Exhibit 13
Every day Calgon Carbon helps
people around the world to be
safer and healthier by purifying
the water they use, the air they
breathe, and the food they eat.
[Photo of water droplet]
[Logo of Calgon Carbon Corporation]
[Photo of woman drinking a glass of water]
. CCC is the world's largest producer of granular activated carbon (GAC) and
has provided 60% of the activated carbon installed for drinking water
purification worldwide.
. The installation of 500 million pounds of CCC's granular activated carbon in
drinking water treatment plants worldwide provides future demand for CCC's
reactivation service.
. CCC's UV technology is protecting one million people in Michigan, Ohio, and
Pennsylvania from cryptosporidium, giardia, and other potentially harmful
organisms in their drinking water.
. In 2001, CCC's new ISEP(R) technology removed rocket fuel residuals from five
million gallons of drinking water per day. That daily amount will increase to
30 million gallons in 2002.
Water treatment is a $650-billion global market, and demand for reliable, safe
treatment solutions continues to grow.
. Demand for drinking water rises twice as fast as population growth. Scarcity
of good water and increasing governmental regulations also drive the use of
purification technologies.
. CCC's proven technologies in activated carbon, ultraviolet light, and ion
exchange remove or destroy contaminants and microorganisms in drinking water
that threaten people's safety and health.
. CCC's Sentinel(TM) UV Disinfection System, developed during the past five
years, inactivates cryptosporidium and other pathogens in drinking
Purified drinking water keeps us healthier
water. EPA regulations could result in more than $1 billion in sales of UV
systems for drinking water disinfection in the next 10 years.
. For more than 40 years, GAC has been used to purify drinking water and to
improve its taste and odor.
Calgon Carbon Corporation 1
CCC serves some of the largest industries in the world, including food,
chemicals, refining, pharmaceuticals, and environmental compliance.
. CCC's technologies help meet needs for clean process water and air within
industrial facilities.
. Manufacturers also use CCC's purification technologies to produce
higher-quality products like chemicals and plastics.
. CCC's proven solutions for air and gas purification not only help
manufacturers meet emission standards, but also help reduce pollution on a
global scale.
. Beverages like beer, wine and soft drinks, and processed foods are
better-testing products because of CCC's technologies. These same
Removing impurities from foods makes our
technologies help pharmaceutical manufacturers achieve the highest possible
level of consistency in prescription and over-the-counter medicines.
Calgon Carbon Corporation 2
[Photo of child eating]
. In 2001, CCC products and services helped purify 20 billion pounds of high
fructose corn syrup used in hundreds of food products, including breakfast
cereals, condiments, salad dressings, sauces, and soft drinks.
. CCC's engineered solutions helped isolate a pharmaceutical intermediate that
could treat thousands of cancer patients.
. Since 1996, CCC's Phoenix(TM) Systems, used for odor control in sewage
treatment plants, have treated 290 billion cubic feet of air--enough to fill
more than one million commercial blimps.
children safer
Calgon Carbon Corporation 3
[Photo of family]
. Since Operation Desert Storm, CCC has supplied enough respirator carbons to
ensure the safety of 150 million people in industry, public safety, and the
military.
. CCC is the only qualified supplier of carbons used in breathing apparatuses
to protect the U.S. military from toxic gases used in chemical warfare.
. Carbon cloth is used as a lining in infantry uniforms to shield the skin from
contact with airborne toxins.
. Many people use home water filters to ensure that their drinking water is
safe and pure. In 2001, CCC supplied manufacturers of these devices with
enough GAC to produce 20 million home water filters.
Calgon Carbon Corporation 4
Fast-growing demand for personal safety and improved quality of life can be met
with the innovative, cost-effective technologies provided by CCC.
. CCC's unique carbon cloth is used for medical and personal protection
applications. Wound dressings made with carbon cloth not only prevent odor,
but enhance comfort and promote faster healing.
. CCC is a leading supplier of GAC for home water filtration systems. As the
functional component of these filters, GAC removes potentially harmful toxins
while also improving taste and odor.
. CCC has miniaturized its proven industrial scale purification technologies for
consumer applications including Purrfectly Fresh(TM) for
More public servants return home safely
eliminating household odors and PreZerve(TM) for protecting valuables by
preventing tarnish on silver and fine jewelry.
