Good morning. My name is Brooke and I will be your conference operator today. At this time, I would like to welcome everyone to the Graftech second quarter 2012 earnings call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the call over to your host, Kelly Taylor. Ma’am, you may begin.

Thank you, Brooke. Good morning and welcome to Graftech International’s second quarter 2012 conference call. On the call today is Graftech’s Chief Executive Officer, Craig Shular and our Chief Financial Officer, Lindon Robertson. We issued our earnings release this morning. If you did not receive a copy, please contact [Marie Nor] at 216-676-2160 and she’ll be happy to fax or email a copy to you. As a reminder, some of the matters discussed during this call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Please note the cautionary language about our forward-looking statements contained in our press release. That same language applies to this call. Also, to the extent that we discuss any non-GAAP financial measures, you will find reconciliations in our press release, which is posted on our website at www.graftech.com in the Investor Relations Section. For your reference, a replay of the call is available on our website. At this time, I’d like to turn the call over to Craig.

Thank you, Kelly. Good morning to everyone, and thank you for joining Graftech’s call today. We will take you through our second quarter highlights and then open it to questions. In Q2, sales were $316 million, down 1% versus a year ago. EBITDA increased 11% to $67 million. Net debt came in it at $597 million, up largely the result of our 10 million share buyback and increased working capital. During the second quarter, we repurchased 8.8 million shares and another 1.2 million in July at an average purchase price of $10.17. This completes our 10 million share buyback program that was announced in December of 2011. Upon completion, the Board of Directors approved a new share repurchase program for up to 10 million additional shares of common stock. With the recently completed 10 million share buyback program coupled with the 2 million shares that were repurchased in the fourth quarter last year, we have now bought back 8.2% of our outstanding shares. This underscores our commitment to delivering long-term sustainable value for our shareholders. Wrapping the second quarter highlights, as discussed in the last earnings call, our Seadrip production team has worked with scientists from our Engineered Solutions segment to develop a super-premium grade of needle coke. Seadrip has successfully commercialized this product and has begun sales to third parties. This development demonstrates our continued commitment to leverage our core competencies in graphite material science to grow our company by commercializing new products and technologies. While we do not anticipate these sales will be material to 2012 results, we are encouraged by the market acceptance and believe it will prove strategically valuable to our business in the future. Turning to the segments. Industrial Material sales were $260 million and operating income came in at $42 million, a $10 million…

(Operator Instructions). And your first question comes from Luke Folta with Jefferies.

First question, can you let us know where utilization rates were in the second quarter and you gave some full-year targets on what the graph at electrode utilization rate is going to be, 60% to 65%. Can you kind of just walk us through how that works on a quarterly basis and you know as far as shipments go, I know you are not going to disclose the level of shipments, but if you can just kind of walk us through how those move over the course of second half of the year, do they step down in the third quarter and they step back up in 4Q, how should we think about that?

Yeah just operating rates in Q2 as you recall, we finished up Q1 a little bit above 70% and in Q2 we started to throttle it down a little bit. So Q2 probably came in around 64% to 65% and it looks like the balance of the year, we will run about 65%. As far as the shipment pattern, you are right. Q3 will come down a bit. We have the normal EU summer holiday which is going to make that region even slower than it already is. And then Q4 we will have a pickup in the volumes and Luke, that is just the way our book is built. Our book looks exactly like that.

Given your second half expectation for production, does that include a potential, are you thinking about potentially idling a facility or you are going to keep everything running and just throttle back?

Well obviously in tough times like this, you look at everything. So I think it's premature to make any definitive calls, but for sure you can assume that we will be throttling back virtually everyone of our locations just to better serve our customers and have a better cost structure. So at this time I don’t see shutting one specific location down, but I think in these very volatile economic times you have to keep all alternatives open.

And in terms of pricing you talked about coming in maybe a little towards the lower end of the range, should we look at the second half as a bit lower from an average selling price standpoint than the first half?

Yeah, the very tail end of the book came in at a little lower price so I think when its all done everything we've seen obviously the book is pretty much done now, GE prices are probably up about 12% if you take out the currency impacts. So we will increase about 12% maybe a little bit more.

