<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                       -----------------------------------

                                    FORM 10-K
(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 31, 1999

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER: 0-20490

                        THE CARBIDE/GRAPHITE GROUP, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                              25-1575609
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Code)
                         One Gateway Center, 19th Floor
                                 Pittsburgh, PA
                                      15222
                    (Address of principal executive offices)

                       -----------------------------------

       Registrant's telephone number, including area code: (412) 562-3700


           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $0.01 per share

                       -----------------------------------

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  _X_   No ___

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]

         The aggregate market value of voting stock held by non-affiliates of
the Registrant as of the close of business on September 24, 1999 was
$48,114,056.

         As of the close of business on September 24, 1999 there were 8,337,842
shares of the Registrant's $0.01 par value Common Stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

         The information required under Part III is incorporated by reference to
the Registrant's Proxy Statement and Notice of the Annual Meeting of
Stockholders for 1999, which is to be filed within 120 days after July 31, 1999.


<PAGE>   2

PART I

ITEM 1 BUSINESS

OVERVIEW

The Carbide/Graphite Group, Inc. (the Company or Registrant) is a major U.S.
manufacturer of graphite electrode products and calcium carbide products.
Graphite electrodes are used as conductors of electricity, and are consumed, in
the electric arc furnace steel-making process common to all mini-mill steel
producers. Calcium carbide and derivative products, primarily acetylene, are
used in the manufacture of specialty chemicals, as a fuel in metal cutting and
welding and for metallurgical applications such as iron and steel
desulfurization. The Company is the only manufacturer of graphite electrodes
that produces its own requirements of needle coke, the principal raw material
used in the manufacture of graphite electrodes, and the Company sells needle
coke to its competitors in the graphite electrode business. Net sales for the
Company's graphite electrode products segment and calcium carbide products
segment represented 76.5% and 23.5%, respectively, of consolidated net sales for
fiscal 1999. Refer to Note 10 to the Company's consolidated financial statements
for its fiscal year ended July 31, 1999 (incorporated by reference under Item 8
of this Form 10-K) for information regarding sales (including export sales),
operating income and identifiable assets by reportable business segment.

     Weakness in certain regions of the global economy and its effect on the
global demand for steel negatively impacted demand for many of the Company's
products in fiscal 1999. Also, the relative strength of the U.S. economy and
U.S. dollar resulted in an increased level of steel imports into the U.S., as
foreign steel producers looked for markets to absorb excess production. This
situation resulted in the further curtailment of steel production in the U.S.,
which is the most significant market for the Company's graphite electrodes and
calcium carbide for metallurgical applications. As steel production declined in
late 1998 and early 1999, demand for graphite electrodes, needle coke and
calcium carbide for metallurgical applications was reduced significantly.

     In response to weak demand for many of its products, the Company initiated
a comprehensive cost savings program during fiscal 1999. A component of this
program is the closure of two high-cost graphite production units at the
Company's St. Marys, Pennsylvania plant. This cost savings program, coupled with
the commissioning of two major capital projects in the Company's graphite
business in February 1999, reduced staffing levels by about 300 employees
Company wide, representing a reduction in staffing of approximately 24%. The
Company also achieved cost reductions in the areas of raw materials, utilities,
transportation and professional services during fiscal 1999 in an effort to help
offset the negative effect of lower sales. The Company will attempt to achieve
further cost reductions in fiscal 2000.

     In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
(DOJ) that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.

     Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc. (UCAR), SGL Carbon Corporation (SGL
Corp.) and SGL Carbon AG (SGL) as defendants (together, the Named Defendants)
and seek treble damages. On March 30, 1998, a number of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case initiated a separate action in the same District Court which
asserts substantially the same claims and seeks the same relief as the
consolidated case and names the Named Defendants,

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as well as Showa Denko Carbon, Inc. (Showa Denko). Thereafter, seven additional
groups of purchasers who were previously included in the purported class of
plaintiffs covered by the consolidated case instituted their own actions against
the Named Defendants, Showa Denko and, in several cases, certain present or
former related parties of UCAR and Showa Denko, asserting substantially the same
claims and seeking the same relief as in the consolidated case. Four such
actions were filed in the United States District Court for the Eastern District
of Pennsylvania on April 3, 1998, May 14, 1998, May 28, 1998 and March 31, 1999,
respectively. One action was filed in the United States District Court for the
Northern District of Ohio on April 17, 1998 but has been transferred to the
Eastern District of Pennsylvania for pre-trial proceedings. Another action was
filed in the United States District Court for the Western District of
Pennsylvania on June 17, 1998 but has also been transferred to the Eastern
District of Pennsylvania for pre-trial proceedings. The complaints or amended
complaints in some of the cases have also named as defendants other companies
including Mitsubishi Corporation, Tokai Carbon U.S.A., Inc. and related
companies. On December 7, 1998, the Company was served with a complaint filed by
Chaparral Steel Company against the Named Defendants, Showa Denko and parties
related to Showa Denko and UCAR in state court in Ellis County, Texas alleging
violations of various Texas state antitrust laws and seeking treble damages.
Chaparral Steel Company has filed an amended complaint adding two additional
related plaintiffs.

     The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sales to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.

     On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.

     The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, have agreed to serve prison sentences in connection with those guilty
pleas or agreements to plead guilty.


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     The Company has also advised the Commission of the European Communities
(the European Commission) that it wishes to invoke its Leniency Notice.
Generally under these guidelines, the European Commission may reduce fines and
other penalties if a company sufficiently cooperates with the European
Commission. The Company understands that the European Commission will determine
fines, if any, at the completion of its proceedings.

     On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.

     During fiscal 1998, the Company recorded a $38 million pre-tax charge ($25
million after expected tax benefits) for potential liabilities resulting from
civil lawsuits, claims, legal costs and other expenses associated with the
pending antitrust matters (the Initial Antitrust Charge). During fiscal 1999,
the Company recorded an additional $7.0 million charge ($4.5 million after
expected tax benefits) for such potential liabilities (the Supplemental
Antitrust Charge). The combined $45.0 million charge (the Antitrust Charge)
represents the Company's estimate, based on current facts and circumstances, of
the expected cost to resolve pending antitrust claims. The Company understands
that defendants UCAR and Showa Denko have reached settlements with the class
action plaintiffs and various individual purchasers at amounts substantially
higher than the levels contemplated in the Antitrust Charge. In light of these
and other developments including: (a) possible future settlements with other
purchasers and the effect of the possible additional payments ("most favored
nations") noted above, (b) the outcome of the European Commission antitrust
investigation, (c) potential additional lawsuits by foreign purchasers, (d) the
failure of agreements in principle to result in definitive settlement
agreements, (e) the failure to satisfy the conditions to the class action
settlement, and (f) adverse rulings or judgments in pending litigation, the
antitrust matters could result in aggregate liabilities and costs which could
differ materially and adversely from the Antitrust Charge and could affect the
Company's financial condition and its ability to service its currently planned
liquidity needs. As of July 31, 1999, $23.6 million in antitrust settlements and
costs had been paid. See "Liquidity and Capital Resources" under Item 7 of this
Form 10-K.

GRAPHITE ELECTRODE PRODUCTS BUSINESS

Products and Markets

The Company's graphite electrode products business segment includes graphite
electrodes, needle coke, bulk graphite, granular graphite (primarily from
machine turnings) and other related miscellaneous sales. The following table
presents the Company's net sales and percentage of segment sales within its
graphite electrode products segment for fiscal 1999, by principal product
category:

<TABLE>
<CAPTION>
                                                                                         FISCAL 1999
                                                                    -----------------------------------------------
Product Category                                                      Net Sales                          % of Total
-------------------------------------------------------------------------------------------------------------------
(dollars in thousands)

<S>                                                                   <C>                                <C>
Graphite electrodes                                                    $130,182                                70.9%
Needle coke (third party sales)                                          31,833                                17.3
Bulk graphite                                                            12,750                                 6.9
Granular graphite                                                         7,155                                 3.9
Other                                                                     1,698                                 1.0
-------------------------------------------------------------------------------------------------------------------

  Total graphite electrode product net sales                           $183,618                               100.0%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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     Domestic sales of graphite electrode products are made primarily by the
Company's direct sales force, consisting of seven salesmen for graphite
electrodes and one salesman for other graphite products. This sales force is
supported by five technical service personnel. International sales of electrodes
are made through longstanding relationships with over twenty independent agents.
Exports of graphite electrodes account for 40% to 50% of the Company's annual
shipments of graphite electrodes and subject the Company to risks associated
with fluctuations in foreign currency exchange rates. Most foreign currencies
were weaker in relationship to the U.S. dollar during fiscal 1999 which
negatively impacted foreign price realizations and operating results. The
Company regularly enters into forward foreign currency contracts to help
mitigate foreign currency exchange rate exposure. In addition, the Company is
attempting to shift sales to markets in which transactions are completed in U.S.
dollars and to markets with foreign currencies that are not as weak. There can
be no assurance that the Company's attempts to mitigate its exposure to foreign
currency valuations will fully offset the negative effects of the strengthened
U.S. dollar.

     During fiscal 1999, one of the Company's graphite customers, Dow Chemical
Company, Inc. (Dow), announced its intention to permanently close its magnesium
production facility in Freeport, Texas. The Company previously supplied Dow with
all of its graphite anode needs under a long-term supply agreement. The
cancellation of the supply agreement accounts for approximately 8 million pounds
of graphite production capacity. In connection with the Company's cost savings
program, the Company has eliminated a significant amount of the costs associated
with producing the graphite anodes previously supplied to Dow. With the
continued weak demand for graphite electrodes, the Company does not believe that
the graphite anodes previously supplied to Dow will be replaced with sales of
electrodes or other graphite products for at least the next several quarters.
The cancellation of this contract contributed to the decline in shipments of
graphite electrodes for fiscal 1999.

     The Company's needle coke affiliate, Seadrift Coke, L.P. (Seadrift) sold
approximately 50% of its needle coke production to six other graphite electrode
producers. As a result of a capacity expansion project at Seadrift, the
Company's sales of needle coke to its competitors in the graphite electrode
industry is expected to become a more significant
component of the graphite electrode products segment in the future.

     In connection with the fiscal 1995 sale (the Specialty Products Sale) of
the Company's graphite specialty products business (Specialty Products) to SGL
Corp., the Company agreed to continue to produce graphite rods and plates (also
known as bulk graphite), the majority of which were sold to SGL Corp. at prices
approximating the Company's manufacturing cost under a supply agreement that
expired in January 1998 (the SGL Supply Agreement). Sales to SGL Corp. under
this contract in fiscal 1998 were $3.9 million versus $16.7 million in fiscal
1997. The Company also sells these bulk graphite rods and plates, and certain
other graphite products, to other graphite specialty customers. The Company
continues to pursue a strategy to increase its customer base for bulk graphite.
While the Company believes that it will continue to sell bulk graphite to SGL
Corp. and other bulk graphite customers, there can be no assurance that the
Company will be able to sell quantities of bulk graphite equal to those sold
while the SGL Supply Agreement was in effect. Bulk graphite sales to SGL Corp.
and other graphite customers totaled $3.3 million and $9.4 million,
respectively, in fiscal 1999. Granular graphite is primarily turnings from the
machining of graphite electrodes and is used in a variety of industrial
applications, including brake shoe materials and carbon additives for steel
chemistry. In addition, the Company provides processing services, which include
graphitizing baked rods.

     The steel industry, which constitutes the principal market for the
Company's graphite electrodes and a major market for its calcium carbide for
metallurgical applications, is highly cyclical. As a result, the Company's steel
industry-related products will face periods of reduced demand, which, because of
the generally high fixed costs of the Company's business, could result in
substantial downward pressure on profitability. Weakness in certain regions of
the global economy had a negative impact on demand for graphite electrodes,
premium needle coke and calcium carbide for metallurgical applications in fiscal
1999 and has resulted in and is expected to continue to result in decreased
shipments and/or average prices of graphite electrodes, needle coke and calcium
carbide for metallurgical applications for the first half of fiscal 2000 and
potentially beyond. Demand for and sales of graphite electrodes, needle coke and
calcium carbide can also fluctuate from quarter to quarter due to such factors
as scheduled plant shutdowns by customers, changes in customer production
schedules in response to seasonal changes in energy costs, weather conditions,
strikes and work stoppages at customer plants and changes in customer order
patterns in response to the announcement of price increases or decreases.


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Manufacturing and Modernization

The Company's electrodes and other graphite products are manufactured at its
facilities in Niagara Falls, New York and St. Marys, Pennsylvania. Both plants
are equipped with facilities for milling, mixing, homogenizing and extruding;
baking and rebaking; pitch impregnating; graphitizing; and machine finishing.
The Company currently has the effective capacity to manufacture approximately
110 million pounds of electrodes and approximately 20 million pounds of bulk
graphite annually.

     The Company manufactures all of its needle coke (the primary raw material
for graphite electrodes) at its affiliate, Seadrift. The Company currently has
the capacity to manufacture approximately 200,000 tons of needle coke annually,
a 48% increase over previous levels as a result of a $22 million capital
expansion and process modification project completed in fiscal 1998.
Approximately 40% of Seadrift's capacity is used internally for the production
of graphite electrodes. Needle coke is shipped from Seadrift largely by rail to
the Company's St. Marys facilities and by rail, barge and overseas vessel to its
third-party customers.

     The Company has completed a program to modernize certain components of its
electrode manufacturing process (the Modernization Program). The primary
objectives of the Modernization Program, which had a total cost of approximately
$40 million, are the automation of labor intensive processes and the replacement
of older equipment with new, state-of-the-art technology in order to reduce
costs while improving electrode quality and consistency. A major aspect of the
Modernization Program focused on the electrode forming processes, including the
addition of equipment to automate the Company's sizing and weighing systems, and
to enhance production capabilities by adding new needle coke preheaters, needle
coke and pitch mixers as well as mix cooling/homogenization equipment. These
improvements, with a total cost of approximately $32 million, are designed to
reduce total labor requirements and minimize variations in the critical initial
forming of the electrodes, resulting in better and more consistent electrode
quality. This project also allows the Company to produce 28-inch electrodes. In
addition, the Company has added three new computer-controlled machine tools used
for electrode finishing in its Niagara Falls facility. At a cost of
approximately $8 million, the machine tool system meets the highest electrode
machining standard. The majority of the cost for the machine tool system is
being financed under a long-term operating lease. Startup costs associated with
the Modernization Program did not have a material impact on the Company's
financial results for fiscal 1999.

CALCIUM CARBIDE PRODUCTS BUSINESS

Products and Markets

The Company's primary products in this segment are acetylene and calcium carbide
for metallurgical applications such as iron and steel desulfurization and
deoxidation. The following table presents the Company's net sales and percentage
of segment sales within its calcium carbide products segment for fiscal 1999, by
principal product category:

<TABLE>
<CAPTION>
                                                                                         FISCAL 1999
                                                                      ---------------------------------------------
Product Category                                                      Net Sales                          % of Total
-------------------------------------------------------------------------------------------------------------------
(dollars in thousands)

<S>                                                                   <C>                                 <C>
Acetylene:
  Pipeline acetylene                                                    $17,085                                30.2%
  Fuel gas applications                                                  14,056                                24.9
Metallurgical applications                                               19,679                                34.8
Other                                                                     5,692                                10.1
-------------------------------------------------------------------------------------------------------------------
  Total calcium carbide product net sales                               $56,512                               100.0%
-------------------------------------------------------------------------------------------------------------------
</TABLE>


     The Company produces acetylene at its Louisville and Calvert City, Kentucky
plants for pipeline delivery to three customers, International Specialty
Products (ISP), Air Products and Chemicals, Inc. (Air Products) and E.I. duPont
de Nemours & Company (DuPont), for use as a feedstock in the manufacture of
specialty chemicals. Each of these customers has been supplied by the Company
for over thirty years. Although relationships with these pipeline customers are
long-standing,


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there can be no assurance that any of these customers will continue to operate
their adjacent facility or require the Company's acetylene product. ISP, the
Company's largest pipeline acetylene customer, in response to lower global
demand and lower prices for some of its acetylene-based products, reduced their
demand for the Company's acetylene during fiscal 1999 by as much as 75% of its
historical levels. This reduction in demand may be permanent. Partially
offsetting the sales effect of the lower deliveries to pipeline acetylene
customers is an increase in average pipeline acetylene prices resulting from the
volume/price structure of the Company's acetylene supply contracts.

     Calcium carbide is sold to industrial gas generators as a raw material for
the production of cylinder acetylene, a fuel gas which is primarily used in the
metal fabrication and construction industries. The acetylene distribution market
is comprised of several large, national distributors of industrial gases with
numerous generating locations, and a large number of small companies that serve
their regional markets. The Company sells to both types of customers. The
Company expects sales in this product line to remain flat in fiscal 2000.

     The Company sells calcium carbide for metallurgical applications, such as
blast furnace hot metal desulfurization, foundry iron desulfurization and
electric furnace slag conditioning and deoxidation. Most calcium carbide
desulfurization products are finely ground and, together with several additives,
are injected into baths of molten iron to reduce the sulfur content of the
material. The Company continues to face increased competition in this product
line, as well as weakness in the steel industry. The Company has formed new
alliances which are expected to increase shipments. However, net sales are
expected to be flat in fiscal 2000 and, potentially, beyond unless market
conditions improve. The Company sells calcium carbide to major distributors
which in turn supply carbide mixtures and a variety of ancillary services to
steel mills for metallurgical applications.

     The Company markets calcium carbide products to all of its end customers
through a sales force of three and through distributors, with technical service
support from a staff of two. Sales to customers other than pipeline customers
are made through purchase orders.

Manufacturing

The Company manufactures its calcium carbide products at plants in Louisville
and Calvert City, Kentucky with a combined production capacity of approximately
200,000 tons. Both plants operate submerged arc electric furnaces for the
production of calcium carbide, as well as crushing, screening and packing
equipment; acetylene generators; and grinding facilities. The Louisville plant
supplies pipeline acetylene to DuPont; the Calvert City plant supplies pipeline
acetylene to ISP and Air Products. The Calvert City plant is operated in
block-run fashion on an as needed basis.

COMPETITION

Graphite Electrode Products

The Company's competition in graphite electrodes includes two major producers,
UCAR and SGL, as well as a group of smaller, foreign producers, including Showa
Denko, Tokai Carbon Co., Ltd. (of Japan), Nippon Carbon Co. Ltd. (of Japan) and
ERFTcarbon AG (of Germany). Participants in the graphite electrode industry
compete on the basis of service and product quality, reliability, efficiency and
price.