Sources:
Calgon Carbon Corporation
The McIlvaine Company
World Health Organization
Calgon Carbon Corporation 5
Historically, the company's stock price has correlated closely with Economic
Profit (E.P.) performance. E.P. is the company's primary financial measurement,
and there was continued improvement in 2001.
[GRAPH APPEARS HERE]
Economic Profit is a financial measurement defined as net operating profit
after taxes (NOPAT), as compared to the cost of capital employed.
Note: This graph is based upon the company's actual weighted average cost of
capital as calculated for each of the years presented.
Letter to Share Owners
We are pleased that in 2001 investors recognized the value of Calgon Carbon
Corporation as a low-risk, long-term investment. Last year, our share price
outperformed every major stock index. We are also energized as a leader with
proven technologies that make the world a safer and healthier place for people
to live.
Progress toward our primary financial goal, Economic Profit (E.P.), is shown
on this page. With Economic Profit as our financial guide, we have managed cash
well in the short term, conservatively invested capital, and made decisions
that are best for our shareholders in the long term.
Based upon the close historical correlation between E.P. and our stock price,
we believe an increase in CCC share price was merited in 2001.
The following financial results in 2001 also demonstrate our success in key
areas:
Sales increased one percent overall and 14 percent in targeted growth areas.
Our strategic
Shareholder value
plan continues to be to grow profitable service and solutions sales. We
succeeded in 2001 in spite of unfavorable foreign currency values and a
depressed economy.
Operating expenses decreased 10 percent to $51 million. Our people responded
courageously to the challenges of 2001, and for the second year in a row
dramatically reduced controllable spending.
Calgon Carbon Corporation 6
Debt was reduced four percent to nearly $64 million. Positive cash flow from
operations continued strong at $25 million. We paid down debt to the lowest
level in six years, even though investments to pursue new value growth projects
increased 33 percent.
Our major regret in 2001 was a 19 percent drop in earnings. Higher costs for
natural gas and coal versus 2000 were enough to account for this entire
shortfall. Our sales of activated carbon decreased as we lacked the cost
structure and commercial organization to complete profitably in some markets. We
endured a 77-day strike at our largest facility to address a five-year-old
non-competitive labor agreement. We are investing in a new lower-cost
manufacturing facility in China. And, we spent the money necessary to upgrade
our organization to improve are activated carbon business. These actions, which
negatively impacted 2001 earnings, will being to
growth continued in 2001
yield positive results in 2002.
In 2001, We demonstrated again that people and culture are the key to CCC
success. My thanks to all stakeholders who demonstrated trust and teamwork with
each other in pursuit of shareholder value growth. I want to acknowledge the
strong support of our employees, leaders, and board of directors during the
past year. We also thank Nick Prater, who will retire in April after serving as
a board member for 11 years. We wish Nick and his wife, Jennifer, a long and
happy retirement.
As the "head coach" of Calgon Carbon, I believe in our bright future as a
leader in the water/filtration industry. Our progress in 2001 will prove CCC to
be a valuable investment in the years ahead. Our team remains confident in our
direction, and we are motivated by the health and security we help to provide to
mankind.
Sincerely,
/s/ Jim Cederna
Chairman
and Chief Executive Officer
[Photo of Jim Cederna]
Calgon Carbon Corporation 7
Strong Fundamentals
. The culture of trust and teamwork to drive value growth has improved through
the use of leading-edge measurements and behavior-change tools.
. The company's strategic plan has been updated based on rapid progress made in
the past two years. The strategic target of Economic Profit should be reached
by 2004 (a one-to-two-year delay from the original strategic plan due mainly
to the economic downturn).
. CCC has invested in a flexible, streamlined, capable team organized for
global growth. In 2001, there was a 20% change in leadership.
. CCC has developed a productive work environment where all (both union and
non-union) employees will be paid based upon performance.
. CCC has developed new products and services, and also formed new alliances to
better satisfy customers. In the consumer product area, for example, the
company is focusing marketing efforts on the PreZerve(TM) product line,
exclusively marketed through QVC Inc., the leader in direct television
marketing.