Okay and then just lastly and I will get back in line on needle coke, we've seen a pullback in oil prices since the peak of this year and I guess I just wanted to understand how you guys were thinking about needle coke next year, does, I mean, does the pullback in oil prices mean that needle coke prices have to go down next year or can you, are you thinking about a situation where maybe you can take advantage of that margin benefit by having your inputs go down but maybe keeping prices flat like they have been pretty much to the whole recession here?

Well, I think it's premature to talk about needle coke prices but if I just look at oil and decant oil and you go back when some of the price increases where initially targeted, we had oil that was at a much lower level, it was in the 70, so when you say its down, yes its down from the highs, but when I see oil at 88 and Brent over a 100, these are still high levels for oil. So I still see oil and decant inputs as being high and higher surely than what they were a year and a half ago in the marketplace.

Your next question comes from Ian Zaffino with Oppenheimer.

As far as your guidance, I mean is your guidance based on what you are seeing or is it really based on IMF and therefore cash. So is it kind of bottomed up or is it top down?

No, Ian it's based on what we see, obviously we work and sell in 70 countries. So it's based on what we see our interface with our customers which shops we are in everyday giving service and customer tech activity. So it's what we see in the geographies we operate in, it's what we hear from our customers, and so I think it’s a pretty close reality to the marketplace that we face today.

Okay, and at what point in the second quarter did you start to slow your production rates?

Well, we've been studying obviously let's say halfway through the quarter. We just saw no improvements in any of the economies, every economic data coming out was just worse than the prior one. So we started working on it, started to slowdown some of the facilities, and like I said well you will see some more of that from us and unfortunately we will probably have some more reductions in headcount just to reflect the realities of our customers’ demands and the markets we face.

Okay. And then could you talk about the inventory at the customer level, where they are, are they going to take that lower any of your stocking?

What we see right now and I think it's because of the environment our customers have been living in the last six plus months, they managed their inventories pretty tight. So I don't see a lot of excess electrodes in the supply chain right now, like anything it’s a function of how significant is the demand drop off. But I think our customer base has gone into these tough times with much leaner inventories than perhaps some other times. They are getting very good at it; I think everybody in the supply chain is getting better at it. So obviously if demand drops off significantly again they may have some excess inventory but right now one little bright spot is there is does not seem to be a lot of excess graphite electrodes other than a few one plant here, two plants here. It looks pretty lean.

Your next question comes from Arun Viswanathan with Longbow Research.

I guess my first question is needle coke, I think you spoke before about a 25% to 30% last call. Are you still looking at that as the annual kind of expectation?

Yes, Arun, the increase in needle coke is still 25% to 30%, that’s come right in that range. It’s coming quite good.

Okay, and then I guess just trying to understand the markets. So is there any reason to believe that you would potentially encounter the same situation that you did last year when (inaudible) delayed in setting some of the pricing and then you know, the electrode book also got delayed. I mean, if you could just help me understand what you see as far as how the next year negotiations will play out?

Yes, well, Arun, recall the delay at the end of last year coming to this year was the steel customers had a lot of graphite electrode inventories because the second half of last year slowed down so dramatically for them. So they had annual contracts as they always do and they got at the beginning of the year and then as we all recall, last year steel production kind of peaked in May or early June and then from then on had a very tough ride down. So what delayed the book building for this year was most of the steel customers around the world had excess inventories because it had steep drop off in steel demand in the second half of last year. So this year I think good news it looks like the trade does not have a lot of excess drop at electrodes but let me caution that again that’s just going to the demand picture is going to have a bearing on that. If demand continues kind of the way we see it now soft, well it looks like there won’t be a lot of excess out there, if it deteriorates further and things slowdown well yes we could have some excess electrodes at some places. Good news going into it looks pretty lean I mean everyone has kept their inventories very tight because the environment has been so uncertain for so many quarters now, so I think our customers have done good job keeping inventories quite lean in not just electrodes but other raw materials again driven by the large uncertainty in the global economies.

And then another question on engineered solutions. I know that you have kind of experienced weakness in the solar market and that’s likely not coming back may be you could help me understand how much of that you have replaced and where do you stand in kind of building the growth in that business?