     UCAR and SGL are market and price leaders, each having worldwide market
shares ranging between 25% and 35%. Both maintain operations in various
international markets. The Company is one of a small group of graphite electrode
producers each having a worldwide market share of 5% to 7%. While the Company
markets its graphite electrodes worldwide, it has no production facility outside
of the United States and, accordingly, has significant transportation, duty cost
and, at times, foreign currency exchange rate disadvantages relative to some of
its competitors who have production facilities located in foreign markets.

     From time to time, graphite electrode manufacturers, including the Company,
experience temporary declines in the quality of their graphite electrodes,
sometimes resulting in customer credits and reimbursements. The Company
continually evaluates and implements procedures to improve electrode quality and
believes that its electrode performance meets the quality requirements of its
customers. Moreover, the Modernization Program is intended to further enhance
the Company's ability to consistently manufacture electrodes of acceptable
quality. There can be no assurance, however, that temporary declines in
electrode quality will not recur.

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<PAGE>   8

     Outside of Japan, there are currently only three needle coke producers:
Conoco, Inc. (Conoco), UNO-VEN Company (Uno-Ven) and Seadrift. Conoco is the
largest needle coke producer and is the market leader, with annual capacity
currently estimated by the Company to be 400,000 tons. Uno-Ven has a production
capacity of approximately 100,000 tons per year and Seadrift's production
capacity is currently approximately 200,000 tons per year. In Japan, there are
four small producers, one of which is a Conoco affiliate, and two of which make
a different type of coke from coal tar pitch. The Company believes the three
Japanese producers (other than the Conoco affiliate) produce an aggregate of
approximately 200,000 tons per year. Participants in the needle coke industry
compete primarily on price and quality.

     The Company has numerous competitors in the sale of granular graphite,
including granular graphite marketed by other electrode manufacturers and a
variety of graphite scrap dealers and granular graphite substitutes. Graphite
blocks and rods (also known as bulk graphite) are produced by a number of
companies throughout the world, including UCAR and SGL. These materials are
marketed on a worldwide basis by the Company.

Calcium Carbide Products

The Company's primary competitor in the manufacture and marketing of calcium
carbide in the United States and Canada is Elkem. Participants in the calcium
carbide market compete on the basis of service and product quality, reliability,
efficiency and price.

     The Company sells all of its acetylene to the adjacent specialty chemical
plants of its pipeline customers. These plants are not supplied with acetylene
by any source other than the Company, although certain pipeline acetylene
customers have alternative production facilities producing the same end products
for which they purchase acetylene from the Company. See "Calcium Carbide
Products Business--Products and Markets." For many years, other, less expensive
materials have competed with cylinder acetylene for use in the metal fabrication
and construction industries. Acetylene has maintained its market position
through its versatility and ease of use. Acetylene provides the hottest cutting
flame of all the fuel gases and thus allows for faster, cleaner cutting
operations.

     Calcium carbide for metallurgical applications competes with magnesium- and
lime-based desulfurization products and lime spar. The commodity price of
magnesium and the resultant price of magnesium-based desulfurizers affects the
demand for calcium carbide-based desulfurization products. As previously
mentioned, the Company is experiencing increased competition from substitute
products which is expected to have a negative impact on sales and results in
fiscal 2000 and, potentially, beyond.

RAW MATERIALS AND COSTS

Graphite Electrode Products

The significant raw material costs of production for all graphite electrode
manufacturers are needle coke, coal tar pitch, natural gas for the heating of
kilns and electricity for graphitizing. The Company's graphite electrode
business purchases all of its needle coke requirements from Seadrift, an
affiliate of the Company.

     Seadrift uses low sulfur decant oil, a by-product of fluid catalytic
cracking units in integrated oil refineries, in the manufacture of needle coke.
Most of this feedstock is purchased from refineries along the U.S. Gulf Coast. A
limited number of refineries on the U.S. Gulf Coast produce decant oil suitable
for use by Seadrift. Due to restraints on local availability, Seadrift also
purchases decant oil on the West and East Coasts at a higher cost (due primarily
to transportation costs) than if obtained from a local refinery. Conoco and
Uno-Ven, Seadrift's two largest needle coke competitors, operate large,
integrated refineries that have the ability to desulfurize decant oil.

     The cost of refinery decant oil is pegged to the U.S. Gulf Coast spot cargo
barge prices for heavy fuel oil and, in certain cases, West Texas Intermediate
crude oil. The Company regularly hedges oil costs by trading in futures
contracts for crude oil and swap agreements for low sulfur fuel oil. The Company
utilizes several suppliers of low sulfur decant oil in an effort to disperse the
risk of availability to some degree. Prices and availability of low sulfur
decant oil may be impacted by many factors, including world crude oil production
and output, global demand for oil products and the production parameters of
Seadrift's decant oil suppliers. While the Company believes that a sufficient
amount of decant oil of an acceptable quality is currently readily available,
there can be no assurance that Seadrift will be able to obtain an adequate
quantity of suitable feedstocks at all times in the future or at acceptable
prices.

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<PAGE>   9

     Electricity for graphitizing electrodes represents a major cost factor due
to the large quantities of electricity needed to graphitize electrodes. At the
Company's plant in Niagara Falls, electricity is supplied by the Power Authority
of the State of New York at favorable, pre-determined prices under a contract
that expires in 2006. The St. Marys plant is supplied electricity under a
conventional power contract. Through an electricity co-generation process,
Seadrift is a net power producer, resulting in only nominal electrical power
costs for that facility. The Company purchases natural gas for heating kilns
from either interstate natural gas carriers or from local gas well operators.

Calcium Carbide Products

Raw materials required for calcium carbide manufacture are lime, coke and large
amounts of electricity for submerged arc electric furnaces. The Company believes
that its raw materials are widely available at satisfactory prices. Both the
Louisville and Calvert City plants are supplied electricity under conventional
power contracts.

EMPLOYEES

The Company employed 965 people as of July 31, 1999. At July 31, 1999, the
Company employed 704 people in its graphite electrode products segment; of which
39% were salaried and 61% were paid hourly. Seadrift is staffed entirely with
salaried personnel. At July 31, 1999, there were 244 people in the calcium
carbide segment; of which 19% were salaried and 81% were paid hourly. At July
31, 1999, the Company employed 17 people in its corporate function, all of whom
were salaried employees.

     The Company has various labor agreements with unions representing its
hourly work force. Within the graphite electrode products business, the St.
Marys labor agreement was renegotiated and became effective in June 1999. The
new agreement will expire in June 2001. This agreement was negotiated to terms
deemed satisfactory to the Company. The Niagara Falls labor agreement expires in
January 2004. Within the calcium carbide products business, the Louisville and
Calvert City agreements will expire in July 2001 and February 2001,
respectively. The Company believes that its relationships with the unions are
stable. However, there can be no assurance that new agreements will be reached
when the current agreements expire without union action or will be on terms
satisfactory to the Company.

PATENTS AND TRADEMARKS

The Company does not believe that any of its patents, patent applications or
trademarks are material to its business or operations.

ENVIRONMENTAL COMPLIANCE

In connection with the agreement under which the Company acquired its operating
assets from The BOC Group, plc (BOC) (the Asset Acquisition), BOC agreed to
indemnify the Company, its successors and assigns, against certain liabilities,
to the extent not disclosed and expressly excluded from the indemnity, arising
from (i) pre-closing operations of its former divisions (regardless of whether
such liabilities arose during or before BOC's ownership thereof); (ii) assets
transferred to the Company pursuant to the Asset Acquisition; and (iii)
pre-closing activities conducted at the real property and leased premises
transferred to the Company pursuant to the Asset Acquisition (the BOC
Environmental Indemnity Agreement). Such indemnification includes certain
liabilities arising out of the use, generation, transportation, storage,
treatment, release or disposal of hazardous materials; the violation of any
environmental regulations; or any claim or cause of action to the effect that
the Company is responsible or liable for acts or omissions of BOC concerning
hazardous materials. Under the indemnity, the Company is required to pay 20% of
the first $2.5 million of costs relating to such environmental claims or
liabilities. Thereafter, BOC is responsible for all of such liabilities. The BOC
indemnity survives for all covered claims brought within 15 years after closing
of the Asset Acquisition, which occurred in July 1988. A number of identifiable
costs at the time of the Asset Acquisition, such as the need for certain
pollution control equipment, receipt of certain discharge permits and the need
for continued operation and maintenance of a landfill used exclusively by

8
<PAGE>   10

the Company at its St. Marys facility, were disclosed by BOC and were excluded
from the indemnification. The Company has installed much of the pollution
control equipment and received the discharge permits excluded from the BOC
indemnity. If any of the pollution control equipment excluded from the BOC
indemnity is required in the future for reactivation of production equipment or
increases in capacity, the costs related thereto are not believed by the Company
to be material.

     In connection with the Specialty Products Sale, the Company agreed to
indemnify SGL Corp. for 80% of all environment costs in excess of an aggregate
$100,000 threshold up to a maximum exposure of $6.0 million for a five-year
period. In addition, with respect to the Company's former subsidiary, Speer
Canada, Inc., sold pursuant to the Specialty Products Sale, the Company agreed
to indemnify SGL Corp. for 80% of all environmental costs, in excess of a
$100,000 threshold, relating to such former subsidiary's operations prior to the
consummation of the Specialty Products Sale, up to a maximum exposure of $1.5
million. As of July 31, 1999, no environmental claims have been submitted for
indemnification by SGL Corp.

     During fiscal 1999, the Company completed an environmental compliance audit
(ECA) of all five of its operating facilities. Such ECA was completed by an
independent, experienced environmental consulting firm to assess the compliance
status of each facility. In addition to the compliance objectives, the ECA
evaluated the effectiveness of the existing management systems as well as the
risks associated with management practices related to the use, storage, and
disposal of regulated and non-regulated materials. All areas of non-compliance
identified by the ECA have been corrected and the Company is in the process of
implementing suggestions to achieve best management practices in an effort to
maintain and improve environmental performance. None of the areas of
non-compliance identified by the ECA were deemed to be material.

     The Clean Air Act was amended in 1990 (including Title V). The Clean Air
Act has resulted and will continue to result in revisions to state
implementation plans which may necessitate the installation of additional
controls for certain of the Company's emission sources. The Company's Title V
applications for its five production facilities are in various
stages of completion.

     In the process of developing permit applications for facility upgrades at
the Company's Niagara Falls, NY and St. Marys, PA graphite plants, the Company
determined that certain parameters in its air permits do not reflect current
operations. The Company is working to resolve this issue and has advised the
appropriate state environmental authorities. The Company's plan to resolve this
issue at its Niagara Falls, NY plant was approved by the State of New York
environmental authority. This plan required the Company to spend approximately
$0.3 million in capital improvements to achieve resolution. With respect to the
St. Marys, PA plant, the Company is in the process of preparing a proposed plan
of action to achieve resolution of this issue. Such plan of action will include
the installation and ongoing operation of an air emissions scrubbing unit. A
preliminary cost estimate for this unit is approximately $3 million installed,
plus $0.5 million per year in ongoing cash operating costs. The Company believes
that certain costs are subject to reimbursement under the BOC Environmental
Indemnity Agreement. It is unclear whether or not the state will levy a fine in
connection with this issue.

     During fiscal 1999, the Company spent approximately $1.3 million on capital
expenditures in order to comply with environmental laws and regulations (which
expenditures are included in the consolidated financial statements, including
the notes thereto, appearing elsewhere in this Form 10-K as additions to
property, plant and equipment). During fiscal 2000, the Company expects to spend
approximately $2.4 million for such projects.

ITEM 2 PROPERTIES

The Company maintains its corporate headquarters at One Gateway Center,
Pittsburgh, Pennsylvania under a lease with an initial term expiring on December
31, 1999. A new lease has been entered into by the Company for the same property
that begins on January 1, 2000 and has an expiration of June 30, 2003.

                                                                               9
<PAGE>   11

     The Company has the following additional properties, which are owned or
leased, as indicated:

<TABLE>
<CAPTION>
                                                                                                       Area
                                                                                               (approximate             Owned
Location                                                                              Use       square feet)        or Leased
-----------------------------------------------------------------------------------------------------------------------------

<S>                                          <C>                                               <C>                  <C>
Graphite electrode products facilities:
  Niagara Falls, New York                                                      Electrodes          1,000,000            Owned
  St. Marys, Pennsylvania                                                      Electrodes            742,000            Owned
  Seadrift, Texas                                                             Needle coke            743,000            Owned
Calcium carbide products facilities:
  Calvert City, Kentucky                                                 Carbide products            150,000            Owned
  Louisville, Kentucky                                                   Carbide products            200,000            Owned
  Louisville, Kentucky                       Carbide sales, technical and finance offices              6,000           Leased
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>


     Pursuant to the Specialty Products Sale, SGL Corp. acquired a discrete
portion of the Company's St. Marys facility. The Company and SGL Corp. share
common steam services in St. Marys. In addition, the Company leases to SGL Corp.
a portion of a building and certain parking lot space at its facility in Niagara
Falls pursuant to a lease expiring in January 2000.

     The Company owns all of its major manufacturing facilities. The Company
believes that its plants and facilities, which are of varying ages and types of
construction, are generally in satisfactory condition.

     Many of the Company's operations are conducted at extremely high
temperatures, exceeding 5,000 degrees Fahrenheit in the case of electrode
graphitizing. In some facilities, a maintenance "turnaround" is conducted
annually; in other facilities, major maintenance is conducted on an ongoing
basis. Maintenance expenditures, which are expensed as incurred, amounted to
approximately $29.3 million, $37.7 million and $37.5 million for the fiscal
years ended July 31, 1999, 1998 and 1997, respectively.


ITEM 3 LEGAL PROCEEDINGS

GENERAL

In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.

     Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR, SGL Corp. and SGL as the Named Defendants and seek
treble damages. On March 30, 1998, a number of purchasers who were previously
included in the purported class of plaintiffs covered by the consolidated case
initiated a separate action in the same District Court which asserts
substantially the same claims and seeks the same relief as the consolidated case
and names the Named Defendants, as well as Showa Denko. Thereafter, seven
additional groups of purchasers who were previously included in the purported
class of plaintiffs covered by the consolidated case instituted their own
actions against the Named Defendants, Showa Denko and, in several cases, certain
present or former related parties of UCAR and Showa Denko,

10
<PAGE>   12

asserting substantially the same claims and seeking the same relief as in the
consolidated case. Four such actions were filed in the United States District
Court for the Eastern District of Pennsylvania on April 3, 1998, May 14, 1998,
May 28, 1998 and March 31, 1999, respectively. One action was filed in the
United States District Court for the Northern District of Ohio on April 17, 1998
but has been transferred to the Eastern District of Pennsylvania for pre-trial
proceedings. Another action was filed in the United States District Court for
the Western District of Pennsylvania on June 17, 1998 but has also been
transferred to the Eastern District of Pennsylvania for pre-trial proceedings.
The complaints or amended complaints in some of the cases have also named as
defendants other companies including Mitsubishi Corporation, Tokai Carbon
U.S.A., Inc. and related companies. On December 7, 1998, the Company was served
with a complaint filed by Chaparral Steel Company against the Named Defendants,
Showa Denko and parties related to Showa Denko and UCAR in state court in Ellis
County, Texas alleging violations of various Texas state antitrust laws and
seeking treble damages. Chaparral Steel Company has filed an amended complaint
adding two additional related plaintiffs.

     The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sales to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.

     On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.

     The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, serve prison sentences, in connection with those guilty pleas or
agreements to plead guilty.

     The Company has also advised the European Commission that it wishes to
invoke its Leniency Notice. Generally under these guidelines, the European
Commission may reduce fines and other penalties if a company sufficiently
cooperates with the European Commission. The Company understands that the
European Commission will determine fines, if any, at the completion of its
proceedings.

                                                                              11
<PAGE>   13

     On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.

     During fiscal 1998, the Company recorded the Initial Antitrust Charge, a
$38 million pre-tax charge ($25 million after expected tax benefits) for
potential liabilities resulting from civil lawsuits, claims, legal costs and
other expenses associated with the pending antitrust matters. During fiscal
1999, the Company recorded the Supplemental Antitrust Charge, an additional $7.0
million charge ($4.5 million after expected tax benefits) for such potential
liabilities. The combined $45.0 million Antitrust Charge represents the
Company's estimate, based on current facts and circumstances, of the expected
cost to resolve pending antitrust claims. The Company understands that
defendants UCAR and Showa Denko have reached settlements with the class action
plaintiffs and various individual purchasers at amounts substantially higher
than the levels contemplated in the Antitrust Charge. In light of these and
other developments including: (a) possible future settlements with other
purchasers and the effect of the possible additional payments ("most favored
nations") noted above, (b) the outcome of the European Commission antitrust
investigation, (c) potential additional lawsuits by foreign purchasers, (d) the
failure of agreements in principle to result in definitive settlement
agreements, (e) the failure to satisfy the conditions to the class action
settlement, and (f) adverse rulings or judgments in pending litigation, the
antitrust matters could result in aggregate liabilities and costs which could
differ materially and adversely from the Antitrust Charge and could affect the
Company's financial condition and its ability to service its currently planned
liquidity needs. As of July 31, 1999, $23.6 million in antitrust settlements and
costs had been paid. See "Liquidity and Capital Resources" under Item 7 of this
Form 10-K.

     The Company is also involved in various legal proceedings considered
incidental to the conduct of its business, the ultimate disposition of which, in
the opinion of the Company's management, will not have a material adverse effect
on the financial position, fiscal year operating results or business of the
Company. Claims (other than environmental and contract claims and claims for
punitive damages) against the Company are generally covered by insurance which
includes a $250,000 per occurrence self-insured retention. As of July 31, 1999,
a $0.2 million reserve has been recorded to provide for estimated exposure on
claims for which a loss is deemed probable.

ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS

This item is not applicable to the Registrant for this Annual Report on Form
10-K.

12
<PAGE>   14

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded on the NASDAQ National Market System. The
following tables provide information regarding the high and low prices at which
the Company's Common Stock traded for each of the quarterly periods in the
fiscal years ended July 31, 1999 and 1998.