. CCC is the only company in the activated carbon business that is investing in
new world-class operating facilities:
- Through a new venture, the Datong Carbon Company, CCC will begin
operation of an activated carbon manufacturing facility in China in
2002.
- A new Center for Excellence on the Gulf Coast will be the largest
reactivation service center in the U.S., and will be operational in
2003.
CCC has built a bright future
[GRAPHIC APPEARS HERE]
Calgon Carbon Corporation 8
. CCC is the only company to provide a proven engineered solution for the
removal of contaminants and potentially health-threatening microorganisms,
viruses, and bacteria for less than $0.50 per month added to a household water
bill. This is a cost-effective combination of the Sentinel UV(TM) Disinfection
System and granular activated carbon technologies.
By following its transformation model, CCC has built a bright future.
Fundamental change has been achieved in every facet of the company, from
culture to facilities and organization. CCC is leveraging its technological
leadership and strong financial position to accelerate growth in profitable
product markets, expand geographically, and establish strategic alliances for
new business, as it moves toward its vision of a successful service/solutions
company.
Mr. Xiu Bao Ping is CCC's venture partner in the Datong Carbon Company, an
example of the new global alliances that will drive CCC's growth. The joint
venture will operate a facility in China, producing high-quality GAC using
CCC's proven technology.
Global Alliances
"Calgon Carbon is a world leader in activated carbon, and I am confident that
our partnership will be a catalyst for growth in the Asian market in the years
ahead."
Mr. Xiu Bao Ping
Director, Datong
Carbon Company
[Photo of Xiu Bao Ping]
Calgon Carbon Corporation 9
The people of CCC are implementing the strategic plan that will successfully
move the company to its vision. They will make it happen.
"As the global leader in activated carbon, our vision is to exceed market
growth by supplying customers worldwide with total activated carbon solutions."
[Photo of Joseph A. Fischette]
CCC's leadership team is focused
Joseph A. Fischette
Senior Vice President, General Counsel, and Secretary
Joe Fischette, 55, has 23 years of service with CCC. He has been chief legal
officer for the corporation since 1985 and became chairman of the
Carbon/Service platforms in 2000. He also directs the company's Growth Chain,
which includes global purchasing and logistics. In addition, he has
responsibility for customer service and applications engineering. Joe earned
his J.D. from Duquesne University.
"We have strengthened and centralized our marketing organization for global
effectiveness. Our unified marketing effort will increase market share and
drive growth in all CCC businesses."
[Photo of C.H.S. Majoor]
C.H.S. (Kees) Majoor
Vice President, Global Marketing
Kees Majoor, 52, joined CCC in January 2001 as director of sales, marketing,
and invest in people for Chemviron Carbon, the company's European operating
unit. He was promoted to his current position in the Carbon/Service platforms
in October of that year, and is headquartered in Belgium. His degree in
business management is from the Institute for Automotive Industry and
Management in the Netherlands.
Calgon Carbon Corporation 10
"We will become the most cost-effective and responsive provider of air and
water purification services through Centers of excellence around the world."
[Photo of James Fishburne]
on future growth and increased profitability
James G. Fishburne
Vice President, Global Sales
Jim Fishburne, 55, joined CCC in October 2001 as vice president responsible for
worldwide sales of the company's activated carbon products and related
services. Prior to joining CCC, he had held senior sales management positions
with International Paper and Eastman Kodak. Jim was awarded a degree in
economics from the University of Notre Dame.
"We operate the world's most advanced activated carbon manufacturing and
reactivation facilities. We are committed to continuous improvement in cost
reduction and operating efficiencies for peak performance."
[Photo of John Stanik]
John S. Stanik
Senior Vice President, Manufacturing and Technology
John Stanik, 48, has spent most of his 11 years at CCC in manufacturing,
including four years as manager of the Big Sandy plant in Kentucky, the
company's largest activated carbon and reactivation facility. He was promoted
to his current position in 2001 and is responsible for Carbon/Service
operations worldwide--eight carbon manufacturing and reactivation facilities. He
also directs the Technology Commercialization Team. John earned a degree in
chemical engineering at Carnegie Mellon University.
"We will pursue double-digit sales growth by using our unique core technologies
to provide solutions to water, air, food, and industrial purification
challenges around the world."
