. Net debt should notbe considered in isolation or as a substitute for total debt or totaldebt and other long term obligations calculated in accordance withGAAP. GTI's method for calculating net debt may not be comparable tomethods used by other companies and is not the same as the method forcalculating net debt under its senior secured revolving creditfacility. GTI does not forecast the fair value adjustment for hedginginstruments.