QUARTERLY STOCK INFORMATION

<TABLE>
<CAPTION>
Year Ended July 31, 1999                                                                   High                 Low
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>              <C>
First                                                                                      $21 5/8          $ 7 3/4
Second                                                                                      17 1/8           10 3/4
Third                                                                                       13 11/16          9 3/8
Fourth                                                                                      15               11
-------------------------------------------------------------------------------------------------------------------
  Fiscal Year                                                                              $21 5/8          $ 7 3/4
===================================================================================================================


<CAPTION>
Year Ended July 31, 1998                                                                   High                 Low
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>              <C>
First                                                                                      $39 15/16        $28 1/2
Second                                                                                      39 1/8           33
Third                                                                                       37               28 1/2
Fourth                                                                                      34 1/8           20
-------------------------------------------------------------------------------------------------------------------
  Fiscal Year                                                                              $39 15/16        $20
===================================================================================================================
</TABLE>


     No cash Common Stock dividends were declared during fiscal 1999 or fiscal
1998. The Company estimates that as of September 24, 1999, there were 83 record
holders and approximately 1,800 beneficial holders of its Common Stock.

DIVIDEND OF PREFERRED SHARE PURCHASE RIGHTS

In fiscal 1999, the Company's Board of Directors declared a dividend
distribution of one Preferred Share Purchase Right on each outstanding share of
Common Stock. The dividend distribution was made on June 1, 1999 payable to
stockholders of record on that date. The Preferred Share Purchase Rights are
designed to ensure that all of the Company's stockholders receive fair and equal
treatment in the event of certain takeovers of the Company. The Rights are not
intended to prevent a takeover, but should encourage anyone seeking to acquire
the Company to negotiate with the Company's Board of Directors prior to
attempting a takeover.


                                                                              13
<PAGE>   15

ITEM 6 SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
Year Ended July 31,                              1999            1998            1997            1996          1995
-------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts,
percentages and pricing information)

<S>                                          <C>             <C>             <C>             <C>           <C>
STATEMENTS OF OPERATIONS DATA(1)(2):
Net sales                                    $240,130        $293,751        $289,586        $259,394      $241,456
Cost of goods sold                            202,888         242,535         235,401         214,396       198,160
Selling, general and administrative            14,925          14,884          16,031          14,609        16,247
Early retirement/severance charge(3)               --              --           1,100              --            --
Other expense (income)(4)                      15,043          38,000              --            (308)       (3,358)
-------------------------------------------------------------------------------------------------------------------

Operating income (loss)                         7,274          (1,668)         37,054           30,697       30,407
Interest expense, net                           6,617           5,130           7,894            9,073       10,518
Special financing expenses                         --              --              --              889          357
Provision (benefit) for income taxes              259          (1,729)         10,732            6,416        7,206
-------------------------------------------------------------------------------------------------------------------

Income (loss) from operations
   and before extraordinary loss             $    398        $ (5,069)       $ 18,428        $  14,319    $  12,326
-------------------------------------------------------------------------------------------------------------------
Per share income (loss) from
  operations and before extraordinary loss
  applicable to common stock:
  Basic                                      $   0.05        $  (0.58)       $   2.16         $   1.90     $   2.00
  Diluted                                        0.05           (0.58)           2.09             1.67         1.59
BALANCE SHEET DATA (AT PERIOD END):
Working capital                              $ 75,604        $ 70,129        $100,825         $104,825     $106,449
Property, plant and equipment, net            130,342         137,603          87,653           65,177       58,370
Total assets                                  274,416         289,099         235,860          212,870      214,409
Long-term debt                                110,500         110,232          80,035           81,763      110,000
Stockholders' equity                           81,317          84,814          96,209           74,808       43,012
OTHER OPERATING DATA(2):
Gross profit margin percentage                   15.5%           17.4%           18.7%            17.3%        17.9%
Operating income (loss) margin percentage         3.0            (0.6)           12.8             11.8         12.6
EBITDA(5)                                    $ 40,420        $ 50,708        $ 49,354         $ 39,560     $ 35,371
Depreciation and amortization(5)               18,103          14,376          11,200            9,171        8,322
Capital expenditures(6)                        15,532          64,306          33,765           15,670       10,526
Quantity of graphite electrodes sold
  (in thousands of pounds)                    104,035         119,307         110,293          105,279      100,775
Graphite electrode average
  net price per pound                        $   1.25        $   1.34        $   1.34         $   1.28     $   1.19
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Excludes the historical operating results of Specialty Products.

(2)  Certain amounts reported in previous years have been reclassified to
     conform with current year presentation.

(3)  Represents costs associated with the retirement of two executives in fiscal
     1997.

(4)  Represents expense related to facility closure activities in fiscal 1999,
     expenses related to the Antitrust Reserve in fiscal 1999 and 1998 and
     income related to a long-term contract for the construction of a graphite
     electrode plant in the People's Republic of China (the China Contract) in
     fiscal years 1996 and 1995.

(5)  EBITDA is defined as operating income before depreciation and amortization,
     early retirement/severance charges and other expense and income. EBITDA is
     not presented as a measure of operating results under generally accepted
     accounting principles. However, management believes that EBITDA is an
     appropriate measure of the Company's ability to service its cash
     requirements. Depreciation and amortization included in the computation of
     EBITDA includes amortization of certain intangibles and does not include
     depreciation and amortization related to Specialty Products.

(6)  Prior to fiscal 1996, includes capital expenditures related to Specialty
     Products.

No cash Common Stock dividends were declared or paid during the five-year period
ended July 31, 1999.


14
<PAGE>   16

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW OF RESULTS

The Company's earnings from operations for the fiscal year ended July 31, 1999
were $0.4 million, or $0.05 per share, versus a loss of $5.1 million, or $0.58
per share, for the fiscal year ended July 31, 1998 and earnings of $18.4
million, or $2.09 per share, for the fiscal year ended July 31, 1997. During
fiscal 1999 and fiscal 1998, the Company recorded net charges of $4.5 million
and $25.0 million, respectively, representing the Antitrust Charge. Also during
fiscal 1999, the Company recorded an $8.0 million pre-tax charge ($5.2 million
net of tax benefits) to provide for the closure of certain graphite production
facilities (the Closure Charge). Excluding the effects of these charges,
earnings from operations for fiscal 1999 and 1998 were $10.2 million, or $1.21
per share, and $19.9 million, or $2.24 per share, respectively.

     Extraordinary losses resulting from the early retirement of the Senior
Notes (as herein defined) during the fiscal years presented reduced the
Company's net results to an $11.5 million loss, or $1.32 per share, for fiscal
1998 and net income of $18.3 million, or $2.07 per diluted share, for fiscal
1997.

     The Company's reportable business segments include graphite electrode
products, which includes graphite electrodes, needle coke and other graphite
specialty products, and calcium carbide products, which includes pipeline
acetylene, calcium carbide for metallurgical applications and calcium carbide
for fuel gas applications. The following table sets forth certain financial
information for the periods discussed below and should be read in conjunction
with the consolidated financial statements, including the notes thereto,
appearing elsewhere in this Annual Report on Form 10-K:

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
-------------------------------------------------------------------------------------------------------------------
(dollar amounts in thousands)

<S>                                                                    <C>                <C>              <C>
Net sales:
  Graphite electrode products                                          $183,618           $215,767         $210,045
  Calcium carbide products                                               56,512             77,984           79,541
-------------------------------------------------------------------------------------------------------------------
  Total net sales                                                      $240,130           $293,751         $289,586
===================================================================================================================

Percentage of net sales:
  Graphite electrode products                                              76.5%              73.5%            72.5%
  Calcium carbide products                                                 23.5               26.5             27.5
-------------------------------------------------------------------------------------------------------------------
  Total percentage of net sales                                           100.0%             100.0%           100.0%
===================================================================================================================

Gross profit as a percentage of segment net sales:
  Graphite electrode products                                              16.4%              18.0%            19.9%
  Calcium carbide products                                                 12.6               15.9             15.6
Percentage of total net sales:
  Total gross profit                                                       15.5%              17.4%            18.7%
  Selling, general and administrative                                       6.2                5.0              5.5
  Operating income (loss)                                                   3.0               (0.6)            12.8
  Income (loss) from operations                                             0.2               (1.7)             6.4
  Net income (loss)                                                         0.2               (3.9)             6.3
-------------------------------------------------------------------------------------------------------------------
</TABLE>


FISCAL 1999 VERSUS FISCAL 1998

Net sales for fiscal 1999 were $240.1 million versus $293.8 million in fiscal
1998, an 18.3% decrease. Graphite electrode product net sales declined 14.9% to
$183.6 million, while calcium carbide product net sales declined 27.5% to $56.5
million.

     Within the graphite electrode products segment, graphite electrode net
sales were $130.2 million, representing an 18.6% decrease resulting from a 12.8%
decrease in electrode shipments and a 6.7% decrease in average electrode prices.
Graphite electrode shipments for fiscal 1999 totaled 104.0 million pounds versus
119.3 million pounds in fiscal 1998. Weakness in certain regions of the global
economy had a negative impact on demand for electric arc furnace steel and, as a
result, lower graphite electrode shipments and prices during fiscal 1999. Lower
demand for electric arc furnace steel and, as a result, graphite electrode
demand may continue for the next several quarters. Domestic and foreign


                                                                              15
<PAGE>   17


electrode shipments as a percentage of total electrode shipments for fiscal
1999 were 57.7% and 42.3%, respectively, versus 55.7% and 44.3%, respectively,
in fiscal 1998. Average domestic electrode prices during fiscal 1999 were down
9.6% from fiscal 1998 due to lower electric arc furnace steel production in the
U.S. market. Average foreign net prices were down 3.4% due to lower
transactional prices overseas and as a result of an unfavorable U.S. dollar
exchange rate. The strong U.S. dollar versus most European currencies is
expected to continue to have a negative impact on foreign price realizations for
the foreseeable future. Needle coke sales during fiscal 1999 decreased 6.1% to
$31.8 million. A 15.9% increase in needle coke shipments was more than offset by
a 19.0% decrease in needle coke prices. The decrease in needle coke prices was
due primarily to the lower demand for graphite electrodes described above, which
in turn has resulted in weakening demand for needle coke industry-wide. Graphite
specialty product sales during fiscal 1999 were essentially flat at $21.6
million, although a 37.5% increase in higher-margin bulk graphite sales
essentially offset a 25.9% reduction in lower-margin granular graphite sales.

     During fiscal 1999, one of the Company's graphite customers, Dow, announced
its intention to permanently close its magnesium production facility in
Freeport, Texas. The Company previously supplied Dow with all of its graphite
anode needs under a long-term supply agreement. The cancellation of the supply
agreement accounts for approximately 8 million pounds of graphite production
capacity. In connection with the Company's cost savings program (discussed
below), the Company has eliminated a significant amount of the costs associated
with producing the graphite anodes previously supplied to Dow. With the
continued weak demand for graphite electrodes, the Company does not believe that
the graphite anodes previously supplied to Dow will be replaced with sales of
electrodes or other graphite products for at least the next several quarters.
The cancellation of this contract contributed to the reported decline in
shipments of graphite electrodes for fiscal 1999.

     Within the calcium carbide product segment, pipeline acetylene sales for
fiscal 1999 declined 40.8% to $17.1 million. The decrease was the result of a
significant decrease in shipments to pipeline acetylene customers. ISP, the
Company's largest pipeline acetylene customer, in response to lower global
demand and lower prices for some of its acetylene-based products, reduced their
demand for the Company's acetylene during fiscal 1999 by as much as 75% of its
historical levels. This reduction in demand may be permanent. Partially
offsetting the sales effect of the deliveries to pipeline acetylene customers
was an increase in average pipeline acetylene prices resulting from the
price/volume structure of the Company's acetylene supply contracts. Sales of
calcium carbide for metallurgical applications of $19.7 million represented a
17.0% decrease from fiscal 1998, primarily due to lower shipments. Weakness in
domestic steel production by integrated steel producers, coupled with lower
prices for magnesium (a substitute product) and selective promotion of magnesium
over calcium carbide by a major distributor, resulted in the lower sales levels.
Calcium carbide for fuel gas applications totaled $14.1 million for fiscal 1999,
a 29.8% decrease from fiscal 1998 resulting primarily from lower shipments. Net
sales of calcium carbide products are expected to remain at these levels
throughout fiscal 2000 and, potentially, beyond as a result of weak demand and
lower prices. All other calcium carbide product sales for fiscal 1999 increased
slightly to $5.7 million as a result of increased shipments of electrode paste.

     Gross profit as a percentage of graphite electrode product sales for fiscal
1999 was 16.4% versus 18.0% in fiscal 1998. The decrease in the gross margin was
the result of lower prices of graphite electrodes and needle coke and the
decrease in shipments of graphite electrodes. In addition, depreciation and
amortization increased approximately $4.0 million in fiscal 1999, which alone
negatively impacted the gross margin by 2.2%. Partially offsetting the effect of
the above was a decline in net decant oil costs, which were 12.4% lower during
fiscal 1999. An increase in decant oil costs experienced in early fiscal 2000
may have a negative impact on the Company's gross margin if the higher oil costs
continue for an extended period of time or if the Company is unable to realize
needle coke price increases in fiscal 2000. The Company's commodity hedging
program will mitigate the increase in oil costs to some degree in fiscal 2000.
Gross profit as a percentage of calcium carbide product sales for fiscal 1999
was 12.6% versus 15.9% in fiscal 1998. The decrease in the gross margin was the
result of lower sales in the carbide business.

     In response to weak demand for many of the Company's products, the Company
initiated a comprehensive cost savings program. A component of this program is
the closure of two high-cost graphite production facilities at the Company's St.
Marys, PA plant. This cost savings program, coupled with the commissioning of
two major capital projects in the Company's graphite business in February 1999,
reduced staffing levels by approximately 300 employees

16
<PAGE>   18


Company wide, representing a reduction in staffing of approximately 24%. The
Company also achieved cost reductions in the areas of raw materials, utilities,
transportation and professional services during fiscal 1999 in an effort to help
offset the negative effect of lower sales. The Company expects to achieve
further cost reductions in fiscal 2000.

     Selling, general and administrative expenditures for fiscal 1999 were $14.9
million, unchanged as compared to fiscal 1998. An increase in expenses
associated with the Company's variable incentive compensation plans was
essentially offset by a reduction in general operating expenses, which was the
result of the Company's cost savings program.

     During fiscal 1999 and in connection with the Company's cost savings
program discussed above, the Company announced plans to close certain baking and
graphitizing operations at its St. Marys, PA plant resulting in a 12% reduction
in the Company's graphite electrode production capacity. The Company estimates
that it is capable of producing 110 million pounds of graphite electrodes per
year after the facility closure. Other expense in fiscal 1999 includes the
Closure Charge. Included in this charge is $5.7 million for the net write-off of
impaired fixed assets and spare parts inventory, $1.4 million for hourly and
salary workforce severance costs and $0.9 million in other closure-related
costs. Essentially all of these costs were funded in fiscal 1999. Other expense
for fiscal 1999 also includes the $7.0 million Supplemental Antitrust Charge.

     Net interest expense for fiscal 1999 was $6.6 million, including $7.4
million of interest expense associated with the Company's revolving credit
facility and $0.3 million in bank fees, less $1.1 million in capitalized
interest associated with the Modernization Program. Net interest expense for
fiscal 1998 was $5.1 million, including $5.2 million of interest expense
associated with the revolving credit facility, $1.5 million of interest expense
associated with the 11.5% Senior Notes due 2003 (the Senior Notes) previously
outstanding and $0.4 million in bank fees, less capitalized interest of $1.7
million and interest income of $0.3 million.

     The effective tax rate for fiscal 1999 was 39.4%. The effective rate
differs from the federal statutory rate due primarily to state taxes and
non-deductible expenses, offset by benefits derived from the Company's foreign
sales corporation.

     As a result of a tender of the Company's Senior Notes in fiscal 1998 (the
Tender) and a related revolving credit facility refinancing, the Company
recorded a $6.4 million net extraordinary loss on the early extinguishment of
debt during fiscal 1998. This extraordinary charge represents the premium paid
to Senior Note holders in connection with the Tender and the write-off of
unamortized deferred financing fees associated with the Senior Notes tendered
and a revolving credit facility replaced in connection with the Tender.


FISCAL 1998 VERSUS FISCAL 1997

Net sales for fiscal 1998 were $293.8 million versus $289.6 million in fiscal
1997, representing a 1.4% increase. Graphite electrode product sales increased
2.7% to $215.8 million, while calcium carbide product sales decreased 2.0% to
$78.0 million.

     Within the graphite electrode products segment, graphite electrode net
sales for fiscal 1998 were $160.0 million, representing an 8.7% increase over
fiscal 1997 as a result of an 8.2% increase in shipments. Graphite electrode
shipments in fiscal 1998 totaled 119.3 million pounds. Domestic and foreign
electrode shipments as a percentage of total electrode shipments for fiscal 1998
were 55.7% and 44.3%, respectively, versus 53.2% and 46.8%, respectively, in
fiscal 1997. The average net price for graphite electrodes for fiscal 1998 was
$1.34 per pound, unchanged as compared to fiscal 1997. A 4.8% decrease in the
foreign net price of graphite electrodes, which resulted primarily from the
continued strengthening of the U.S. dollar against foreign currencies, was
offset by a 3.5% increase in the domestic net price and the improved
domestic/foreign sales mix. Needle coke sales for fiscal 1998 were $33.9 million
versus $28.6 million in fiscal 1997, with the increase resulting from a 13.8%
increase in shipments and a 4.1% increase in the average selling price of needle
coke. Needle coke shipments were up substantially over fiscal 1997 due to
increased production capacity at the Company's affiliate, Seadrift. Graphite
specialty product sales during fiscal 1998 totaled $21.9 million versus $34.2
million in fiscal 1997. The decrease in sales was principally the result of the
expiration of the SGL Supply Agreement. The contract expired in January 1998.

     Within the calcium carbide products segment, pipeline acetylene sales were
$28.9 million in fiscal 1998, a 4.7% increase over fiscal 1997 resulting from a
5.4% increase in pipeline acetylene deliveries. Sales of calcium carbide for
metallurgical applications were $23.7 million, a 3.8% decrease from fiscal 1997
resulting from a 1.9% decline in shipments


                                                                              17
<PAGE>   19


and a 1.9% decrease in prices. Sales of calcium carbide for fuel gas
applications totaled $20.0 million, a 5.6% decrease resulting from a 4.2%
decrease in shipments and a 1.4% decrease in prices. All other calcium carbide
products net sales totaled $5.4 million for fiscal 1998, a decrease of 11.8%
resulting primarily from lower shipments of electrically calcined anthracite
coal.