[Photo of Robert O'Brien]
Robert P. O'Brien
Senior Vice President, Engineered Solutions
Bob O'Brien, 51, joined CCC in 1973 and subsequently held a number of
technical, sales, and marketing management positions in the U.S. and Europe. He
was promoted to his current position in 1999 and is responsible for sales,
marketing, design, and manufacturing of systems that utilize technologies in
carbon adsorption, ultraviolet light, and advanced ion exchange separation. He
also directs the Information Technology group. Bob holds a B.S. in chemical
engineering from the Pennsylvania State University.
Calgon Carbon Corporation 11
"CCC's strong balance sheet and consistently positive cash flow provide the
financial resources for organic growth, geographic expansion, and new business
development."
[Photo of William Cann]
The financial strength of a leader creates value
William E. Cann
Senior Vice President,
Chief Financial Officer
Bill Cann, 46, joined CCC in 1999 as senior vice president and chief financial
officer. In 2001, he also assumed responsibility for the company's Asian
operations, the Consumer platform, and Business Development. Prior to joining
the company, Bill had served in senior executive positions with Reichhold, Inc.
and Owens Corning. In his last assignment there, he was based in Hong Kong as
financial director for Asia/Pacific operations. Bill holds a B.B.A. in
accounting from the University of Toledo.
"We continue to invest in our people because it is their commitment and
day-to-day dedication that will make CCC's Vision a reality."
[Photo of Robert Courson]
Robert W. Courson
Executive Director, Invest in People
Bob Courson, 55, has 29 years of service with CCC. Since joining the company in
1973 as manager of labor relations, he continually progressed to positions of
increasing responsibility. His current managerial scope encompasses the entire
range of human resources, including recruiting, employee development,
compensation, labor relations, and culture change. Bob holds a B.A. in
political science from the College of Wooster.
"Investors are not only recognizing CCC's vital role in making our world a
safer and healthier place, but also the company's growth opportunities and its
value as a long-term investment
[Photo of Gail Gerono]
Gail A. Gerono
Director, Investor Relations
and Corporate Communications
Gail Gerono, 50, joined CCC in 1990 as manager, investor relations. She was
subsequently promoted to her current position, and her responsibilities were
expanded to include corporate communications. In 2001, she also became
responsible for corporate quality and process excellence globally. Gail holds a
B.A. in French from Mercyhurst College and is an M.B.A. candidate at Duquesne
University.
Calgon Carbon Corporation 12
Financial Contents
14
Management's Discussion and Analysis
18
Report of Management
18
Report of Deloitte & Touche LLP Independent Accountants
19
Consolidated Statement of Income and Comprehensive Income
20
Consolidated Balance Sheet
21
Consolidated Statement of Cash Flows
22
Consolidated Statement of Shareholders' Equity
23
Notes to the Consolidated Financial Statements
43
Six-Year Summary Selected Financial and Statistical Data
44
Quarterly Financial Data --Unaudited
44
Common Shares and Market Information
Financial Highlights
(Dollars in millions except
per share data) 2001 2000 1999
- --------------------------------------------------------------------------
Net Sales $ 270.59 $ 268.98 $ 296.15
Income Before Restructuring Charges $ 8.20 $ 8.27 $ 4.29
Net Income (Loss) After
Restructuring Charges $ 7.97 $ 9.85 $ (13.73)
Income per Common Share Before
Restructuring Charges
Basic and Diluted $ .21 $ .21 $ .11
Net Income (Loss) per Common
Share After
Restructuring Charges
Basic $ .21 $ .25 $ (0.35)
Diluted $ .20 $ .25 $ (0.35)
- --------------------------------------------------------------------------
[Photo of Globe]
Calgon Carbon Corporation (CCC) is a global leader in services and solutions
for purifying water and air, food, beverages, and industrial process streams.
Headquartered in Pittsburgh, Pennsylvania, CCC employs approximately 1,000
people at 13 manufacturing, reactivation, and equipment fabrication facilities,
and 11 sales and service centers. CCC is known as Chemviron Carbon in Europe,
Africa, and the Middle East. In 2001, the company's sales totaled $271 million.
The company is evolving from a products supplier to a service and solutions
provider through four business platforms: Carbon, Service, Engineered
Solutions, and Consumer.
