GRAFTECH INTERNATIONAL LTDEAF
GRAFTECH INTERNATIONAL LTD Income Taxes Disclosure
Income Taxes
Loss before income taxes was derived from the following sources:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | (88,252) | $ | (79,339) | $ | (111,821) | |||||||||||
| Foreign | (82,190) | (73,929) | (161,943) | ||||||||||||||
| Loss before income taxes | $ | (170,442) | $ | (153,268) | $ | (273,764) | |||||||||||
Income tax expense (benefit) consisted of the following:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | — | $ | — | $ | (1,268) | |||||||||||
| State and local | 273 | 153 | 1,139 | ||||||||||||||
| Foreign | 6,328 | 5,378 | 9,738 | ||||||||||||||
| Total current tax expense | 6,601 | 5,531 | 9,609 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 29,571 | (17,535) | (12,200) | ||||||||||||||
| State and local | 5,203 | (395) | (443) | ||||||||||||||
| Foreign | 8,018 | (9,704) | (15,480) | ||||||||||||||
| Total deferred tax expense (benefit) | 42,792 | (27,634) | (28,123) | ||||||||||||||
| Income tax expense (benefit) | $ | 49,393 | $ | (22,103) | $ | (18,514) | |||||||||||
With the adoption of ASU 2023-09, a reconciliation of income taxes for 2025 at the U.S. statutory rate to income tax expense follows:
| (dollars in thousands) | 2025 | |||||||
| Amount | % | |||||||
| Loss before income taxes | $ | (170,442) | ||||||
| U.S. federal tax at statutory rate | $ | (35,793) | 21.0 | % | ||||
| State and local income taxes, net of federal income tax effect | ||||||||
| Change in valuation allowance | 4,481 | (2.7) | % | |||||
| Other | 883 | (0.5) | % | |||||
| Foreign tax effects: | ||||||||
| Switzerland: | ||||||||
| Statutory tax rate difference between U.S. and Switzerland | 6,223 | (3.7) | % | |||||
| Changes in valuation allowance | 20,274 | (11.9) | % | |||||
| Investment impairment in subsidiaries | (1,905) | 1.1 | % | |||||
| Other | 50 | — | % | |||||
| Other foreign jurisdictions | 7,933 | (4.6) | % | |||||
| Change in valuation allowance | 47,232 | (27.7) | % | |||||
| Other permanent items | 15 | — | % | |||||
| Effective tax rate | $ | 49,393 | (29.0) | % | ||||
Prior to the adoption of ASU 2023-09, a reconciliation of income taxes for 2024 and 2023 at the U.S. statutory rate to income tax benefit follows:
| (dollars in thousands) | 2024 | 2023 | |||||||||
| U.S. federal tax at statutory rate | $ | (32,190) | $ | (57,490) | |||||||
| Impact of U.S. Tax Cuts and Jobs Act of 2017 - GILTI | 195 | 1,041 | |||||||||
| Impact of Tax Receivable Agreement | (26) | 91 | |||||||||
| Valuation allowance | 10,396 | (282) | |||||||||
| State taxes, net of federal tax benefit | (10,054) | 818 | |||||||||
| U.S. tax impact of foreign earnings (net of foreign tax credits) | 587 | 311 | |||||||||
| Establishment/resolution of uncertain tax positions | — | (36) | |||||||||
| Adjustment for foreign income taxed at different rates | 11,476 | 16,666 | |||||||||
| Foreign tax credits | — | (2,534) | |||||||||
| Impact of non-deductible goodwill impairment | — | 24,570 | |||||||||
| Other | (2,487) | (1,669) | |||||||||
| Income tax benefit | $ | (22,103) | $ | (18,514) | |||||||
Net cash paid (refunds received) for income taxes consisted of the following:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. Federal | $ | — | $ | (2,944) | $ | — | |||||||||||
| U.S. State and local | (384) | 1,124 | 1,588 | ||||||||||||||
| Foreign | 6,539 | 6,730 | 41,738 | ||||||||||||||
| Net cash paid for income taxes | $ | 6,155 | $ | 4,910 | $ | 43,326 | |||||||||||
Net cash paid for income taxes exceeded 5% of total net income tax paid in the following jurisdictions:
| (in thousands) | 2025 | ||||
| Foreign | |||||
| Brazil | $ | 725 | |||
| Germany | 382 | ||||
| Italy | 348 | ||||
| Mexico | 2,277 | ||||
| Spain | 1,589 | ||||
Switzerland(1) | 627 | ||||
| Other | 590 | ||||
(1) Includes Switzerland cantonal capital tax paid in lieu of income tax when losses occur.