     Gross profit as a percentage of graphite electrode product sales for fiscal
1998 was 18.0% versus 19.9% in fiscal 1997. The decrease in the gross margin
resulted primarily from the disruption in production of needle coke which
resulted from the extended plant shutdown to install and start-up new equipment
at the Company's affiliate, Seadrift. In addition, depreciation and amortization
increased 32.6% during fiscal 1998 to $12.4 million as a result of the Company's
capital expenditures during fiscal years 1998 and 1997. The negative impact from
the extended shutdown and higher depreciation charge more than offset the
benefits of increased needle coke and graphite electrode sales volumes and
improved needle coke prices during fiscal 1998. In addition, the cost of decant
oil, the primary raw material in the production of needle coke, during the
fiscal year ended July 31, 1998 was approximately 11% lower as compared to
fiscal 1997, which contributed positively to the gross margin. Gross profit as a
percentage of calcium carbide product sales for fiscal 1998 was 15.9% versus
15.6% in fiscal 1997. The increase was primarily the result of lower operating
costs during fiscal 1998.

     Selling, general and administrative expenditures for fiscal 1998 were $14.9
million versus $16.0 million in fiscal 1997. The decrease was primarily the
result of a $1.8 million decrease in incentive compensation expenses for
salaried employees in fiscal 1998.

     During the fiscal year ended July 31, 1997, the Company recorded a $1.1
million non-recurring charge to provide for benefits associated with the early
retirement of two executives of the Company.

     During fiscal 1998, the Company recorded the Initial Antitrust Charge, a
$38 million pre-tax charge ($25 million after expected tax benefits), classified
as "other expense" in the consolidated statement of operations for the fiscal
year ended July 31, 1998, for potential liabilities resulting from civil
lawsuits, claims, legal costs and other expenses associated with pending
antitrust matters.

     Net interest expense for fiscal 1998 was $5.1 million, including $5.2
million of interest expense associated with the Company's revolving credit
facility, $1.5 million in interest expense associated with the Senior Notes and
$0.4 million in amortization and bank fees. These interest expense items were
reduced by $1.7 million in capitalized interest associated with the Company's
Modernization Program projects and $0.3 million in interest income. Net interest
expense for fiscal 1997 was $7.9 million, including $9.4 million in interest
expense associated with the Senior Notes and $0.3 million in amortization. These
interest expense items were reduced by $0.5 million in capitalized interest and
$1.5 million in interest income in fiscal 1997.

     The Company's effective income tax rate for fiscal 1998 was a benefit of
25.4% versus a provision of 36.8% for fiscal 1997. The benefit for fiscal 1998
was unusually low relative to the federal statutory rate of 35% due to state
income tax expenses, the write-off of certain state net operating loss tax
benefits, the effect of non-deductible expenses incurred throughout fiscal 1998
and the impact of adjustments to the Company's prior year tax estimates.

     As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt during fiscal 1998.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company adopted Statement of Financial Accounting Standards (SFAS) #131,
"Disclosures about Segments of an Enterprise and Related Information" and SFAS
#132, "Employers' Disclosure about Pensions and Other Postretirement Benefits"
for its fiscal year ended July 31, 1999. The Company is required to adopt SFAS
#133, "Accounting for Derivative Instruments and Hedging Activities" for its
fiscal year ending July 31, 2001. SFAS #133 establishes accounting and reporting
standards for derivatives and hedging activities. The Company has not yet
completed its evaluation of the financial accounting and reporting impact of
SFAS #133.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs are primarily for capital expenditures, working
capital (including antitrust settlements) and debt service on its revolving
credit facility. The weakness in certain regions of the global economy and its
impact on demand for the Company's products has resulted in the deferment of
certain discretionary capital projects. The Company



18
<PAGE>   20


estimates that it will spend approximately $15 million in capital improvements
during fiscal 2000. Such spending may include non-discretionary capital for
environmental upgrades. Also, the Company presently believes that it will fund
approximately $20 million in antitrust settlements during fiscal 2000.

     The Company believes that its cash flows from operations and availability
under its revolving credit facility should be sufficient to fund all of its
currently planned liquidity needs through at least the expiration of its
revolving credit facility in December 2003. However, the terms and conditions of
any settlements of pending antitrust claims may adversely impact such liquidity
needs. In addition, the Company's expected cash flows from operations could be
negatively impacted if weak demand for the Company's products experienced in
fiscal 1999 or increased oil costs experienced in early fiscal 2000 continues
for an extended period of time. In the event these resources are not sufficient
to fund the Company's planned capital expenditures, service its indebtedness and
pay any other obligation including those that may arise from pending legal
proceedings and the resolution of current antitrust matters, the Company may be
required to refinance or renegotiate its revolving credit facility, obtain
additional funding or further delay discretionary capital projects. If the
Company were required to refinance or renegotiate its revolving credit facility
or obtain additional funding to satisfy its liquidity needs, there can be no
assurance that sources of funds would be available in amounts sufficient for the
Company to meet its obligations or on terms favorable to the Company.

     In connection with the Tender, the Company entered into an agreement with a
consortium of banks led by PNC Bank for a $150 million revolving credit facility
with a $15 million sublimit for letters of credit which will expire in December
2003 (as amended, the 1997 Revolving Credit Facility). The 1997 Revolving Credit
Facility was amended during fiscal 1998 and fiscal 1999. Interest under the 1997
Revolving Credit Facility is based on, at the option of the Company, either PNC
Bank's prime rate or a floating LIBOR rate plus a spread (currently 1.125%)
based on a leverage calculation (specifically, the Consolidated Total
Indebtedness to EBITDA Ratio, as defined in the agreement). As of July 31, 1999,
the interest rate on borrowings outstanding under the 1997 Revolving Credit
Facility, including the effect of interest rate swap agreements currently
outstanding, was 6.8%. Repayment of funds borrowed under the facility is not
required until the expiration of the facility. The most restrictive covenants
under the 1997 Revolving Credit Facility include a maximum Consolidated Total
Indebtedness to EBITDA Ratio of 3.75 to 1.0, minimum Interest Coverage Ratio of
3.5 to 1.0 and a minimum Consolidated Tangible Net Worth, all as defined in the
1997 Revolving Credit Facility agreement. The 1997 Revolving Credit Agreement,
as amended, excludes the Antitrust Charge from EBITDA for both pricing and
covenant calculation purposes. The 1997 Revolving Credit Facility is
collateralized with receivables, inventory and substantially all of the
Company's property, plant and equipment.

     As of July 31, 1999, the Company had $32.1 million of availability under
the 1997 Revolving Credit Facility. As of July 31, 1999, borrowings under the
1997 Revolving Credit Facility totaled $110.5 million and letters of credit
outstanding totaled approximately $7.4 million.

     During fiscal 1998, the Company's Board of Directors authorized the
expenditure of up to $10 million to repurchase the Company's Common Stock.
Subject to price and market considerations and applicable securities laws, such
purchases may be made from time to time in open market, privately negotiated or
other transactions. No time limit was placed on the duration of the repurchase
program. The extent and timing of any repurchases will depend on market
conditions and other corporate considerations. During fiscal 1999, the Company
repurchased 414,200 shares of its Common Stock for $4.2 million under its share
repurchase program. Since fiscal 1998, the Company has repurchased an aggregate
467,200 shares of its Common Stock under its share repurchase program at a total
cost of $5.7 million.

     During fiscal 1999, total assets decreased $14.7 million to $274.4 million.
A $12.5 million reduction in outstanding customer accounts receivable and a
$22.8 million reduction in property, plant and equipment due to non-cash
depreciation and impaired asset write-offs were partially offset by a $4.8
million increase in inventories and $15.5 million in capital expenditures. Total
liabilities decreased $11.2 million to $193.1 million, with most of the decrease
attributable to funding antitrust settlements and costs during fiscal 1999.
Stockholders' equity declined $3.5 million to $81.3 million, with the decline
attributable to funding $4.2 million in Common Stock repurchases during fiscal
1999.

     Cash flow provided by operations for fiscal 1999 was $17.7 million. Cash
inflows from net income plus non-cash items of $32.2 million, which includes the
$5.2 million net Closure Charge, were reduced by $14.5 million in net cash
outflows from changes in working capital items. Major working capital outflows
during fiscal 1999 included a $5.8 million increase in inventory, coupled with
$22.1 million in funding of antitrust settlements and costs. In addition, the
Company funded $1.4 million in severance and other related costs associated with
the St. Marys, PA graphite production facility

                                                                              19
<PAGE>   21
closure and $7.6 million in net interest payments. These outflows were
partially offset by a $12.4 million cash inflow from reduced accounts
receivable.

     The Company's investing activities have historically included short-term
investments and capital expenditures ranging from $15.5 million in fiscal 1999
to $64.3 million in fiscal 1998. The substantial increase in capital
expenditures during fiscal 1997 and fiscal 1998 is due primarily to the
Modernization Program and other significant capital projects initiated in fiscal
1997. The Company believes that most of its future investing activity cash flow
requirements will be for capital expenditures.

     The Company's financing activities have principally represented short-term
draw downs and repayments on its revolving credit facilities, as well as
periodic repurchases of Senior Notes in open market transactions and cash
inflows from exercises of stock options. The Company also repurchased treasury
shares in fiscal 1999 and 1998 at a cost of $4.2 million and $1.9 million,
respectively. Other financing activities during fiscal 1998 also included the
effects of the Tender.

WORKING CAPITAL REDUCTION PROGRAM

     The Company intends to implement a working capital reduction program during
fiscal 2000. In connection with this program, the Company intends to temporarily
reduce graphite electrode and needle coke production in order to reduce
inventory levels and further improve the Company's cost structure. This program
is expected to have a positive effect on operating cash flows as cash outflows
for raw materials, labor and utilities will be reduced during the period of
lower production. However, the program is expected to have a negative impact on
the Company's operating results during the period of reduced production, as the
Company will not realize operating efficiencies typical of higher levels of
production. This situation may result in the Company reporting a net loss from
operations for the fiscal year ending July 31, 2000. The program, which is
expected to be effective for the quarter ending January 31, 2000 and part of the
quarter ending April 30, 2000, is expected to result in the temporary layoff of
approximately 180 employees.

ITEM 7A QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

The Company is exposed to financial, market and economic risks in many areas of
its business. The Company utilizes several financial instruments and risk
management programs in an effort to mitigate much of this exposure. The
following is a summarization of the programs utilized by the Company in an
attempt to mitigate these risks.

FOREIGN CURRENCY RISKS

Approximately 30% of the Company's net sales during each of the fiscal years
ended July 31, 1999, 1998 and 1997 were to customers located in foreign
countries. The majority of these foreign sales were denominated in local
currencies, subjecting the Company to foreign currency exchange rate risk. The
Company regularly enters into forward foreign currency contracts to help
mitigate foreign currency exchange rate exposure on customer accounts receivable
and sales commitments denominated in foreign currencies. These contracts require
the Company to deliver foreign currencies in the future in order to receive U.S.
dollars owed to it under the contracts at settlement. In the past, the Company
has been generally successful in fulfilling its obligations to deliver the
foreign currencies due under its forward foreign currency contracts. These
contracts generally mature within 12 months and are principally unsecured
contracts with commercial banks. Gains and losses related to forward foreign
currency contracts are deferred and recognized in income at the time of the sale
of the product.

     As of July 31, 1999 and 1998, the Company had $26.4 million and $39.4
million, respectively, in forward foreign currency contracts outstanding. A
hypothetical 10% change in forward rates would result in a gain or loss of
approximately $2.6 million related to the contracts outstanding as of July 31,
1999, although any gain or loss would be substantially offset by an inverse
change in the value of future collections on foreign accounts receivable or
sales commitments. For purposes of this sensitivity analysis, October 1999
forward rates as of July 31, 1999 were adjusted by the 10% hypothetical change
and applied to the notional value of the contracts outstanding. The average
maturity of the Company's forward foreign currency contracts is October 1999.

     The cash flows from these contracts are classified in a manner consistent
with the underlying nature of the transactions. See Note 2 to the consolidated
financial statements for a detailed description of the Company's foreign
currency exposure, including customer accounts receivable denominated in foreign
currencies and forward foreign currency contracts outstanding.

20
<PAGE>   22

COMMODITY PRICE RISKS

The Company's affiliate, Seadrift, purchases approximately 2.5 million barrels
of low sulfur decant oil each year to produce needle coke, the key raw material
in the production of graphite electrodes. The cost of refinery decant oil is
pegged to the U.S. Gulf Coast spot cargo barge prices and, in some cases, West
Texas Intermediate crude oil. The Company regularly enters into crude oil and
low sulfur fuel oil futures and swap agreements in order to help mitigate
exposure to fluctuations in the cost of decant oil. These futures and swap
contracts are financial hedges; the Company never actually takes delivery of the
oil product that is the subject of the contracts.

     In the case of futures contracts, the Company agrees to purchase crude oil
in the future at a set price, then liquidates the contract prior to settlement.
The difference between the price of crude oil on the date the Company enters
into the contract and the price on the settlement date represents the financial
gain or loss on that contract. In the case of swap contracts, the Company agrees
to pay a fixed price for low sulfur fuel oil and a counter party agrees to pay
the variable market price for a particular month. The difference between the
fixed price and the average market price for the applicable month represents the
financial gain or loss on the contract. Gains and losses associated with these
contracts, when settled, are deferred as an adjustment to Seadrift's oil
inventory values and, ultimately, the carrying cost of needle coke.

     As of July 31, 1999, the Company had $6.0 million in low sulfur fuel oil
swap contracts. A 10% change in the futures rates for low sulfur fuel oil would
result in a $0.8 million gain or loss related to these contracts, although any
gain or loss would be substantially offset by an inverse change in the purchase
price of low sulfur decant oil expected to be purchased in the future. This
hypothetical computation assumes a parallel shift in the applicable commodity
futures prices. For purposes of this sensitivity analysis, forward low sulfur
fuel oil prices for the months of August 1999 through December 1999 were
adjusted by the 10% hypothetical change and applied to the notional number of
barrels being hedged per the contracts outstanding. An increase in decant oil
costs experienced in early fiscal 2000 may have a negative impact on the
Company's gross margin if the higher oil costs continue for an extended period
of time or if the Company is unable to realize needle coke price increases in
fiscal 2000. The Company's commodity hedging program will mitigate the increase
in oil costs to some degree in fiscal 2000.

     An additional market risk associated with the commodity product Seadrift
purchases is availability of low sulfur decant oil of an acceptable quality. The
Company utilizes several suppliers of low sulfur decant oil in an effort to
disperse the risk of availability to some degree. Prices and availability of low
sulfur decant oil may be impacted by many factors, including world crude oil
production and output, global demand for oil products and the production
parameters of Seadrift's decant oil suppliers. While the Company believes that a
sufficient amount of decant oil of an acceptable quality is currently readily
available, there can be no assurance that Seadrift will be able to obtain an
adequate quantity of suitable feedstocks at all times in the future or at
acceptable prices.

     See Note 2 to the consolidated financial statements for a detailed
description of the consolidated financial statement impact of the Company's oil
hedging activities during the fiscal years presented therein.

INTEREST RATE RISKS

The Company's indebtedness as of July 31, 1999 is comprised of approximately
$110 million in borrowings outstanding under the 1997 Revolving Credit Facility.
Interest cost under the 1997 Revolving Credit Facility is based on either PNC
Bank's prime rate or a floating LIBOR rate plus a spread (currently 1.125%)
based on a leverage calculation. The Company uses interest rate swap and cap
agreements to hedge a portion of its debt cost in an attempt to strike a
favorable balance between fixed and variable rate debt and keep financing costs
as low as possible. The Company has entered into several interest rate swap and
cap agreements. The interest rate swap agreements effectively fix the Company's
LIBOR rate at approximately 5.7% for a decreasing level of borrowings
outstanding ranging from $70.0 million in fiscal 2000 to $15.0 million in fiscal
2003. The interest rate swap agreements did not have a material impact on the
Company's consolidated financial statements during the fiscal year ended July
31, 1999. The interest rate cap agreements effectively cap the Company's base
LIBOR rate at 7.5% on borrowings ranging from $30.0 million in fiscal 2000 to
$26.0 million in fiscal 2003. The interest rate cap agreements did not have a
material impact on the Company's consolidated financial statements for the
fiscal year ended July 31, 1999.

                                                                              21
<PAGE>   23

     The Company's effective interest rate, which includes actual interest costs
as well as bank fees and amortization of debt transaction costs, for its fiscal
year ended July 31, 1999 was 7.0%. The Company's blended effective interest rate
on borrowings outstanding as of July 31, 1999 was 7.0%. A hypothetical 10%
change in the blended effective interest rate assuming debt levels as of July
31, 1999 would result in a $0.8 million increase or decrease in interest costs.

YEAR 2000

The Company has modified, upgraded and replaced certain components of its
computer software, operating systems and manufacturing process control systems
to accommodate the Year 2000 changes required for correct recording of dates in
the year 2000 and beyond. The Company has adopted a comprehensive Year 2000
compliance action plan that includes (i) inventorying all of its information
technology (IT) systems, manufacturing process control systems and non-IT
systems, (ii) assessing these systems and resources for Year 2000 compliance,
(iii) remedying and replacing non-compliant systems, (iv) testing upgraded
systems for compliance, and (v) developing contingency plans. The Company has
substantially completed its Year 2000 compliance program, and, while the Company
continues to test and refine its contingency plans, the Company's significant IT
and non-IT systems are Year 2000 compliant. The Company does not expect to
experience significant operational problems associated with Year 2000
compliance.

     The Company continues to evaluate the Year 2000 compliance programs of its
critical customers, suppliers and service providers in an attempt to determine
the adequacy of their programs in addressing the Year 2000 issue. This
evaluation includes the distribution of questionnaires to such parties and the
development of contingency plans that assume the failure of a third party
critical to the Company's business. The Company believes that the most
reasonably likely worst-case scenario for the Company with respect to the Year
2000 issue is the failure of a critical vendor, including but not limited to a
utility supplier, or the failure of a critical customer, including electric arc
furnace steel producers who use a substantial amount of power in their
production process. A failure by a critical supplier or group of critical
customers could negatively impact sales, profits and cash flows. The Company
believes that the formulation of contingency plans will help mitigate exposure
and losses should such a failure occur. However, because the Company's overall
Year 2000 compliance is contingent upon the readiness of its critical vendors
and customers, there can be no assurance that the Company's Year 2000 compliance
programs will adequately address Year 2000 issues not under its direct control.

FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements that are based on current
expectations, estimates and projections about the industries in which the
Company operates, management's beliefs and assumptions made by management. Words
such as "expects," "anticipates," "intends," "plans," "believes," "estimates"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, and
are subject to the safe harbor created thereby. These statements are based on a
number of assumptions that could ultimately prove inaccurate and, therefore,
there can be no assurance that such statements will prove to be accurate.
Factors that could affect actual future results include the developments
relating to the antitrust investigations by the Department of Justice, the
antitrust enforcement authorities of the European Union or related civil
lawsuits as well as the assertion of other claims relating to such
investigations or lawsuits or the subject matter thereof. While the Company
believes that its Antitrust Reserve is adequate, there can be no assurance that
agreements in principle will be finalized or that future developments or other
factors might not adversely affect current estimates. Such factors also include
the possibility that forecasted demand or prices for the Company's products may
not occur or continue, changing economic and competitive conditions (including
currency exchange rate and commodity pricing fluctuations), technological risks
and other risks, costs and delays associated with the start-up and operation of
major capital projects (including the Company's modernization program), changing
governmental regulations (including environmental rules and regulations) and
other risks and uncertainties, including those detailed in the Company's filings
with the Securities and Exchange Commission. The Company does not undertake to
publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise.

22
<PAGE>   24

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
The Carbide/Graphite Group, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of The
Carbide/Graphite Group, Inc. and Subsidiaries (the Company) at July 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended July 31, 1999, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP
------------------------------

Pittsburgh, Pennsylvania 15219
September 8, 1999
<PAGE>   25
CONSOLIDATED STATEMENTS OF OPERATIONS
THE CARBIDE/GRAPHITE GROUP, INC.



<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share information)

<S>                                                                    <C>                <C>              <C>
Net sales                                                              $240,130           $293,751         $289,586
Operating costs and expenses:
  Cost of goods sold                                                    202,888            242,535          235,401
  Selling, general and administrative                                    14,925             14,884           16,031
  Early retirement/severance charge (Note 12)                                --                 --            1,100
  Other expense (Note 12)                                                15,043             38,000               --
---------------------------------------------------------------------------------------------------------------------------

    Operating income (loss)                                               7,274             (1,668)          37,054
Other costs and expenses:
  Interest expense, net (Note 6)                                          6,617              5,130            7,894
---------------------------------------------------------------------------------------------------------------------------

    Income (loss) before income taxes
      and extraordinary loss                                                657             (6,798)          29,160
Provision (benefit) for taxes on income from operations (Note 4)            259             (1,729)          10,732
---------------------------------------------------------------------------------------------------------------------------

    Income (loss) before extraordinary loss                                 398             (5,069)          18,428
Extraordinary loss on early extinguishment of debt, net of
    tax benefit of $3,769 in 1998 and $84 in 1997 (Note 6)                   --             (6,417)            (126)
---------------------------------------------------------------------------------------------------------------------------

        Net income (loss)                                              $    398           $(11,486)        $ 18,302
===========================================================================================================================

EARNINGS PER SHARE INFORMATION (Note 1)
  Income (loss) before extraordinary loss:
    Basic                                                              $   0.05           $  (0.58)        $   2.16
    Diluted                                                            $   0.05           $  (0.58)        $   2.09
---------------------------------------------------------------------------------------------------------------------------

  Extraordinary loss on early extinguishment of debt, net:
    Basic                                                                    --              (0.74)           (0.01)
    Diluted                                                                  --              (0.74)           (0.02)
---------------------------------------------------------------------------------------------------------------------------

  Net income (loss):
    Basic                                                              $   0.05           $  (1.32)        $   2.15
    Diluted                                                            $   0.05           $  (1.32)        $   2.07
---------------------------------------------------------------------------------------------------------------------------

Common and common equivalent shares:
    Basic                                                             8,391,192          8,699,304        8,517,022
    Diluted                                                           8,415,437          8,699,304        8,822,706
===========================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


24
<PAGE>   26

CONSOLIDATED BALANCE SHEETS
THE CARBIDE/GRAPHITE GROUP, INC.

<TABLE>
<CAPTION>
July 31,                                                                                      1999             1998
---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share and per share information)

<S>                                                                                      <C>              <C>
ASSETS
Current assets:
  Accounts receivable--trade, net of allowance for doubtful
     accounts: $819 in 1999 and $2,025 in 1998 (Note 2)                                  $  37,997        $  50,469
  Inventories (Note 3)                                                                      73,621           68,839
  Income taxes receivable (Note 4)                                                           6,592               --
  Deferred income taxes (Note 4)                                                            12,093           18,189
  Other current assets                                                                       5,989            6,884
---------------------------------------------------------------------------------------------------------------------------

    Total current assets                                                                   136,292          144,381
Property, plant and equipment, net (Note 5)                                                130,342          137,603
Other assets                                                                                 7,782            7,115
---------------------------------------------------------------------------------------------------------------------------

      Total assets                                                                       $ 274,416        $ 289,099
===========================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Overdrafts                                                                             $   4,079        $   2,457
  Accounts payable, trade                                                                   16,937           15,525
  Income taxes payable (Note 4)                                                                 --            1,002
  Accrued expenses:
    Antitrust claims reserve (Note 7)                                                       21,404           36,538
    Vacation                                                                                 3,242            3,826
    Workers' compensation                                                                    5,597            5,782
    Other                                                                                    9,429            9,122
---------------------------------------------------------------------------------------------------------------------------

    Total current liabilities                                                               60,688           74,252
Long-term debt (Notes 2 and 6)                                                             110,500          110,232
Deferred income taxes (Note 4)                                                               8,107            6,561
Retirement benefit plans and other (Note 8)                                                 11,424           10,725
Deferred revenue (Note 1)                                                                    2,380            2,515
---------------------------------------------------------------------------------------------------------------------------

      Total liabilities                                                                    193,099          204,285
===========================================================================================================================

Commitments and contingencies (Note 7)
---------------------------------------------------------------------------------------------------------------------------

Stockholders' equity:
  Preferred Stock, $0.01 par value; 2,000,000 shares authorized; none issued                    --               --
  Common Stock, $0.01 par value; 18,000,000 shares authorized;
     shares issued: 9,937,042 in 1999 and 9,884,542 in 1998                                     99               99
  Additional paid-in capital, net of equity issue costs of $1,398                           36,616           36,243
  Retained earnings                                                                         55,595           55,197
  Common Stock to be issued under options (Note 9)                                              39              100
---------------------------------------------------------------------------------------------------------------------------
                                                                                            92,349           91,639
Common Stock held in treasury at cost (Note 14):
  1,599,200 shares in 1999 and 1,185,000 shares in 1998                                    (11,032)          (6,825)
---------------------------------------------------------------------------------------------------------------------------

      Total stockholders' equity                                                            81,317           84,814
===========================================================================================================================

      Total liabilities and stockholders' equity                                         $ 274,416        $ 289,099
===========================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                                                              25
<PAGE>   27

CONSOLIDATED STATEMENTS OF CASH FLOWS
THE CARBIDE/GRAPHITE GROUP, INC.

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------
(in thousands)

<S>                                                                    <C>                <C>               <C>
Net income (loss)                                                      $    398           $(11,486)         $18,302
Adjustments to reconcile net income (loss)
  to cash provided by operations:
  Depreciation and amortization                                          18,022             14,012           10,882
  Amortization of debt issuance costs                                       160                190              341
  Amortization of intangible assets                                          81                364              318
  Adjustments to deferred taxes                                           7,642            (14,102)          (1,656)
  Provision for loss--accounts receivable                                   120                 --              120
  Extraordinary loss on early extinguishment of debt                         --             10,186              210
  Loss on the impairment of assets                                        5,742                 --               --
Increase (decrease) in cash from changes in:
  Accounts receivable                                                    12,352             (1,381)          (3,816)
  Inventories                                                            (5,782)            (9,394)          (4,666)
  Income taxes                                                           (7,438)             1,796            6,755
  Other current assets                                                      871               (936)            (926)
  Accounts payable and accrued expenses                                 (14,160)            28,892            6,467
  Net change in other non-current assets and liabilities                   (311)                50             (125)
---------------------------------------------------------------------------------------------------------------------------

    Net cash provided by operations                                      17,697             18,191           32,206
---------------------------------------------------------------------------------------------------------------------------

Investing activities:
  Capital expenditures                                                  (15,532)           (64,306)         (33,765)
  Proceeds from (purchases of) short-term investments                        --             15,750           (5,550)
---------------------------------------------------------------------------------------------------------------------------

    Net cash used for investing activities                              (15,532)           (48,556)         (39,315)
---------------------------------------------------------------------------------------------------------------------------

Financing activities:
  Payments on revolving credit facilities                               (68,670)           (75,400)              --
  Proceeds from revolving credit facilities                              69,020            185,550               --
  Repurchase or redemption of Senior Notes, including premiums
     of $8,077 in 1998 and $168 in 1997                                      --            (88,030)          (1,896)
  Net change in cash overdraft                                            1,622              2,457               --
  Proceeds from exercise of stock options under benefit plans               157                619              354
  Purchase of treasury stock                                             (4,207)            (1,930)              --
  Other                                                                     (87)              (836)              --
---------------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) financing activities                 (2,165)            22,430           (1,542)
---------------------------------------------------------------------------------------------------------------------------

Net change in cash and cash equivalents                                      --             (7,935)          (8,651)
Cash and cash equivalents, beginning of period                               --              7,935           16,586
---------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                     --                 --          $ 7,935
===========================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



26
<PAGE>   28

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THE CARBIDE/GRAPHITE GROUP, INC.

<TABLE>
<CAPTION>
                                                                                                    Common
                                                                                                  Stock to
                                                       Common Stock    Additional                be Issued     Unfunded
                                  Comprehensive        ------------       Paid-In    Retained        Under      Pension    Treasury
                                  Income (Loss)     Shares     Amount     Capital    Earnings      Options   Obligation       Stock
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except
share information)

<S>                               <C>            <C>           <C>     <C>          <C>           <C>        <C>          <C>
Balance at July 31, 1996                         9,397,670       $94     $30,153     $48,381     $1,151            $(76)  $  (4,895)
Net income                            $ 18,302                                        18,302
Decrease in unfunded
  pension obligation                        76                                                                       76
-----------------------------------------------

  Comprehensive income                $ 18,378
===============================================

Stock option compensation                                                                            47
Exercise of stock options                          354,602         3       2,093                 (1,037)
Tax benefit on exercise
  of stock options                                                         1,917
-----------------------------------------------------------------------------------------------------------------------------------


Balance at July 31, 1997                         9,752,272        97      34,163      66,683        161              --      (4,895)
Net loss                              $(11,486)                                      (11,486)
===============================================

Exercise of stock options                          132,270         2         678                    (61)
Tax benefit on exercise
  of stock options                                                         1,402
Purchase of treasury stock                                                                                                   (1,930)
-----------------------------------------------------------------------------------------------------------------------------------



Balance at July 31, 1998                         9,884,542        99      36,243      55,197        100              --      (6,825)
Net income                            $    398                                           398
===============================================

Exercise of stock options                           52,500        --         218                    (61)
Tax benefit on exercise
  of stock options                                                           155
Purchase of treasury stock                                                                                                   (4,207)
-----------------------------------------------------------------------------------------------------------------------------------

BALANCE AT JULY 31, 1999                         9,937,042       $99     $36,616     $55,595     $   39              --    $(11,032)
===================================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.



                                                                              27
<PAGE>   29


FINANCIAL NOTES
THE CARBIDE/GRAPHITE GROUP, INC.


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of The
Carbide/Graphite Group, Inc. and its wholly owned subsidiaries and affiliates.
Intercompany accounts and transactions have been eliminated.

     The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These may affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the consolidated financial statements. They may also affect the reported
amounts of revenues and expenses during the reporting period. Actual amounts
could differ from those estimates upon resolution of certain matters.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company adopted SFAS #131, "Disclosures about Segments of an Enterprise and
Related Information" and SFAS #132, "Employers' Disclosure about Pensions and
Other Postretirement Benefits" for its fiscal year ended July 31, 1999. The
Company is required to adopt SFAS #133, "Accounting for Derivative Instruments
and Hedging Activities" for its fiscal year ending July 31, 2001. SFAS #133
establishes accounting and reporting standards for derivatives and hedging
activities. The Company has not yet completed its evaluation of the financial
accounting and reporting impact of SFAS #133.

INVENTORIES

Inventories are stated at the lower of cost or market, with cost determined
under both the actual cost and the last-in, first-out (LIFO) method. The
supplies inventories are valued at the lower of average cost or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost and depreciated on a
straight-line basis over the estimated useful service lives of the related
assets. Interest costs associated with the construction of major capital
additions are capitalized as part of the cost of the related assets. Gains or
losses from the sale or retirement of assets are included in income. Repairs and
maintenance are expensed as incurred.

REVENUE RECOGNITION

Net sales to customers are recognized when products are shipped.

DEFERRED REVENUE

The Company has entered into a long-term supply contract to deliver carbide lime
to a customer for which it has received the contract amount in advance. The
Company is recognizing revenue associated with the agreement over the life of
the contract utilizing the straight-line method.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

ENVIRONMENTAL EXPENDITURES

The Company expenses or capitalizes environmental expenditures that relate to
current operations, as adjusted for indemnity claims against BOC, as
appropriate. Expenditures which do not contribute to future revenues and that
relate to existing conditions caused by past operations are expensed.
Liabilities are recorded when remedial efforts are probable and the costs can be
reasonably estimated.


28
<PAGE>   30

EARNINGS PER SHARE

The following table provides a reconciliation of the income (loss) and share
amounts for the basic and diluted earnings per share computations for income
(loss) from operations for the fiscal years ended July 31, 1999, 1998 and 1997
(dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                                                                          Per Share
                                                                  Income (Loss)             Shares           Amount
---------------------------------------------------------------------------------------------------------------------------

<S>                                                               <C>                    <C>              <C>
1999
Basic earnings per share                                              $     398          8,391,192           $ 0.05
===========================================================================================================================

Effect of dilutive securities:
  Options for common stock                                                   --             24,245
---------------------------------------------------------------------------------------------------------------------------

Diluted earnings per share                                            $     398          8,415,437           $ 0.05
===========================================================================================================================

1998
Basic earnings per share                                               $ (5,069)         8,699,304           $(0.58)
===========================================================================================================================

Effect of dilutive securities:
  Options for common stock                                                    --                --
---------------------------------------------------------------------------------------------------------------------------

Diluted earnings per share                                             $ (5,069)         8,699,304           $(0.58)
===========================================================================================================================

1997
Basic earnings per share                                                $18,428          8,517,022           $ 2.16
===========================================================================================================================

Effect of dilutive securities:
  Options for common stock                                                   --            305,684
---------------------------------------------------------------------------------------------------------------------------

Diluted earnings per share                                              $18,428          8,822,706           $ 2.09
===========================================================================================================================
</TABLE>


     Since the Company's results were a net loss from operations for the fiscal
year ended July 31, 1998, common equivalent shares were excluded from the
diluted earnings per share computation as their effect would have been
anti-dilutive.

INTANGIBLES AND DEFERRED CHARGES

Deferred charges and intangibles are recorded at historical cost and amortized
on a straight-line basis over the estimated economic life of the agreement or
contract underlying the assets.

RECLASSIFICATION

Certain amounts previously reported have been reclassified to conform with the
current year presentation.


                                                                              29
<PAGE>   31

2. FINANCIAL INSTRUMENTS

The Company's financial instruments as of July 31, 1999 and 1998 included its
revolving credit facility, with a carrying and estimated fair value of $110.5
million as of July 31, 1999. In addition, the Company purchases and currently
holds certain derivative financial instruments as hedging vehicles, as more
fully described below.

     The Company regularly enters into forward foreign currency contracts to
help mitigate foreign currency exchange rate exposure on customer accounts
receivable and sales commitments denominated in foreign currencies. The
Company's accounts receivable as of July 31, 1999 and 1998 included the
following foreign currency balances (in thousands):

<TABLE>
<CAPTION>
July 31,                                                                                      1999             1998
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>            <C>
German Marks                                                                                $4,057         $  4,230
Japanese Yen                                                                                 2,234            3,761
French Francs                                                                                1,468            2,053
Spanish Pesata                                                                                 592            1,946
Italian Lira                                                                                   586              745
Euros                                                                                          412               --
British Sterling                                                                                57            2,292
Belgian Francs                                                                                  --              836
---------------------------------------------------------------------------------------------------------------------------

  Total foreign currency accounts receivable                                                $9,406         $ 15,863
===========================================================================================================================
</TABLE>


     As of July 31, 1999 and 1998, the Company held forward foreign currency
contracts in the following foreign denominations (in thousands):

<TABLE>
<CAPTION>
                                                                     1999                                 1998
                                                           ----------------------               --------------------
                                                                           MARKET                             Market
                                                           CONTRACT         VALUE               Contract       Value
July 31,                                                      VALUE    GAIN (LOSS)                 Value  Gain (Loss)
---------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>         <C>                      <C>       <C>
Euros                                                       $12,549         $(213)                    --          --
German Marks                                                  5,183           100                $14,805    $    193
Japanese Yen                                                  3,636           (47)                 6,168         880
French Francs                                                 1,694            63                  7,155          48
British Sterling                                              1,907           (24)                 1,603         (13)
Spanish Pesata                                                  633            30                  3,806         (19)
Italian Lira                                                    621            68                  3,910          (6)
Belgian Francs                                                  213             4                  2,003          35
---------------------------------------------------------------------------------------------------------------------------

  Total forward foreign currency contracts                  $26,436         $ (19)               $39,450     $ 1,118
===========================================================================================================================
</TABLE>


     These contracts generally mature within 12 months and are principally
unsecured exchange contracts with commercial banks. Gains and losses related to
forward foreign currency contracts are deferred and recognized in income at the
same time as the sale of the product. Gains and losses deferred as of July 31,
1999 and 1998 were not material. The cash flows from these contracts are
classified in a manner consistent with the underlying nature of the
transactions.