Yes, Arun. You are right. We had built a tremendous solar business a lot of new products and technology, we have some premier products and solutions for the solar industry and then when that fell of dramatically the middle of last year yes we felt bad it was about 25% of engineered solutions sales. But as always engineered solutions has a portfolio of technologies and offerings to the marketplace and what we have is some of the advanced consumer electronic segments have continue to do well. They have a significant business in the smartphone sector in all of the readers. So all those new technology products coming out, you will often find that GrafTech has a solution in there. So that part of the business continues to grow large double digits. We have done very, very well and so now you have got into a point where that is kind of filled up the hole that solar slowdown caused but I will remind you of is there is a lot of installed solar already and there will be more to come and what I will remind you on we installed solar today, the products we sell in there are consumables and they get consumed in furnaces that make the solar silicon. So they have a very nice steady stream of replacement. So there will be a return of solar business that will come back to us down the road here it is part would be the replacements that just for the installed capacity that's out there that will be very good business for us and then as you see --

That is not depended on sorry on any kind of subsidies for ---

No that's installed now, that's running, that's an ongoing business that we get and like I said we have some spectacular products and solutions for that space. So many times we have the OEM business and some of those get consumed in 12, 18, 24 months depending on the furnace type and how the customer uses it. So that's a steady stream of replacement that will be increasingly coming back to us, and then lets not loose sight that the solar industry keeps improving its technologies and its efficiency in converting sun to energies that continues to get better and better. And so you see Japan in this last quarter announced a very large solar program that probably in another year or two we will start to see some very nice sales from that program and so I see solar is about probably going to be very soft this year. Next year I don't see a huge comeback, maybe the second half we will start to see some benefit from it, but when you get into 2014, we will have a lot of replacement business, steady replacement business will be very attractive to us and we will start getting new programs like the very large, I think it’s a $4 billion program that the Japanese Government has announced again trying to get away from their dependency on nuclear and get to a clean green energy renewable source.

So when we look at the guidance, I guess I can see that most of the variability is due to industrial materials right, not ES?

That's right. Most of it is just our steel portfolio; we have a tremendous steel portfolio, but in very tough economic times like this people and businesses and governments around the world, just are not going to commit to significant projects that involve steel. So you have a lot of players on the sideline. And then you have some large geographies like we talked to EU, just devastated, so there's very little going on in the steel arena right now. That's the big variability right there. And so that's our graphite electrodes business is slowing, our needle coke business is slowing so we are going to adjust our production platform there, take out some cost. And then on the ES which you have big picture, you have that solar hole that was created in the middle of last year when solar dropped off, but you have that now being replaced by some of the other growth opportunities that ES has and in fact they are starting to over run that with double digit growth. And then in ’13 and ’14 I think in ES you are going to see, you will see some solar come back, but you will see some other growth sectors also that engineered solutions has for us. So yeah, the variability right now is primarily ES; it’s primarily steel.

Okay, and just so I am clear, the 235 to 255, would you say that the low end of that is say running at 60 operating rate, not 65 and then running at only 10% pricing. Is that how we should look at or is there something I am not understanding there?

No. The pricing is pretty much put together. The books are pretty much put together. So GE prices are up a little over 12%, real price increase ex-currency; so that’s pretty much together. You can always have some customers that have some difficulties and you can loose an order, you can have some customers that get in financial difficulty and you don’t want to shift; right. So these are that tough times. We’ve had maybe four, five steel companies around the world, already declared bankruptcy, so kind of the weak, smaller ones are starting to get into some real trouble. Some are lacking LCs where we would like to prefer to have an LC. So you have that going on. So that can give you some volatility in volumes, but the pricing is pretty much. That’s all balanced in the book.

Your next question comes from Tim Hayes with Davenport.

A couple of questions; for your Seadrift operation, how much of your raw material cost increased say this year versus last year; I just want to get a reminder of how much that’s going up?

Well, I would point you towards kind of oil/decant oil. Decant oil of course tracks WTI here in the US quite closely. So if you look at Seadrift and really we want to look back a couple years because the price in needle coke hasn’t gone up for a couple of years. So if you go back, you know the last price increase before this one that we’re talking about the 25% to 30%, you go back, oil was back in kind of the low 70 a barrel, so when I look at oil and I see its 88 now and Brent is even above a 100 bucks, I see oil as still high and still expensive. So I still see cost pressure. So Tim, think of decant steadily going up for us over the last couple of years and at 88 bucks I still consider oil expensive and that’s our key raw material. So when you think of cost structure at Seadrift, think of decant, look at decant over a couple of year period and you are going to see pretty much, yeah there has been a lot of movement but the trend has been up from kind of low 70s to high 80s.