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are set forth in the following table:
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Post-employment and other employee benefits | $ | 15,144 | $ | 15,240 | |||||||
| Operating losses | 50,976 | 39,908 | |||||||||
| Capital loss and foreign tax credit | 14,690 | 14,245 | |||||||||
| Disallowed interest carryforward | 43,079 | 27,529 | |||||||||
| Inventory adjustments | 6,601 | 4,936 | |||||||||
| Long-term contract option amortization | 781 | 845 | |||||||||
| Other | 4,529 | 4,618 | |||||||||
| Total gross deferred tax assets | 135,800 | 107,321 | |||||||||
| Less: valuation allowance | (92,200) | (19,308) | |||||||||
| Total deferred tax assets | 43,600 | 88,013 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | $ | 51,623 | $ | 50,247 | |||||||
| Goodwill and acquired intangibles | 7,364 | 6,676 | |||||||||
| Other | 426 | 1,922 | |||||||||
| Total deferred tax liabilities | 59,413 | 58,845 | |||||||||
| Net deferred tax (liability) asset | $ | (15,813) | $ | 29,168 | |||||||
At each reporting period, the Company assesses the need for valuation allowances against deferred tax assets and whether it is more likely than not that deferred tax benefits will be realized in each jurisdiction. Consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence include a strong earnings history, an event or events that would increase the Company's taxable income or reduce expenses, or tax planning strategies that would create the ability to realize deferred tax assets. Examples of negative evidence include cumulative losses in recent years or a history of tax attributes expiring unused. In circumstances where the negative evidence outweighs the positive evidence, the Company has established or maintained valuation allowances on the jurisdiction’s net deferred tax assets. However, the recognition of the valuation allowance does not limit the Company's ability to utilize these tax assets on a tax return in the future should taxable income be realized in sufficient amount to realize the assets.
At the end of the second quarter of 2025, the Company’s cumulative losses in the U.S. and Switzerland in recent years, when assessed with other positive and negative evidence, represented sufficient negative evidence to require full valuation allowances on its U.S. and Switzerland previously realizable deferred tax assets. As of December 31, 2025, the Company’s U.S. and Switzerland operations had valuation allowances recorded of $69.9 million and $20.3 million, respectively.
Valuation allowance activity for 2025, 2024 and 2023 is as follows:
| (in thousands) | |||||
| Balance as of December 31, 2022 | $ | 9,269 | |||
| Credited to income | (268) | ||||
| Translation adjustment | (45) | ||||
Balance as of December 31, 2023 | 8,956 | ||||
| Charged to income | 10,396 | ||||
| Translation adjustment | (44) | ||||
Balance as of December 31, 2024 | 19,308 | ||||
| Charged to income | 72,812 | ||||
| Translation adjustment | 80 | ||||
Balance as of December 31, 2025 | $ | 92,200 | |||
The increase in the valuation allowance in 2025 was primarily attributable to the full valuation allowances on the U.S. and Switzerland deferred tax assets, in amount of $51.7 million and $20.3 million respectively. The increase in the valuation allowance in 2024 was primarily attributable to generating additional state net operating and capital losses during the year that we may not be able to utilize.
As of December 31, 2025, the Company had a total foreign tax credit carryforward of $4.9 million. These tax credit carryforwards begin to expire in 2027. In addition, the Company had state net operating and capital loss carryforwards of $332.0 million (net of federal benefit), which can be carried forward from five to 20 years. These state carryforwards resulted in a deferred tax asset of $20.9 million as of December 31, 2025. The Company also has U.S. state tax credits of $0.2 million as of December 31, 2025. The Company's U.S. interest limitations and federal loss carryforwards on a gross basis were $202.2 million and $13.3 million, respectively, as of December 31, 2025. These carryforwards do not expire. The Company’s foreign loss carryforwards on a gross basis were $218.8 million, primarily attributable to losses in Switzerland, which can be carried forward for seven years. Nevertheless, the Company recorded full valuation allowances against its deferred tax assets in the U.S. and Switzerland.
As of December 31, 2025 and 2024, the Company had no unrecognized tax benefits, and we do not expect there will be new unrecognized tax benefits within 12 months. No amounts of accrued interest or penalties have been recorded as of December 31, 2025 or 2024.
The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2022 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. Other jurisdictions are generally closed for years prior to 2020.
As of December 31, 2025, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $1.0 billion. Because $1.0 billion of such earnings have previously been subject to taxation by way of the transition tax on foreign earnings required by the Tax Cuts and Jobs Act of 2017, as well as the current and previous years’ GILTI inclusion, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of GrafTech's foreign investments would generally be limited to foreign withholding and state taxes. The Company intends, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet future U.S. cash needs.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 14, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.