30
<PAGE>   32

     The Company regularly enters into crude and low sulfur fuel oil futures
contracts and swap agreements. Such contracts and agreements are accounted for
as hedges of decant oil purchases, the primary raw material in the production of
needle coke. As of July 31, 1999 and 1998, the Company held the following oil
futures and swap contracts (in thousands):

<TABLE>
<CAPTION>
                                                                     1999                                 1998
---------------------------------------------------------------------------------------------------------------------------
                                                                           MARKET                               Market
                                                           CONTRACT         VALUE               Contract         Value
July 31,                                                      VALUE   GAIN (LOSS)                  Value   Gain (Loss)
---------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>        <C>                       <C>        <C>
West texas intermediate futures contracts                        --            --               $  4,765    $   (973)
Low sulfur fuel oil swap contracts                           $5,972        $1,759                  1,829        (498)
---------------------------------------------------------------------------------------------------------------------------

  Total commodity hedging contracts                          $5,972        $1,759               $  6,594    $ (1,471)
===========================================================================================================================
</TABLE>


     As of July 31, 1999 and 1998, deferred gains and losses associated with the
Company's oil hedging activities, including losses not yet recorded in the
consolidated financial statements and gains and losses deferred as an adjustment
to the Company's inventory value totaled a gain of $2.2 million and a loss of
$2.4 million, respectively. Losses associated with oil hedging activities
recognized as an increase to cost of goods sold in the consolidated statements
of operations were $3.4 million, $1.0 million and $0.3 million for the fiscal
years ended July 31, 1999, 1998 and 1997, respectively.

     In conjunction with the revolving credit facility refinancing completed in
fiscal 1998 (see Note 6), the Company entered into several interest rate swap
and cap agreements. The interest rate swap agreements effectively fix the
Company's average LIBOR borrowing rate at approximately 5.7% for a decreasing
level of borrowings outstanding ranging from $70.0 million in fiscal 2000 to
$15.0 million in fiscal 2003. The interest rate swap agreements did not have a
material impact on the Company's consolidated financial statements during the
fiscal year ended July 31, 1999 and 1998. The interest rate cap agreements
effectively cap the Company's base LIBOR rate at 7.5% on borrowings ranging from
$30.0 million in fiscal 2000 to $26.0 million in fiscal 2003. The interest rate
cap agreements did not have a material impact on the Company's consolidated
financial statements for the fiscal years ended July 31, 1999 and 1998.

3. INVENTORIES

Inventories were as follows (in thousands):

<TABLE>
<CAPTION>
July 31,                                                                                      1999             1998
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>              <C>
Finished goods                                                                             $22,386          $15,061
Work in process                                                                             43,723           36,672
Raw materials                                                                               13,429           18,545
---------------------------------------------------------------------------------------------------------------------------

                                                                                            79,538           70,278
LIFO reserve                                                                               (16,487)         (12,545)
---------------------------------------------------------------------------------------------------------------------------

                                                                                            63,051           57,733
Supplies                                                                                    10,570           11,106
---------------------------------------------------------------------------------------------------------------------------

  Total inventories                                                                        $73,621          $68,839
===========================================================================================================================
</TABLE>


     As of July 31, 1999 and 1998, approximately 72.2% and 66.0%, respectively,
of the Company's inventory was valued on a LIFO basis. If valued on a current
cost basis, total inventories would be $16.5 million and $12.5 million higher as
of July 31, 1999 and 1998, respectively.

     During fiscal 1999, the Company recorded a $1.0 million pre-tax charge to
write-off supplies inventories that became obsolete upon the closure of certain
graphite production facilities. See Note 12.

                                                                              31
<PAGE>   33

4. INCOME TAXES

The components of the provision (benefit) for income taxes related to operations
included the following (in thousands):

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                     <C>               <C>               <C>
Current:
  Federal                                                               $(7,827)          $ 11,523          $11,581
  State                                                                     444                850              807
---------------------------------------------------------------------------------------------------------------------------

                                                                         (7,383)            12,373           12,388
Deferred                                                                  7,642            (14,102)          (1,656)
---------------------------------------------------------------------------------------------------------------------------

  Provision (benefit) for income taxes                                  $   259           $ (1,729)         $10,732
===========================================================================================================================
</TABLE>


     A reconciliation of federal statutory income taxes to effective taxes
follows:

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                    <C>                <C>               <C>
Federal statutory taxes                                                $    230           $ (2,379)         $10,206
Tax effect of:
  State income taxes, net of federal benefit                                225                415              437
  Foreign sales corporation benefit                                        (232)              (394)            (700)
  Prior year return and audit adjustments                                   (92)               442              379
  Non-deductible expenses                                                    69                 88              117
  Other                                                                      59                 99              293
---------------------------------------------------------------------------------------------------------------------------

  Total effective taxes                                                $    259           $ (1,729)         $10,732
===========================================================================================================================
</TABLE>


     The components of deferred tax assets and liabilities follow (in
thousands):

<TABLE>
<CAPTION>
                                                                     1999                                 1998
                                                       --------------------------           --------------------------
                                                       DEFERRED TAX  DEFERRED TAX           Deferred Tax  Deferred Tax
July 31,                                                     ASSETS   LIABILITIES                 Assets   Liabilities
---------------------------------------------------------------------------------------------------------------------------

<S>                                                    <C>           <C>                    <C>           <C>
Depreciation                                                     --       $11,180                     --      $9,550
Antitrust claims reserve                                    $ 7,491            --                $12,788          --
Employee retirement benefits                                  1,784            --                  1,591          --
Inventory adjustments                                           790            --                  1,115          --
Workers' compensation                                         2,213            --                  2,284          --
Allowance for doubtful accounts                                 593            --                    731          --
Vacation reserve                                                792            --                  1,015          --
Other                                                         1,503            --                  1,654          --
---------------------------------------------------------------------------------------------------------------------------

  Total deferred taxes                                      $15,166       $11,180                $21,178      $9,550
===========================================================================================================================
</TABLE>

     Management believes that the net deferred tax asset as of July 31, 1999
will be realized through carryback provisions and reductions to future taxable
income. All federal tax returns prior to fiscal 1997 have been settled with the
Internal Revenue Service. Management does not believe that the settlement of its
open tax years will have a material adverse effect on the Company's future
operating results.

32
<PAGE>   34

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
July 31,                                                                                      1999             1998
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                      <C>             <C>
Buildings and improvements                                                               $  51,647       $   30,691
Machinery and equipment                                                                    272,469          250,142
---------------------------------------------------------------------------------------------------------------------------

                                                                                           324,116          280,833
Accumulated depreciation                                                                  (207,506)        (194,247)
---------------------------------------------------------------------------------------------------------------------------

                                                                                           116,610           86,586
Land                                                                                         7,711            7,711
Construction in progress                                                                     6,021           43,306
---------------------------------------------------------------------------------------------------------------------------

  Total property, plant and equipment                                                    $ 130,342       $  137,603
===========================================================================================================================
</TABLE>


6. LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
July 31,                                                                                      1999             1998
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>            <C>
11.5% Senior Notes Due 2003 (a)                                                                 --       $       82
The 1997 Revolving Credit Facility (b)                                                    $110,500          110,150
---------------------------------------------------------------------------------------------------------------------------

  Total long-term debt                                                                    $110,500       $  110,232
===========================================================================================================================
</TABLE>


(a)  In fiscal 1998, the Company completed the Tender, a transaction in which
     the Company repurchased essentially all ($79.9 million of the $80.0 million
     then outstanding) of its Senior Notes originally issued in fiscal 1994.
     After the Tender, $0.1 million in Senior Notes were outstanding. During
     fiscal 1999, the Company notified the trustee of the Senior Notes that it
     intended to exercise an option to redeem early the remaining Senior Notes
     at a price of $1,057.50 for each $1,000 in Senior Note principal, plus
     accrued and unpaid interest. The early redemption of the remaining Senior
     Notes outstanding was completed during fiscal 1999 and did not have a
     material impact on the Company's consolidated financial statements.

(b)  In connection with the Tender, the Company entered into an agreement with a
     consortium of banks led by PNC Bank for the 1997 Revolving Credit Facility,
     a $150 million revolving credit facility with a $15 million sublimit for
     letters of credit which will expire in December 2003. The 1997 Revolving
     Credit Facility was amended during fiscal 1998 and 1999. Interest under the
     1997 Revolving Credit Facility is based on, at the option of the Company,
     either PNC Bank's prime rate or a floating LIBOR rate plus a spread
     (currently 1.125%) based on a leverage calculation (specifically, the
     Consolidated Total Indebtedness to EBITDA Ratio, as defined in the
     agreement). As of July 31, 1999, the interest rate on borrowings
     outstanding under the 1997 Revolving Credit Facility, including the effect
     of interest rate swap agreements currently outstanding, was 6.8%. Repayment
     of funds borrowed under the facility is not required until the expiration
     of the facility. The most restrictive covenants under the 1997 Revolving
     Credit Facility include a maximum Consolidated Total Indebtedness to EBITDA
     Ratio of 3.75 to 1.0, minimum Interest Coverage Ratio of 3.5 to 1.0 and a
     minimum Consolidated Tangible Net Worth, all as defined in the 1997
     Revolving Credit Facility agreement. The 1997 Revolving Credit Agreement,
     as amended, excludes the Antitrust Charge from EBITDA for both pricing and
     covenant calculation purposes. The 1997 Revolving Credit Facility is
     collateralized with receivables, inventory and substantially all of the
     Company's property, plant and equipment.

     As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt for the fiscal year ended July 31, 1998. This extraordinary charge
represents the premium paid to Senior Note holders in connection with the Tender
and the write-off of unamortized deferred financing fees.


                                                                              33
<PAGE>   35

     Interest expense for the fiscal years ended July 31, 1998 and 1997 was
reduced by $0.3 million and $1.5 million respectively, of interest income earned
on cash, cash equivalents and short-term investments. Also, during fiscal 1999,
1998 and 1997 the Company capitalized $1.1 million, $1.7 million and $0.5
million, respectively, in interest costs associated with capital expenditures.
The Company's effective interest rate on outstanding indebtedness for fiscal
1999 was 7.0%.

7. COMMITMENTS AND CONTINGENCIES

The Company leases various types of machinery, equipment and real estate, which
are accounted for as operating leases. Future minimum rental payments under
non-cancellable operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
Year Ending July 31,
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                                          <C>
2000                                                                                                         $2,239
2001                                                                                                          1,675
2002                                                                                                          1,621
2003                                                                                                          1,506
Thereafter                                                                                                    1,663
===========================================================================================================================
</TABLE>

     Consolidated rent expense for the years ended July 31, 1999, 1998 and 1997
amounted to approximately $3.3 million, $2.9 million and $2.3 million,
respectively.

     The Company purchases electricity from various local producers under
long-term contracts which expire at various dates through 2007. These contracts
require the Company to make future minimum payments aggregating approximately
$4.0 million through the end of the contracts, whether or not the Company takes
power in the future.

     In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Department of Justice
(DOJ) that the Grand Jury is investigating price fixing by producers of graphite
products in the United States and abroad during the past five years. The Company
is cooperating with the DOJ in the investigation. The DOJ has granted the
Company and certain former and present senior executives the opportunity to
participate in its Corporate Leniency Program and the Company has entered into
an agreement with the DOJ under which the Company and such executives who
cooperate will not be subject to criminal prosecution with respect to the
investigation if charges are issued by the Grand Jury. Under the agreement, the
Company has agreed to use its best efforts to provide for restitution to its
domestic customers for actual damages if any conduct of the Company which
violated the Federal Antitrust Laws in the manufacture and sale of such graphite
products caused damage to such customers.

     Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc. (UCAR), SGL Carbon Corporation (SGL
Corp.) and SGL Carbon AG (SGL) as defendants (together, the Named Defendants)
and seek treble damages. On March 30, 1998, a number of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case initiated a separate action in the same District Court which
asserts substantially the same claims and seeks the same relief as the
consolidated case and names the Named Defendants, as well as Showa Denko Carbon,
Inc. (Showa Denko). Thereafter, seven additional groups of purchasers who were
previously included in the purported class of plaintiffs covered by the
consolidated case instituted their own actions against the Named Defendants,
Showa Denko and, in several cases, certain present or former related parties of
UCAR and Showa Denko, asserting substantially the same claims and seeking the
same relief as in the consolidated case. Four such actions were filed in the
United States District Court for the Eastern District of Pennsylvania on April
3, 1998, May 14, 1998, May 28, 1998 and March 31, 1999, respectively. One action
was filed in the United States District Court for the Northern District of Ohio
on April 17, 1998 but has been transferred to the Eastern District of
Pennsylvania for pre-trial proceedings. Another action was filed in the United
States District Court for the Western District of Pennsylvania on June 17, 1998


34
<PAGE>   36

but has also been transferred to the Eastern District of Pennsylvania for
pre-trial proceedings. The complaints or amended complaints in some of the cases
have also named as defendants other companies including Mitsubishi Corporation,
Tokai Carbon U.S.A., Inc. and related companies. On December 7, 1998, the
Company was served with a complaint filed by Chaparral Steel Company against the
Named Defendants, Showa Denko and parties related to Showa Denko and UCAR in
state court in Ellis County, Texas alleging violations of various Texas state
antitrust laws and seeking treble damages. Chaparral Steel Company has filed an
amended complaint adding two additional related plaintiffs.

     The Company has reached settlement agreements representing approximately
60% of domestic antitrust claims with the plaintiffs that filed lawsuits on
March 30, 1998, May 14, 1998, May 28, 1998 and March 31, 1999 and other
purchasers who had yet to file lawsuits. The Company has also reached agreements
in principle representing an additional 36% of domestic antitrust claims with
the class plaintiffs and the plaintiffs who filed the lawsuits on April 3, 1998,
April 17, 1998, and June 17, 1998, subject to the negotiation of certain
conditions and, with respect to the class plaintiffs, court approval. The
settlement in principle with the class plaintiffs, which contemplates possible
payments to certain foreign purchasers, would allow the Company to terminate any
definitive settlement agreement if the claims of foreign purchasers who opt out
of the class settlement exceed certain levels and would allow the class
plaintiffs to terminate such settlement agreement if the Company's sale to
certain foreign purchasers, as defined in the settlement agreement, exceed
certain levels. Although various of the settlements are unique, in the aggregate
they consist generally of current and deferred cash payments and, in a number of
cases, provisions which provide for additional payments under certain
circumstances ("most favored nations" provisions). In addition to the
settlements discussed above, the Company may also settle with various additional
purchasers.

     On February 10, 1999, a U.S. corporation which allegedly made purchases on
behalf of two foreign entities and a group of 22 foreign purchasers which are
based in several foreign countries filed a complaint against the Company, UCAR,
SGL, Tokai Carbon Co., Ltd., Tokai Carbon U.S.A., Inc., Nippon Carbon Co., Ltd.,
SEC Corporation and certain present and former related parties of UCAR in United
States District Court for the Eastern District of Pennsylvania. This complaint
has been amended to add four additional defendants. On September 24, 1999, three
Australian companies and one New Zealand company filed a complaint against the
same parties as are named in the lawsuit filed on February 10, 1999. These cases
assert substantially the same claims and seek the same relief as the
consolidated case. Other foreign purchasers have also made similar claims
against the Company but have not filed lawsuits.

     The Company understands that defendants UCAR and Showa Denko have reached
settlement agreements with the class action plaintiffs, which have been approved
by the court, and have also settled claims brought by various individual
purchasers. The Company further understands that UCAR, Robert P. Krass, Robert
J. Hart, SGL, Robert J. Koehler, Showa Denko and Tokai have agreed to plead or
have pleaded guilty to antitrust conspiracy charges filed by the DOJ and have
agreed to or been ordered to pay fines and, in the case of Messrs. Krass and
Hart, have agreed to serve prison sentences, in connection with those guilty
pleas or agreements to plead guilty.

     The Company has also advised the Commission of the European Communities
(the European Commission) that it wishes to invoke its Leniency Notice.
Generally under these guidelines, the European Commission may reduce fines and
other penalties if a company sufficiently cooperates with the European
Commission. The Company understands that the European Commission will determine
fines, if any, at the completion of its proceedings.

     On June 18, 1998, a group of Canadian purchasers filed a lawsuit in the
Ontario Court (General Division) claiming a conspiracy and violations of the
Canadian Competition Act. The Canadian lawsuit names the Named Defendants and
Showa Denko, as well as several present or former parents, subsidiaries and/or
affiliates of UCAR, SGL and Showa Denko. The Canadian Competition and Consumer
Law Division (Canadian Division) has initiated an inquiry and the Company is
cooperating fully with the authorities conducting that inquiry pursuant to an
agreement with the Director of Research and Investigation of the Canadian
Division under which the Company and its present and former officers, directors
and employees will not be subject to criminal prosecution.

     During fiscal 1998, the Company recorded a $38 million pre-tax charge ($25
million after expected tax benefits) for potential liabilities resulting from
civil lawsuits, claims, legal costs and other expenses associated with the
pending antitrust matters (the Initial Antitrust Charge). During fiscal 1999,
the Company recorded an additional $7.0 million


                                                                              35
<PAGE>   37
charge ($4.5 million after expected tax benefits) for such potential
liabilities (the Supplemental Antitrust Charge). The combined $45.0 million
charge (the Antitrust Charge) represents the Company's estimate, based on
current facts and circumstances, of the expected cost to resolve pending
antitrust claims. The Company understands that defendants UCAR and Showa Denko
have reached settlements with the class action plaintiffs and various individual
purchasers at amounts substantially higher than the levels contemplated in the
Antitrust Charge. In light of these and other developments including: (a)
possible future settlements with other purchasers and the effect of the possible
additional payments ("most favored nations") noted above, (b) the outcome of the
European Commission antitrust investigation, (c) potential additional lawsuits
by foreign purchasers, (d) the failure of agreements in principle to result in
definitive settlement agreements, (e) the failure to satisfy the conditions to
the class action settlement, and (f) adverse rulings or judgments in pending
litigation, the antitrust matters could result in aggregate liabilities and
costs which could differ materially and adversely from the Antitrust Charge and
could affect the Company's financial condition and its ability to service its
currently planned liquidity needs. As of July 31, 1999, $23.6 million in
antitrust settlements and costs had been paid.

     The Company is also party to various legal proceedings considered
incidental to the conduct of its business or otherwise not material in the
judgment of management. Management does not believe that its loss exposure
related to these cases is materially greater than amounts provided in the
consolidated balance sheet as of July 31, 1999. As of July 31, 1999, a $0.2
million reserve has been recorded to provide for estimated exposure on claims
for which a loss is deemed probable.