And have you started to do any booking on needle coke for 2013 over this recent uncertainty in the global economy is that still not, those discussions are have yet to occur?

Yeah, there has been no booking for 2013. I think market volatility has everything really on the sidelines. I think our customer base really just wrestling over the next six months. They’re just trying to finish up this year and uncertainty is so great, there is no activity at all yet on 2013.

Our next question comes from Philip Gibbs with KeyBanc Capital.

I don’t know if this is touched upon, but regarding Seadrift you talked a little bit about your utilizations in the electrode business. Did you talk about your utilization at Seadrift and what you expect there this year?

Yeah, I see Seadrift coming down here the second half. She is going to come down below 80% and I am just trying to get down to market realities and so we’re going to throttle that back down, help ourselves on the cost front, take some cost out, and I think that’s probably the right level with what we see and what's in our guidance here.

Okay. Did you operate above that level in the first half?

Yeah, we tended to operate 90% plus; remember in the second quarter we had some turnaround work; we had the normal annual turnaround, so Q2 was already overproduction for Seadrift, because of the regular maintenance we do and we shut it down for a number of weeks. So I think we have gone from let’s go over the last 12 months, 18 months we have gone from 90% plus out level there to under 80% just to reflect the realities of the global marketplace that we see.

Okay. And then regarding your price for raw material spreads at Seadrift, given what you have talked about already with the brands and decant oil pressures; are you looking for a spread and stability, spread and expansion, stable degradation what are you seeing this year relative to last?

Well spreads are up this year because of the price increase, so remember when it was 25%, 30% price increase spreads are better this year; premature to talk about next year. Like I said, I still view oil as 88 bucks versus where the economy is today; oil is expensive; I still view as high price and the trend for us the last few years is something that oil has been on the increase.

So just to remind you too that we participate in hedging as well, so in the fourth quarter we take a strong view as we can in terms of what our use of those raw materials will be and then what our sales equation will be. So we don’t leave the fourth quarter 100% hedged, but we do as much as we can based on the usage. So our cost equation with the hedge keeps us pretty stable through the current year and as Craig says, we wouldn’t foresee what’s going to happen in 2013, but we have a lot of stability through the year.

Okay and if I can shift over the ES real quick here on the consumer electronics piece of your portfolio seems like it is running well as you pointed out. How do we marry that against the view that lot of the consumer electronics supply chain has been for a lack of better terms in destocking mode over the last few months?

Absolutely that’s a risk; the smartphone segment though has continued to be very good; new readers, virtually every new reader that comes out, we have a very nice positioning and so it is just based that has tended to perform a much better in downturns; if I take you back to kind of ‘09 I think if you go back to that period the smartphone sales actually grew in 2009 when everything else was really falling apart in ’09. So there are segments of that that hold up quite nice and remember smartphones, there is a new generation literally every three months coming out and the beauty of that is the beauty in the challenge right. But our team has done a very good job with superior technology. They are very nimble and they have been able to serve these very tough, very large phone companies, technology companies, so that’s one sector within our total company that’s continued to perform nice in downturns. And that’s really what we try to do in some of the ES technology; being a steel company you face these cycles; we are very good at it, we know what to do. But engineered solutions provides us an opportunity to get our graphite material science into some segments that might help mute some of those big downturns and we’ve got unique solutions, a lot of it’s patent protected, so you put all that together. It’s a nice addition to a steel portfolio.

Okay, and just lastly here Lindon, how should we be thinking about your working capital trends here in the back half of the year?

Well, in this environment, we are balancing the little bit of softness with a production rates as Craig said, it clearly puts a little pressure on our working capital. We are trying to manage as prudently as we can. You've seen our guidance on the operating cash flow, that comprehends the EBITDA drop primarily and then we've given a little range on where we can manage the working capital. Some of that obviously is in the exercising of payables and receivables based on the business and part of that is on the inventory and I would say as clearly in our production rates signal, we are telling you that we are not going to need everything that we could be producing. So we are trying to manage that down, but we are dealing with that pressure.