CCC serves more than 4,000 customers around the world. The company operates
three activated carbon facilities and six carbon reactivation facilities in
Belgium, Japan, the U.K., and the U.S. A new carbon facility in China will
become operational in 2002. CCC also operates two equipment fabrication and
assembly facilities in Pittsburgh, one carbon cloth production facility in the
U.K., and one charcoal production operation in Germany.
CCC draws its management strength from a combination of company veterans with a
thorough knowledge of existing businesses and new executives with fresh
perspectives and extensive global experience, particularly in Europe and Asia,
two strategic growth markets. Alliances for new business development will be a
key part of implementing the company's long-term strategy designed to
accelerate growth and profitability beyond current product and service
offerings.
Calgon Carbon Corporation 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Calgon Carbon Corporation
OVERVIEW
Net earnings for the year 2001 were $8.0 million or $0.20 per diluted share, as
compared to net earnings of $9.9 million or $0.25 per diluted share for 2000.
Revenue, excluding the foreign exchange impact of currency translation,
increased by 2% above 2000 levels. A 10.3% reduction in operating expenses in
2001 helped mitigate the increases the Company realized in its production costs
due to higher energy and raw material costs and additional costs associated
with a strike by the labor union at the Company's Catlettsburg, Kentucky
facility. As a continuing testament to the Company's ability to generate cash,
despite the decreased earnings and a $3.1 million increase in capital
expenditures in 2001 versus 2000, the Company was still able to pay down debt
by an additional $3.0 million, excluding the impact of foreign exchange, as
well as provide its shareholders with $7.8 million in dividend payments.
Because of the changes made throughout the year, Calgon Carbon is stronger
and wiser for having overcome the many challenges it encountered. As it enters
2002, the Company is confident that it will continue to build upon the new
business growth realized in 2001, to better manage controllable costs, and to
improve its already strong balance sheet.
RESULTS OF OPERATIONS
2001 Versus 2000
Consolidated net sales increased in 2001 versus 2000 by $1.6 million or 0.6%.
This was primarily the result of sales increases in three of the Company's four
reportable segments. Sales declined in the Activated Carbon segment by $15.4
million or 12.3%. That decline was primarily the result of lower sales volume
due to increasing competitive pressures in key market segments in the United
States and Europe, slower economy particularly in Asia, and the adverse impact
of foreign currency translation. Sales in the service segment increased by $1.4
million or 1.5%. The increased revenue is the result of general price increases
related to escalation of service contracts partially offset by the adverse
impact of foreign currency translation. Sales in the Engineered Solutions
segment increased by $15.5 million or 47.4%. The increase is primarily
attributed to increased revenue recognition of ion exchange equipment-related
projects due to a major project that commenced in the first quarter of 2001.
Consumer segment sales were virtually flat in 2001 versus 2000. Increased sales
of carbon cloth and new consumer products were offset by decreased demand of
the Company's charcoal-related products and the adverse impact of foreign
currency translation. The total sales decrease for all segments attributable to
the effect of currency translation was $4.7 million.
Gross profit before depreciation, as a percentage of net sales, was 32.2% in
2001 versus 35.4% in 2000. This 3.2 percentage point decline was the result of
competitive pricing and higher costs in promising new major market applications
and increased costs associated with meeting the customer requirements related
to a major project undertaken in 2001. Also contributing toward the margin
decline were higher energy and raw material costs in conjunction with higher
production costs due to the labor strike at the Company's Catlettsburg,
Kentucky facility.
Depreciation and amortization decreased by $0.3 million or 1.3% primarily due
to asset write-offs associated with the May 2000 shutdown of the activated
carbon line in Feluy, Belgium pursuant to the 1999 restructuring plan.
Selling, general and administrative expenses decreased by $4.1 million or
8.2%. The decrease was primarily due to non-repeat additional charges in 2000
of $1.8 million related to a change in estimate of the 1999 restructuring
accrual and a reduction in operating expenses related to organization changes
made in 2000 at the Company's Japanese affiliate. Also contributing to the
reduction were non-recurring costs in 2000 related to the establishment of the
Pittsburgh, Pennsylvania and Feluy, Belgium Centers of Excellence, and the
settlement of a lawsuit that was accrued for in the first quarter of 2000
partially offset by severance payments related to organization changes made in
the third and fourth quarters of 2001.