8. EMPLOYEE RETIREMENT BENEFIT PLANS

The Company maintains defined benefit pension, postretirement health care and
life insurance benefit plans covering substantially all of its hourly employees.
The benefits under the pension plans are based primarily on years of service and
benefit rates established by union contracts. For the pension plans, the
Company's funding policy is to contribute annually the amount recommended by its
consulting actuary, subject to statutory provisions. The postretirement
healthcare and life insurance plans (the OPEB Plans) are currently unfunded and
require the employee to pay a portion of the benefit cost.

     The following is a reconciliation of the beginning and ending benefit
obligations for the Company's pension plans and OPEB Plans (in thousands):

<TABLE>
<CAPTION>
                                                                 Pension Plans                         OPEB Plans
                                                            -----------------------              -----------------------

                                                               1999          1998                   1999        1998
------------------------------------------------------------------------------------------------------------------------

<S>                                                         <C>           <C>                    <C>         <C>
Benefit obligation as of the beginning of the year          $23,944       $18,754                $ 3,652     $ 3,293
  Service cost                                                  960           829                     95         107
  Interest cost                                               1,684         1,407                    246         239
  Actuarial loss (gain)                                         227         1,751                    390         217
  Plan amendments                                               281         1,839                     --          --
  Plan curtailments                                             133            --                    (48)         --
  Benefits paid to retirees                                    (742)         (636)                  (262)       (204)
------------------------------------------------------------------------------------------------------------------------

Benefit obligation as of the end of the year                $26,487       $23,944                $ 4,073     $ 3,652
========================================================================================================================
</TABLE>


     The following is a reconciliation of the beginning and ending fair values
of plan assets for the Company's pension plans (in thousands):

<TABLE>
<CAPTION>
                                                                                                   Pension Plans
                                                                                           ----------------------------

                                                                                              1999             1998
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                                        <C>              <C>
Fair value of plan assets as of the beginning of the year                                  $17,613          $15,971
  Actual return on plan assets                                                               1,821              859
  Employer contributions                                                                     1,077            1,419
  Benefits paid to retirees                                                                   (742)            (636)
-----------------------------------------------------------------------------------------------------------------------

Fair value of plan assets as of the end of the year                                        $19,769          $17,613
=======================================================================================================================
</TABLE>

Components of each of the plan's assets included primarily U.S. government
obligations and common stocks.


36
<PAGE>   38

     The following is a reconciliation of the funded status of the Company's
pension plans and OPEB Plans as of July 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                                 Pension Plans                         OPEB Plans
                                                            -----------------------              ----------------------
                                                               1999          1998                   1999        1998
-----------------------------------------------------------------------------------------------------------------------

<S>                                                         <C>           <C>                    <C>         <C>
Benefit obligations                                         $26,487       $23,944                $ 4,073     $ 3,652
Fair value of plan assets                                    19,769        17,613                     --          --
-----------------------------------------------------------------------------------------------------------------------

  Unfunded status                                            (6,718)       (6,331)                (4,073)     (3,652)
Unrecognized transition obligation                              412           599                     --          --
Unrecognized prior service cost                               5,234         5,972                    (31)        (35)
Unrecognized net actuarial loss (gain)                          741           841                    273        (116)
-----------------------------------------------------------------------------------------------------------------------

  Net funded (unfunded) status recognized                 $    (331)     $  1,081                $(3,831)    $(3,803)
=======================================================================================================================

Accrued benefit liability                                  $ (5,803)     $ (4,098)               $(3,831)    $(3,803)
Intangible asset                                              5,472         5,179                     --          --
-----------------------------------------------------------------------------------------------------------------------

  Net funded (unfunded) status recognized                  $   (331)     $  1,081                $(3,831)    $(3,803)
=======================================================================================================================
</TABLE>


     The following is a summary of the amount of net periodic benefit cost
recognized in the consolidated statement of operations for the years ended July
31, 1999, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                           Pension Plans                          OPEB Plans
                                               -----------------------------------      -------------------------------

                                                   1999        1998        1997          1999       1998       1997
-----------------------------------------------------------------------------------------------------------------------

<S>                                            <C>         <C>          <C>             <C>         <C>        <C>
Service cost                                   $    960    $    829     $   831         $  95       $107       $105
Interest cost                                     1,684       1,407       1,273           246        239        215
Expected return on plan assets                   (1,433)     (1,296)       (875)           --         --         --
Plan curtailments                                   680          --          --           (48)        --         --
Recognized net actuarial loss (gain)                 --         (10)         --            --         (8)       (17)
Net amortization                                    598         486         375            (4)        (4)        (4)
-----------------------------------------------------------------------------------------------------------------------

  Total net periodic benefit cost              $  2,489    $  1,416     $ 1,604         $ 289       $334       $299
=======================================================================================================================
</TABLE>


     The net gain and loss associated with plan curtailments during fiscal 1999
were the result of the curtailment of the St. Marys, Pennsylvania hourly
workforce pension plan and OPEB Plans. The curtailment was the result of the
severance of hourly employees at the St. Marys plant in connection with closure
of certain graphite production facilities (see Note 12).

      The following assumptions were used in the accounting for the Company's
pension plans and OPEB Plans:

<TABLE>
<CAPTION>
                                                                           1999               1998             1997
-----------------------------------------------------------------------------------------------------------------------

<S>                                                                        <C>                <C>              <C>
Discount rate:
  Net periodic benefit cost                                                7.00%              7.50%             7.50%
  Benefit obligation                                                       7.00               7.00              7.50
Expected return on plan assets                                             8.00               8.00              8.00
=======================================================================================================================
</TABLE>


     For estimated OPEB Plan expense and liability measurement purposes, the
health care cost trend rate was assumed to increase 7.0% in fiscal 2000, with
the rate of increase declining evenly each year to 5% in fiscal 2005 and
thereafter. If the assumed health care cost trend rate was increased by one
percent, the fiscal 1999 OPEB Plan benefit cost would have increased 2.2% while
the OPEB Plan benefit obligation as of July 31, 1999 would have increased
approximately 3.1%.


                                                                              37



<PAGE>   39

SAVINGS INVESTMENT PLAN

The Company has a defined contribution savings investment plan for substantially
all salaried employees. Employee contributions up to a maximum of 6% of employee
compensation are matched 50% by the Company. Additional employer contributions
may be made at the discretion of the Board of Directors based on the Company's
current year performance. The cost of these Company contributions was $1.8
million, $1.5 million and $2.0 million for the fiscal years ended July 31, 1999,
1998 and 1997, respectively.

9. OTHER COMPENSATION

MANAGEMENT STOCK OPTION PLANS

The Company has adopted several incentive or non-qualified, compensatory stock
option plans or agreements, participation in which is limited to officers,
directors and/or key employees of the Company (collectively, the MSOP). Options
granted under the MSOP generally vest over three years and expire ten years from
the date of grant. The table below summarizes option activity for the periods
indicated.

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                     <C>                <C>              <C>
Options outstanding, beginning of year:
  Number                                                                479,000            446,250          617,500
  Weighted-average exercise price                                      $  18.79          $   13.67        $    4.52
  Granted:
    Number                                                              269,800            177,000          176,500
    Weighted-average exercise price                                    $  13.94             $21.69        $   24.16
    Weighted-average fair value*                                       $   5.78          $    9.08        $    8.58
  Exercised:
    Number                                                              (52,500)          (132,250)        (311,750)
    Weighted-average exercise price                                    $   3.00          $    4.68        $    1.23
  Forfeited or expired:
    Number                                                               (4,000)           (12,000)         (36,000)
    Weighted-average exercise price                                    $  22.31          $   22.31        $   15.75
---------------------------------------------------------------------------------------------------------------------------

Options outstanding, end of year
  Number                                                                692,300            479,000          446,250
  Weighted-average exercise price                                      $  18.08          $   18.79        $   13.67
===========================================================================================================================
</TABLE>

*    The weighted-average fair value disclosed was computed utilizing the
     measurement alternatives suggested in SFAS #123. Such alternatives were not
     adopted by the Company for compensation measurement purposes.

     The following is a summary of the characteristics of the options
outstanding as of July 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding                                                     Range 1            Range 2              Total
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                <C>               <C>               <C>
Number                                                                  373,300            319,000            692,300
Weighted-average exercise price                                          $13.85             $23.03             $18.08
Range of exercise prices                                           $2.00-$18.25   $22.375-$34.6875     $2.00-$34.6875
Remaining weighted-average contractual life (in months)                     107                101                104
Number of options currently exercisable                                 103,500            179,000            282,500
Weighted-average exercise price of options exercisable                   $13.61             $23.54             $19.90
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


     As of July 31, 1999, 872,500 shares were reserved for issuance under the
MSOP. Options granted under the MSOP for the fiscal years presented were granted
at the fair market value of the Company's Common Stock as quoted on the NASDAQ
National Market System on the date of grant.


38
<PAGE>   40

     The Company adopted the disclosure requirements of SFAS #123, "Accounting
for Stock-Based Compensation." The measurement alternatives of SFAS #123 were
not adopted. SFAS #123 requires the disclosure of pro forma net income (loss)
and earnings per share amounts calculated as if the measurement alternatives
suggested by SFAS #123 had been adopted. The following table summarizes the
required pro forma disclosures for the fiscal years ended July 31, 1999, 1998
and 1997 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                  1999                       1998                        1997
---------------------------------------------------------------------------------------------------------------------------

                                          ACTUAL    PRO FORMA        Actual    Pro Forma         Actual    Pro Forma
---------------------------------------------------------------------------------------------------------------------------

<S>                                       <C>       <C>            <C>         <C>              <C>        <C>
Net income (loss)                         $  398       $ (326)     $(11,486)    $(11,848)       $18,302      $18,023
Earnings (loss) per share                 $ 0.05       $(0.04)     $  (1.32)    $  (1.36)       $  2.07      $  2.04
===========================================================================================================================
</TABLE>


     Significant assumptions used in determining fair value and compensation
cost for stock options in accordance with SFAS #123 included the following:

<TABLE>
<CAPTION>
                                                                           1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                  <C>                <C>              <C>
Risk-free rate of return                                                      5.5%               5.3%             6.3%
Expected volatility                                                          53.6%              44.8%            31.1%
Expected dividend yield                                                       0.0%               0.0%             0.0%
Expected life of option                                              3 to 4 years       4 to 5 years     4 to 5 years
===========================================================================================================================
</TABLE>


BONUS PLANS

In addition to the compensation expense recorded for the MSOP, the Company also
recorded $1.3 million, $0.2 million and $1.4 million in compensation expense for
the fiscal years ended July 31, 1999, 1998 and 1997, respectively, associated
with bonuses for executives and certain key employees of the Company. The bonus
amounts were determined by the Company's Board of Directors.

10. SEGMENT INFORMATION

The Company has three operating segments organized around its major product
groups: Graphite products, the Company's affiliate, Seadrift Coke, L.P. and
calcium carbide products. Two of these operating segments, graphite products and
Seadrift Coke, L.P., have been combined into one reportable segment: graphite
electrode products. The other reportable segment is calcium carbide products.
Such aggregation and presentation of reportable segments is consistent with the
approach utilized by the Company in previous fiscal years.

     The graphite electrode products segment manufactures and markets graphite
electrodes, primarily to electric arc furnace steel producers. In addition, this
segment manufactures and markets needle coke, the principal raw material used in
the manufacture of graphite electrodes, as well as certain other graphite
specialty products. The calcium carbide products segment manufactures and
markets calcium carbide and its direct derivatives, primarily acetylene gas,
that are used in the further manufacturing of specialty chemicals, in fuel gas
applications, and in metallurgical applications such as ductile iron and steel
desulfurization.

     Net sales to the Company's top ten customers as a percentage of total sales
were approximately 30% in each of the fiscal years ended July 31, 1999, 1998 and
1997. Sales of graphite electrodes and calcium carbide for metallurgical
applications to customers in the steel and ductile iron industries accounted for
approximately 60% of net sales in each of the fiscal years presented. Amounts
due from customers in the steel industry at July 31, 1999 and 1998 were $28.7
million and $36.4 million, respectively.

     As a result of increased needle coke production capabilities achieved
throughout fiscal 1998 and 1997, the Company is currently selling a greater
amount of needle coke to its competitors in the graphite electrode industry.
Third party needle coke sales as a percentage of total net sales were 13.3%,
11.5% and 9.9% for the fiscal years ended July 31, 1999, 1998 and 1997,
respectively.


                                                                              39
<PAGE>   41

     Segment information is as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                    <C>                <C>              <C>
NET SALES TO CUSTOMERS BY PRODUCT LINE:
Graphite electrodes                                                    $130,182           $159,997         $147,206
Needle coke                                                              31,833             33,907           28,615
Bulk graphite                                                            12,750              9,273           19,712
Granular graphite                                                         7,155              9,627           10,223
Other                                                                     1,698              2,963            4,289
---------------------------------------------------------------------------------------------------------------------------

  Total graphite electrode product net sales                            183,618            215,767          210,045
---------------------------------------------------------------------------------------------------------------------------

Acetylene:
  Pipeline acetylene                                                     17,085             28,863           27,577
  Fuel gas applications                                                  14,056             20,009           21,187
Metallurgical applications                                               19,679             23,712           24,652
Other                                                                     5,692              5,400            6,125
---------------------------------------------------------------------------------------------------------------------------

  Total calcium carbide product net sales                                56,512             77,984           79,541
---------------------------------------------------------------------------------------------------------------------------

    Total net sales to customers                                        240,130            293,751          289,586
---------------------------------------------------------------------------------------------------------------------------

Intersegment sales, at prevailing market prices:
  Graphite electrode products                                               152                338              248
Eliminations                                                               (152)              (338)            (248)
---------------------------------------------------------------------------------------------------------------------------

    Total net sales                                                    $240,130           $293,751         $289,586
---------------------------------------------------------------------------------------------------------------------------

TOTAL NET SALES TO GEOGRAPHIC AREAS:
  United States                                                        $157,118           $202,557         $199,895
  Europe                                                                 51,157             45,237           40,465
  Other Americas                                                         22,853             32,585           23,943
  Asia/Far East                                                           9,002             13,372           25,283
---------------------------------------------------------------------------------------------------------------------------

    Total net sales                                                    $240,130           $293,751         $289,586
---------------------------------------------------------------------------------------------------------------------------

OPERATING INCOME (LOSS):
  Graphite electrode products*                                         $ 24,710           $ 32,813         $ 36,346
  Calcium carbide products                                                5,079             10,470           10,616
  Unallocated corporate expenses                                        (22,515)           (44,951)          (9,908)
---------------------------------------------------------------------------------------------------------------------------

    Total operating income (loss)                                      $  7,274           $ (1,668)        $ 37,054
---------------------------------------------------------------------------------------------------------------------------

DEPRECIATION AND AMORTIZATION:
  Graphite electrode products                                          $ 16,371           $ 12,365         $  9,325
  Calcium carbide products                                                1,545              1,553            1,505
  Unallocated corporate                                                     187                458              370
---------------------------------------------------------------------------------------------------------------------------

    Total depreciation and amortization                                $ 18,103           $ 14,376         $ 11,200
---------------------------------------------------------------------------------------------------------------------------

EBITDA**
  Graphite electrode products                                          $ 41,081           $ 45,178         $ 45,671
  Calcium carbide products                                                6,624             12,023           12,121
  Unallocated corporate expenses                                         (7,285)            (6,493)          (8,438)
---------------------------------------------------------------------------------------------------------------------------

    Total EBITDA                                                       $ 40,420           $ 50,708         $ 49,354
---------------------------------------------------------------------------------------------------------------------------

IDENTIFIABLE ASSETS:
  Graphite electrode products                                          $224,773           $238,399         $171,643
  Calcium carbide products                                               27,888             29,332           27,695
  Corporate assets                                                       21,755             21,368           36,522
---------------------------------------------------------------------------------------------------------------------------

    Total assets                                                       $274,416           $289,099         $235,860
---------------------------------------------------------------------------------------------------------------------------

CAPITAL EXPENDITURES:
  Graphite electrode products                                          $ 13,718           $ 62,698         $ 31,701
  Calcium carbide products                                                1,814              1,608            2,064
---------------------------------------------------------------------------------------------------------------------------

    Total capital expenditures                                         $ 15,532           $ 64,306         $ 33,765
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

 *Excludes other expense in fiscal 1999 and 1998, which are included in
  "Unallocated Corporate Expenses" (see Note 12).

**EBITDA is defined as operating income before depreciation and amortization,
  early retirement/severance charges and other expense. EBITDA is not presented
  as a measure of operating results under generally accepted accounting
  principles. However, management believes that EBITDA is an appropriate measure
  of the Company's ability to service its cash requirements. EBITDA is an
  important measure in assessing the performance of the Company's business
  segments.


40
<PAGE>   42

11. CASH FLOW INFORMATION

Net cash payments for interest and income taxes were as follows (in thousands):

<TABLE>
<CAPTION>
Year Ended July 31,                                                        1999               1998             1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>               <C>               <C>
Interest                                                                 $7,572            $10,196           $8,913
Income taxes                                                                106              6,627            5,926
===========================================================================================================================
</TABLE>


12. OTHER ITEMS

EARLY RETIREMENT/SEVERANCE CHARGE

Early retirement/severance charges for the year ended July 31, 1997 represent
costs associated with the retirement of two executives of the Company.

OTHER EXPENSE

During fiscal 1999, the Company announced plans to close certain baking and
graphitizing operations at its St. Marys, Pennsylvania plant. Other expense for
fiscal 1999 includes the Closure Charge, an $8.0 million pre-tax charge to
provide for the estimated cost of the facility closure activities. Included in
this charge is $5.7 million for the net write-off of impaired fixed assets and
spare parts inventory, $1.4 million for hourly and salary workforce severance
costs and $0.9 million in other closure-related costs. Essentially all of these
costs were funded in fiscal 1999. Other expense for fiscal 1999 and 1998 also
includes charges of $7.0 million and $38.0 million, respectively, representing,
in total, the Antitrust Charge (see Note 7).