(Operator Instructions) Your next question comes from Luke Folta with Jefferies.

So a question on CapEx. You know there was some pushout into next year, can you talk about what the big pieces are in this year’s CapEx number and kind of what's moved forward a bit?

Yeah, I will toss this over to Lindon, but big picture, you folks know us well. You've been through us through a number of these cycles. We are very good at managing through the cycle. We are very good at facing current reality, acknowledging it and moving quickly. And so you've seen our move so far this year to adjust our production platform, cut costs. Unfortunately we've had to have lay offs at every single location, hourly and salary to adjust to this, very, very tough. But our track record is, we move very quickly on this and CapEx is one of the other areas, we go very hard at in tough times.

So just to add a little to this. In this environment, as Craig said, we are just going to be as tough as we can on ourselves in terms of being conservative here, but at the same time, all the convictions at where we are seated at the right returns. So in a production environment, in this tweak you saw us bring our CapEx down by the way in the first quarter off of the original February guidance. And we told you that our growth CapEx is primarily in the ES space and that we have maintenance requirements across our business that we sustain. And I would tell you that in this last step down, we are attacking both. Partly it's going to be constraining some of the growth CapEx and the ES segment is going to be participating in some of that reduction and as these markets are more questionable, we are being more careful in terms of, well, equally careful, but always careful in terms of how we let go of that CapEx and we. And I think I have described at least in some investor circles here, we use milestones, we use milestones and we check those milestones and make sure that we are able to slow down or stop if we need to. Now that's a small tweak to the ES growth and at the same time we have our IM side. Looking at the maintenance in light of lower production rates, that where could we minimize some maintenance requirements. And so we feel very confident bringing this CapEx down into this range that we've given you. And as production picks up, I would expect the maintenance to go back up to the previous guidance, we've given.

In terms of the spending that goes to Engineered Solutions, can you talk about what sort of impact that's going to have on your market exposures there. I mean is a lot of the CapEx directed towards specific end market or the new end markets you are investing. Can you give us anything to help us understand how to think about that growth going forward?

The market such as the high end advanced consumer electronics will get pretty much all the capital we kind of expect at this year. So far that growth and the orders are holding up very, very nicely. But as Lindon said, we have it on a short leash. If we see a slowdown at different milestones, we reaccess each time, the smartphones still holding up, should we still invest or should we push out and delay three months and then reaccess. So all of our businesses have gone through that. All of them have had to contribute with lower CapEx. So that’s the process we’ve gone through Luke, some is definitely NAS, some of those they have grown very solidly like electronic thermal management are on milestones. So they’re getting their capital right now as long as that segment holds up, they’re going to continue to get 100% of it because we need that capability. It’s running at that good on an operating rate but if see a little falter in the demand there or phone uptakes or new smartphones, we literally will adjust that immediately, slowdown the CapEx, we don’t need it and then push that out of quarter or two quarters. So it’s very fluid and I think it’s just prudent in this environment. We’ve shown you many times in the troughs, how we move quickly. We usually move very, very fast by often ahead of a lot other companies but we’re so committed to be very, very strong balance sheet in downturns because in downturns we have seen strong companies in various industries can really outperform everybody else. The M&A opportunities for them abound, prices are cheap, share buyback opportunities abound, there is all of those if you have moved quickly you have got to maintain a great team and a great balance sheet, you can position your company to come out of a trough like that or difficult environments like we are in today even stronger than the competition. And that was our goal back when we had the crash in ‘08 and you saw us make four very, very good acquisitions back integrate the needle coke at very good acquisition prices. And depending on where this current economic environment leads us, we want to be very well positioned to deliver that. And I think that’s what you will see this team do whether it’s on M&A, internal growth like we are talking about right now in ES which has some great opportunities which also offset some of the cyclicality in steel and then also you have seen us buyback 8.2% of our outstanding shares. So we will evaluate all those and make the best call the best return for our shareholders and just continue to drive shareholder value over a sustainable period.

Lindon, can you talk about what the impact from currency was in the quarter and what your hedging strategy looks like these days?