Research and development expenses were $5.6 million in 2001 versus $7.4
million in 2000, a decrease of $1.8 million or 24.6%. The decrease is primarily
due to salary costs being charged directly to cost of products sold for
employees manning the Catlettsburg, Kentucky facility during the recent labor
union strike combined with a reduction in outside services and personnel
expenses.
The restructuring charge of $0.3 million in 2001 and restructuring income of
$2.3 million in 2000 represent the change in estimate of various components of
the Company's restructuring liability based upon management's re-evaluation of
the sufficiency of the restructuring accrual to meet its future obligations.
Additional information on restructuring charges can be found in Note 2 to the
Consolidated Financial Statements.
Calgon Carbon Corporation 14
Interest expense declined in 2001 versus 2000 by $1.6 million or 32.7%
primarily due to lower interest rates.
The increase in Other expense--net of $0.2 million was primarily due to a
decrease in foreign exchange gains, and the non-recurrence of a sale of
obsolete raw materials recorded in 2000 partially offset by a change in
estimate for certain non-income taxes.
The effective tax rate for 2001 was 30.9% versus 30.6% in 2000. The 2001 rate
was positively impacted by the benefit realized from the Company's foreign
sales corporation and tax credits resulting from a research and development tax
study. The 2000 rate was positively affected by the Company reversing $0.9
million of deferred taxes on its unrepatriated earnings of its European and
Canadian subsidiaries due to management's assessment that those earnings will
continue to be reinvested indefinitely, and a $1.4 million benefit from the
redetermination of its foreign sales corporation benefit for the years 1996
through 1999. Offsetting that impact was increased income in higher taxed
foreign jurisdictions.
2000 Versus 1999
Consolidated net sales decreased in 2000 versus 1999 by $27.2 million or 9.2%.
This was primarily the result of sales decreases in three of the Company's four
reportable segments. Sales of Activated Carbon declined by $19.8 million or
13.7%. That decline was due to the Company's strategy to fix or exit lower
margin markets, as well as the net unfavorable impact of foreign currency
translation. Service sales decreased by $3.3 million or 3.5% due to a decline
in large equipment sales and sales of temporary/emergency systems, combined
with an unfavorable foreign currency translation impact. Sales decreased in the
Engineered Solutions segment by $5.0 million or 13.2%, which was primarily due
to a reduced number of new projects. Sales increased in the Consumer segment by
$0.9 million or 4.5%. The increase was the result of strong charcoal sales,
partially offset by the adverse effect of foreign currency translation. The
total sales decrease for all segments due to the effect of currency translation
was $9.2 million.
Gross profit before depreciation, as a percentage of net sales, was 35.4% in
2000 versus 33.8% in 1999. This 1.6 percentage point improvement was primarily
the result of the implementation of the strategy to lower the cost to serve
activated carbon markets, exiting unprofitable business areas, and a minor
effect from price increases.
Depreciation and amortization decreased by $2.3 million or 10.0% due to a
reduction of the book value of the Company's fixed assets as a result of
write-offs taken as part of the Company's restructuring charge in the fourth
quarter of 1999.
Selling, general and administrative expenses decreased by $5.6 million or
10.2%. The decline reflects savings from restructuring including a reduction in
personnel, and efficiencies gained by the establishment of the Pittsburgh,
Pennsylvania and Feluy, Belgium Centers of Excellence, as well as lower
personnel recruitment costs. The decline was partially offset by additional
charges in 2000 of $1.8 million related to the adjustment of the 1999
restructuring accrual and non-recurring costs to establish the aforementioned
Centers of Excellence.
Research and development expenses were $7.4 million in 2000 versus $7.7
million in 1999, a decrease of $0.3 million, which reflects the Company's
increased focus on cost control.
The restructuring credit of $2.3 million in 2000 represents the reduction of
various components of the Company's restructuring liability based upon
management's re-evaluation of the sufficiency of the restructuring accrual to
meet its future obligations. The 1999 restructuring charge of $29.8 million was
the result of a strategy adopted in the fourth quarter of that year aimed at
lowering costs in the activated carbon markets and increasing the Company's
focus on its service and solutions businesses, while also adapting proven
technologies to a new line of consumer products. Included in these 1999 costs
were employee severance and termination costs and asset write-offs.