                                                                              41
<PAGE>   43

13. QUARTERLY RESULTS (UNAUDITED)

The following table sets forth certain unaudited consolidated quarterly
operating information of the Company (in millions, except per share
information):

<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1999:               1ST QUARTER      2ND QUARTER     3RD QUARTER      4TH QUARTER    FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------------

<S>                                     <C>              <C>             <C>              <C>            <C>
Net sales                                     $69.3           $58.2           $58.3            $54.3          $240.1
Gross profit                                   10.0             8.7             8.7              9.8            37.2
Operating income (loss)                        (1.6)***         5.3             4.5             (0.9)*           7.3
Net income (loss)                              (2.0)            2.5             1.8             (1.9)            0.4
Per diluted share:
  Net income (loss)                           (0.23)            0.30            0.22            (0.23)           0.05
===========================================================================================================================


Year Ended July 31, 1998:
---------------------------------------------------------------------------------------------------------------------------

Net sales                                     $73.4           $74.8           $72.8            $72.8          $293.8
Gross profit                                   14.1            14.5            10.7             11.9            51.2
Operating income (loss)                        10.3            10.1           (31.1)*            9.0            (1.7)
Income (loss) before extraordinary loss         5.7             5.8           (21.3)             4.7            (5.1)
Extraordinary loss                             (6.4)**           --              --               --            (6.4)
Net income (loss)                              (0.7)            5.8           (21.3)             4.7           (11.5)
Per diluted share:
  Income (loss) before extraordinary loss       0.64            0.66           (2.44)            0.54           (0.58)
  Net (loss) income                            (0.09)           0.66           (2.44)            0.54           (1.32)
===========================================================================================================================
</TABLE>

  * Includes a $7.0 million pre-tax charge in fiscal 1999 and a $38.0 million
    pre-tax charge in fiscal 1998 for potential antitrust liabilities (see
    Note 7).

 ** Represents net charges associated with the early retirement of Senior Notes
    (see Note 6).

*** Includes an $8.0 million pre-tax charge for facility closure activities (see
    Note 12).


14. SHARE REPURCHASE PROGRAM

During fiscal 1998, the Company's Board of Directors authorized the expenditure
of up to $10 million to repurchase the Company's Common Stock. Subject to price
and market considerations and applicable securities laws, such purchases may be
made from time to time in open market, privately negotiated or other
transactions. No time limit was placed on the duration of the repurchase
program. The extent and timing of any repurchases will depend on market
conditions and other corporate considerations. During fiscal 1999, the Company
repurchased 414,200 shares of its Common Stock for $4.2 million under its share
repurchase program. Since fiscal 1998, the Company has repurchased an aggregate
467,200 shares of its Common Stock under its share repurchase program at a total
cost of $5.7 million.


ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

This item is not applicable to the Registrant for this Annual Report on Form
10-K.

42
<PAGE>   44

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.

ITEM 11 EXECUTIVE COMPENSATION

Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item will be furnished in the Company's Proxy
Statement dated October 22, 1999 and to be filed within 120 days of July 31,
1999 and is incorporated herein by reference.


PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) List of Financial Statements

     The following consolidated financial statements, including the notes
thereto, of the Company and the Report of Independent Accountants set forth on
pages 24 through 42 and page 23, respectively, of this Annual Report on Form
10-K, are incorporated by reference into this Item 14 of Form 10-K by Item 8
hereof:

*    Consolidated Balance Sheets as of July 31, 1999 and 1998.
*    Consolidated Statements of Operations for the Years Ended July 31, 1999,
     1998 and 1997.
*    Consolidated Statements of Stockholders' Equity for the Years Ended
     July 31, 1999, 1998 and 1997.
*    Consolidated Statements of Cash Flows for the Years Ended July 31, 1999,
     1998 and 1997.
*    Report of Independent Accountants dated September 8, 1999.

(a)(2) List of Financial Statement Schedules

     The following financial statement schedule of the Company and the Report of
Independent Accountants are included on pages 49 and 48, respectively, of this
Annual Report on Form 10-K and are incorporated by reference into this Item 14
on Form 10-K:

*    Report of Independent Accountants dated September 8, 1999.
*    Schedule II--Valuation and Qualifying Accounts for the Years Ended July 31,
     1999, 1998 and 1997.

     All other financial statement schedules are not required, are not
applicable or the information called for therein is included elsewhere in the
consolidated financial statements or related notes thereto.


                                                                              43
<PAGE>   45

(a)(3) List of Exhibits

Exhibit No.   Description
--------------------------------------------------------------------------------

3.1*          Restated Certificate of Incorporation of the Company (incorporated
              herein by reference to Exhibit 3.1 to the Company's Registration
              Statement on Form S-1, Registration No. 33-91002)

3.2*          Amended and Restated By-Laws of the Company (incorporated herein
              by reference to Exhibit 3.2 to the Company's Registration
              Statement on Form S-1, Registration No. 33-91002)

3.3*          Restated Stockholders' Agreement dated as of September 19, 1995
              among the Company and the Management Stockholders (incorporated
              herein by reference to Exhibit 3.3 to the Company's Registration
              Statement on Form S-1, Registration No. 33-31408)

3.4*          Rights Agreement, including the associated Form of Rights
              Certificate and Form of Certificate of Designation for Series A
              Junior Participating Preferred Stock, dated as of May 21, 1999,
              between The Carbide/Graphite Group, Inc. and State Street Bank
              (incorporated herein by reference to Exhibit 1 of the Company's
              Current Report on Form 8-K dated May 21, 1999 and filed on June 1,
              1999)

4.1*          Specimen Certificate for Common Stock of the Company (incorporated
              herein by reference to Exhibit 4.1 to the Company's Registration
              Statement on Form S-1, Registration No. 33-91102)

4.2*          Indenture dated August 26, 1993 between the Company and State
              Street Bank and Trust Company, as trustee, relating to 11 1/2%
              Senior Notes Due 2003, including the form of Senior Note included
              therein (incorporated herein by reference to Exhibit 4.2 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-91102)

4.3*          Supplemental Indenture No. 2 dated as of September 15, 1997
              between the Company and State Street Bank and Trust Company, as
              trustee, related to the elimination of substantially all of the
              restrictive covenants and certain default provisions in the Senior
              Note Indenture (incorporated herein by reference to Exhibit 4.3 to
              the Company's Annual Report on Form 10-K for its fiscal year ended
              July 31, 1997, Commission File No. 0-20490)

10.1*         Securities Purchase Agreement dated as of September 25, 1991
              between the Company and BOC (incorporated herein by reference to
              Exhibit 10.1 to the Company's Registration Statement on Form S-1,
              Registration No. 33-65150)

10.2*         Asset Transfer Agreement dated as of July 9, 1988 among the
              Company, BOC and Centre Capital Investors, L.P. (incorporated
              herein by reference to Exhibit 10.2 to the Company's Registration
              Statement on Form S-1, Registration No. 33-65150)

10.3*         Asset Purchase Agreement dated as of January 17, 1995 among the
              Company, The C/G Specialty Products Business Trust, Materials
              Technology Corporation and SGL Carbon Corporation (incorporated
              herein by reference to Exhibit 2.1 to the Company's Current Report
              on Form 8-K dated January 17, 1995)

10.4*         Share Purchase Agreement dated as of January 17, 1995 between the
              Company and 9012-9677 Quebec Inc. (incorporated herein by
              reference to Exhibit 2.2 to the Company's Current Report on Form
              8-K dated January 17, 1995)

10.5*         Revolving Credit Agreement and Letter of Credit Issuance dated
              September 25, 1997 by and among the Company, PNC Bank, N.A. and
              the Financial Institutions party thereto (incorporated herein by
              reference to Exhibit 10.5 to the Company's Annual Report on Form
              10-K for its fiscal year ended July 31, 1997, Commission File No.
              0-20490)

10.6*         Second Amendment to Revolving Credit and Letter of Credit Issuance
              Agreement and Waiver between the Company and PNC Bank, N.A. dated
              April 30, 1998 (incorporated herein by reference to Exhibit 10.49
              to the Company's Quarterly Report on Form 10-Q for the quarterly
              period ended April 30, 1998, Commission File No. 0-20490)

44
<PAGE>   46

Exhibit No.   Description
--------------------------------------------------------------------------------

10.7*         Third Amendment to the Revolving Credit and Letter of Credit
              Issuance Agreement and Amendment to Revolving Credit Notes Among
              The Carbide/Graphite Group, Inc., the Lenders which are Parties
              thereto, and PNC Bank, N.A., as the Issuing Bank and as the Agent
              for the Lenders dated April 30, 1999 (incorporated herein by
              reference to Exhibit 10.33 to the Company's Quarterly Report on
              Form 10-Q for the quarterly period ended April 30, 1999)

10.8          Fourth Amendment to the Revolving Credit and Letter of Credit
              Issuance Agreement Among The Carbide/Graphite Group, Inc., the
              Lenders which are Parties thereto, and PNC Bank, N.A., as the
              Issuing Bank and as the Agent for the Lenders dated September 8,
              1999

10.9*         Office Lease dated August 30, 1991 between the Company and The
              Equitable Life Assurance Society of the United States
              (incorporated herein by reference to Exhibit 10.10 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-65150) (incorporated herein by reference to Exhibit 10.18 to
              the Company's Annual Report on Form 10-K for its fiscal year ended
              July 31, 1997, Commission File No. 0-20490)

10.10         Employment Agreement dated September 1, 1999 between the Company
              and Walter B. Fowler

10.11*        Employment Agreement dated February 1, 1998 between the Company
              and Stephen D. Weaver (incorporated herein by reference to Exhibit
              10.10 to the Company's Annual Report on Form 10-K for its fiscal
              year ended July 31, 1998, Commission File No. 0-20490)

10.12*        Separation Agreement dated April 25, 1997 between the Company and
              Walter E. Damian (incorporated herein by reference to Exhibit
              10.21 to the Company's Annual Report on Form 10-K for its fiscal
              year ended July 31, 1997, Commission File No. 0-20490)

10.13*        Separation Agreement dated April 25, 1997 between the Company and
              Jim J. Trigg (incorporated herein by reference to Exhibit 10.22 to
              the Company's Annual Report on Form 10-K for its fiscal year ended
              July 31, 1997, Commission File No. 0-20490)

10.14         Separation Agreement dated August 11, 1999 between the Company and
              Ararat Hacetoglu

10.15         Separation Agreement dated October 6, 1999 between the Company and
              Michael F. Supon

10.16*        1995 Stock-Based Incentive Compensation Plan of the Company
              (incorporated herein by reference to Exhibit 10.24 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-31408)

10.17*        Amendment to 1995 Stock-Based Incentive Compensation Plan of the
              Company dated August 26, 1996 (incorporated herein by reference to
              Exhibit 10.25 to the Company's Annual Report on Form 10-K for its
              fiscal year ended July 31, 1996, Commission File No. 0-20490)

10.18*        Agreement under the 1995 Stock-Based Incentive Plan (incorporated
              herein by reference to Exhibit 10.22 to the Company's Registration
              Statement on Form S-1, Registration No. 33-91102)

10.19*        Non-Employee Director Stock-Based Incentive Compensation Plan of
              the Company dated August 26, 1996 (incorporated herein by
              reference to Exhibit 10.27 to the Company's Annual Report on Form
              10-K for its fiscal year ended July 31, 1996, Commission File No.
              0-20490)

10.20*        Incentive Bonus Plan of the Company (incorporated herein by
              reference to Exhibit 10.33 to the Company's Annual Report on Form
              10-K for its fiscal year ended July 31, 1997, Commission File No.
              0-20490)

10.21*        Supplemental Executive Savings Plan of the Company (incorporated
              herein by reference to Exhibit 10.31 to the Company's Annual
              Report on Form 10-K for its fiscal year ended July 31, 1996,
              Commission File No. 0-20490)

10.22*        The 1998 Stock-Based Incentive Compensation Plan (incorporated
              herein by reference from Exhibit 10.32 of the Company's Quarterly
              Report on Form 10-Q for the quarterly period ended January 31,
              1999)


                                                                              45
<PAGE>   47

Exhibit No.   Description
--------------------------------------------------------------------------------

10.23*        Replacement Power Agreement between the Power Authority of the
              State of New York and the Company dated October 17, 1994
              (incorporated herein by reference to Exhibit 10.31 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-91102)

10.24*        Acetylene Purchase Agreement dated as of January 1, 1985 between
              BOC (as predecessor to the Company) and GAF Corporation
              (incorporated herein by reference to Exhibit 10.32 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-91102)

10.25*        Amendment to the Acetylene Supply Agreement between Air Products &
              Chemicals and the Company dated as of October 21, 1994
              (incorporated herein by reference to Exhibit 10.33 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-91102)

10.26*        Acetylene Agreement dated January 1, 1975, as amended June 12,
              1978 and February 10, 1982, between Airco, Inc. and DuPont
              (incorporated herein by reference to Exhibit 10.34 to the
              Company's Registration Statement on Form S-1, Registration No.
              33-91102)

10.27*        Agreement between the Company (Carbide Unit), Calvert City,
              Kentucky, and the Oil, Chemical and Atomic Workers, International
              Union, AFL-CIO Local 3-556, dated February 1, 1996 (incorporated
              herein by reference to Exhibit 10.38 to the Company's Annual
              Report on Form 10-K for its fiscal year ended July 31, 1996,
              Commission File No. 0-20490)

10.28         Agreement between the Company (Electrode Unit) and International
              Union of Electrical, Technical Salaried Machine and Furniture
              Workers, AFL-CIO Local Union 502, dated June 7, 1999

10.29*        Agreement by and between the Company (Carbide Division),
              Louisville, Kentucky Plant, and International Brotherhood of
              Firemen and Oilers Local No. 320, Affiliated with the AFL-CIO,
              dated July 1, 1996 (incorporated herein by reference to Exhibit
              10.40 to the Company's Annual Report on Form 10-K for its fiscal
              year ended July 31, 1996, Commission File No. 0-20490)

10.30*        Agreement between the Company (Electrode Unit) and Oil, Chemical
              and Atomic Workers International Union and Local Union Number
              8-23516, dated January 25, 1999 (incorporated herein by reference
              to Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q
              for the quarterly period ended January 31, 1999)

10.31*        Master Lease between the Company and PNC Leasing Corp. dated
              January 27, 1997 (incorporated herein by reference to Exhibit
              10.43 to the Company's Quarterly Report on Form 10-Q for the
              quarterly period ended April 30, 1997, Commission File No.
              0-20490)

21.1*         Subsidiaries and Affiliates of the Company (incorporated herein by
              reference to Exhibit 21.1 to the Company's Annual Report on Form
              10-K for its fiscal year ended July 31, 1997, Commission File No.
              0-20490)

23.1          Consent of Independent Accountants

27.1          Financial Data Schedule

* Exhibit has previously been filed with the Commission and is herein
  incorporated by reference.

(b) Reports on Form 8-K

On June 1, 1999, the Company filed a Report on Form 8-K dated May 21, 1999
announcing that its Board of Directors had approved a shareholders rights plan.
On June 2, 1999, the Company filed a Report on Form 8-K dated June 2, 1999
announcing that it was in active negotiations with the union representing its
hourly workforce at its St. Marys, PA plant. On June 7, 1999, the Company filed
a Report on Form 8-K dated June 7, 1999 announcing that it had reached a labor
agreement with the union representing its hourly workforce at its St. Marys, PA
plant.


46
<PAGE>   48

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on October 25,
1999.

THE CARBIDE/GRAPHITE GROUP, INC.

By:         /s/  Walter B. Fowler
-------------------------------------------------
            (WALTER B. FOWLER)
            President and Chief Executive Officer

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
October 25, 1999.

<TABLE>
<CAPTION>
Signature                                      Title
---------------------------------------------------------------------------------------------------------------------------

<S>                                            <C>
            /s/  Walter B. Fowler              Chairman of the Board, President, Chief Executive Officer and
------------------------------------------     Director (Principal Executive Officer)
            (WALTER B. FOWLER)

            /s/  Stephen D. Weaver             Vice President-Finance and Chief Financial Officer
------------------------------------------     (Principal Financial Officer)
            (STEPHEN D. WEAVER)

            /s/  Jeffrey T. Jones              Controller-Corporate Finance (Principal Accounting Officer)
------------------------------------------
            (JEFFREY T. JONES)

            /s/  Ararat Hacetoglu              Vice President and General Manager, Carbide Products
------------------------------------------
            (ARARAT HACETOGLU)

            /s/  Michael F. Supon              Vice President and General Manager, Electrodes and
------------------------------------------     Graphite Specialty Products
            (MICHAEL F. SUPON)

            /s/  Jim J. Trigg                  Vice President and General Manager, Seadrift Coke, L.P.
------------------------------------------
            (JIM J. TRIGG)

            /s/  James R. Ball                 Director
------------------------------------------
            (JAMES R. BALL)

            /s/  Paul F. Balser                Director
------------------------------------------
            (PAUL F. BALSER)

            /s/  Robert M. Howe                Director
------------------------------------------
            (ROBERT M. HOWE)

            /s/  Ronald B. Kalich              Director
------------------------------------------
            (RONALD B. KALICH)

            /s/  Nicholas T. Kaiser            Director
------------------------------------------
            (NICHOLAS T. KAISER)

            /s/  Charles E. Slater             Director
------------------------------------------
            (CHARLES E. SLATER)
</TABLE>


                                                                              47
<PAGE>   49

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
The Carbide/Graphite Group, Inc.:

In connection with our audits of the consolidated financial statements of The
Carbide/Graphite Group, Inc. and Subsidiaries (the Company) as of July 31, 1999
and 1998 and for each of the three years in the period ended July 31, 1999,
which financial statements are included in this Form 10-K, we have also audited
the financial statement schedule listed in Item 14 herein.

     In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.


/s/ PricewaterhouseCoopers LLP
----------------------------------
Pittsburgh, Pennsylvania
September 8, 1999



48
<PAGE>   50

SCHEDULE II

THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended July 31, 1999, 1998 and 1997 (in thousands)

<TABLE>
<CAPTION>
Col. A                                         Col. B            Col. C          Col. D         Col. E         Col. F
---------------------------------------------------------------------------------------------------------------------------
                                                                      Additions
                                           Balance at        --------------------------
                                            Beginning           Charged      Charged to                    Balance at
                                            of Period        to Expense  Other Accounts    Deductions*  End of Period
---------------------------------------------------------------------------------------------------------------------------

<S>                                        <C>               <C>         <C>               <C>          <C>
Allowance for Doubtful Accounts:
   Year Ended July 31, 1999                    $2,025              $120              --         $1,326        $   819
   Year Ended July 31, 1998                     2,029                --              --             (4)         2,025
   Year Ended July 31, 1997                     1,896               120             $13             --          2,029
===========================================================================================================================
</TABLE>

 * Represents uncollectible accounts written off and recoveries of customer
   accounts previously reserved for.





                                                                              49