Well, first just talk about the strategy itself. We on the currency side we look at our exposures in the various countries as you know Europe represents about 30% of our revenue. We also have operating plants in Europe both in Spain and France. So we have a natural hedge in our cost equation that we take in and factor first and then we look at balance of our exposure and then try to make sure we have covered, and so far currency has not hurt us and we don’t expect it to be and if you look in terms of the impact that just given it’s not an impact on our EBITDA to speak of our [IEM] side I would tell you that in the price you will see later in the queue it's about a three point hit on the currency side. So while in the second quarter, we will show you that we got a 13% price increase realized in the [IEM] space and by the way that's also on the electrodes specifically, there is just about a 3% drag down on the currency side.

But at this point you don’t have any currency hedges on?

No, we do have some hedges. In fact, in total we ended up with about a [penny] benefit in the quarter. Otherwise it is barely immaterial, that’s why I say between the natural hedge and the instruments that we have it's not a big factor.

So you see it Luke in the price, the Euro slips, you see some impact and when we look at real price increase you look at that but because we have got some natural hedges down when it gets down on the bottom line, there has been some offsets on the cost side and as Lindon said its pretty immaterial to us.

Okay and just last one guys following that Philips spin off, been of any change in what Philips has been doing on needle real coke as far as the service level or commercial aspects, have you noticed any kind of change there following that deal?

No, they are great competitors. They have very, very good products. They have been in the industry a lot of years. We are also a customer over there so they are very good supplier of needle coke. They do a great job.

Our next question comes from Charles Bradford with Bradford Research.

Looking at opportunities to reduce cost, are there any that come up from the new medical plan, because some of the local exchanges that are being contemplated would have pretty significant federal subsidies to reduce medical costs. Have you looked at any of that as a possibility?

Chuck, we have on the medical front obviously with the four new companies that we added over the last couple of years. We immediately integrated them into our low cost plan and then because we have more participants we are a larger business to take the marketplace. So we've gotten some nice synergies off of that. On top of that, we continue to evaluate all different local regional opportunities on this front in anyway we can. I have been very pleased with the way we've done medical plans. We early on years ago as part of our turnaround just got to current reality, we couldn’t afford those big [Cadillac] plans, so for 10 years now we've been in a very low cost motivated wellness program gym facilities, wellness centers at our plants, getting everyone involved in the medical cost game with deductibles or families are watching costs and managing the front end issues with preventive testing we provide for our teammates to try and catch something early, wellness programs and then to your point we also search every regional local program we can, internet shopping medical programs to reduce costs.

How many employees do you have in the US that would come under the Obama Care plan?

Well, when you say Obama Care, let me, our US plan the way we run it, we’re self insure, we manage our own program and we have kind of a basketball alternatives for our teammates. There is a bit over a 1,000 teammates in the US and there would a suite of alternatives with low deductible, up to a high deductible for our families. They would pick it; we would manage the risk internally, so everyone is highly motivated to be efficient with their medical costs, everyone is – we motivate everyone into wellness programs. We motivate folks into preventive testing, so there is rewards if you go and get your annual physical, you get a long list of preventive cast to catch something early. So we’ve done many things like this in addition to motivational programs to quit smoking; we have American Cancer Society; we have team bike rides; all source of things like this. And what they have done for us is they have gotten all of our teammates into the medical program, very conscious of what they are spending, very good at preventive testing and very strong participation in the wellness program. So our men look across the last 10 years have always run below the national average; our increases year-over-year have always been below the national increases and I want to say I may not have this exactly right, but in the last seven years I bet these three of the last seven years where we had zero increase to our US teammates year-over-year on medical cost, because the teams gets such a great job and what I am talking about. And so that’s the way we manage it here; it’s gone well and I have to thank the teammates and their families; we have made them all part of this medical incentive and program to be good at it. So Obama Care for us, we like a lot of companies, we know we’re on our own right, and so we’ve managed this and we’ve tried to drive a very efficient program to protect our families.

At this time there are no further questions. I will now turn the conference back to Craig Shular for closing remarks.

Thank you Brooke, and thank you all for participating in our call and I look forward to talking to you in November at the conclusion of our Q3. Thank you very much. Have a great day.

Thank you. This concludes the conference. You may now disconnect.