The reduction in Other expense--net of $2.1 million was primarily the result
of increased foreign exchange gains and the non-recurrence of miscellaneous
equipment write-offs that were recorded in 1999.
The effective tax rate for 2000 was 30.6% versus a benefit of 40.7% in 1999.
The 2000 rate was positively affected by the Company reversing $0.9 million of
deferred taxes on its unrepatriated earnings of its European and Canadian
subsidiaries due to management's assessment that those earnings will continue
to be reinvested indefinitely, and a $1.4 million benefit from the
redetermination of its foreign sales corporation benefit for the years 1996
through 1999. Offsetting that impact was increased income in higher taxed
foreign jurisdictions.
Calgon Carbon Corporation 15
WORKING CAPITAL AND LIQUIDITY
Cash flows from operating activities were $24.5 million for the year ended
December 31, 2001. This was primarily the net result of the net earnings for
the year, depreciation and amortization, and decreases in receivables,
partially offset by increases in inventories and decreases in accounts payable
and the restructuring reserve. Receivables decreased by $6.7 million as a
result of increased attention to collections. Inventories increased by $5.2
million due to production exceeding the Company's forecasted demand for its
products. The Company had $6.5 million of cash outflows net of exchange and
restructuring primarily due to an increase in working capital in 2001. Payments
made from the restructuring reserve amounted to $2.1 million, comprised almost
entirely of lease payments on a vacated office building and severance and
termination benefits. The Company expects to make $0.9 million in
restructuring-related payments in 2002 with the balance of the remaining
payments to be made in succeeding years through 2006.
Total debt, net of foreign exchange, decreased during the year by $3.0
million to $64.4 million at December 31, 2001, despite the Company's increased
operating working capital. This was primarily the result of management's
ongoing critical review of capital project spending.
The Company has a $113.4 million credit facility consisting of an $86.8
million five-year revolving credit facility expiring in May 2004 and a $26.6
million 364-day revolving credit facility renewed in May 2001, which expires in
May 2002. Included in this facility is a letter of credit subfacility which may
not exceed $30.0 million. At December 31, 2001, there were no borrowings under
the 364-day revolving credit agreement.
During 2001, the Company entered into an interest rate swap agreement to fix
the interest payments for $10.0 million of borrowings under the United States
Credit Facility at 5.48%. This agreement expires in January 2003.
On October 17, 2000, the Board of Directors authorized a repurchase program
for up to 500,000 shares of the Company's common stock. As of December 31,
2001, 11,300 shares had been purchased at a cost of $0.1 million. During 2001,
there were no shares repurchased under this program.
The Company has paid quarterly cash dividends on its common stock since the
third quarter of 1987, the quarter succeeding the one in which the Company went
public. During 2001, the Company paid dividends at a rate of $.20 per share for
a total amount of $7.8 million. Dividend declaration and payout are at the
discretion of the Board of Directors. Future dividends will depend on the
Company's earnings, cash flow, and capital investment plans to pursue long-term
growth opportunities.
The Company expects that cash from operating activities plus cash balances
and available external financing will be sufficient to meet its requirements.
CAPITAL EXPENDITURES AND INVESTMENTS
Capital expenditures were $12.6 million in 2001, $9.5 million in 2000, and $8.6
million in 1999. Expenditures for 2001 primarily included customer capital
spending of $2.6 million, new construction and improvements to manufacturing
facilities of $8.0 million, and a continuing investment in the Company's
business information system of $0.9 million. The 2000 expenditure amount
consisted primarily of a continuing investment in the Company's business
information system of $2.0 million, operating improvement spending at the
Company's manufacturing facilities of $2.0 million, and customer capital
spending of $3.1 million. The 1999 expenditure amount consisted primarily of
spending associated with the business information system of $1.8 million,
domestic service customer capital of $0.7 million, and capacity productivity
and cost reduction-related spending at the Company's manufacturing facilities
of $2.6 million in the United States and $1.3 million in Europe. Capital
expenditures for 2002 are projected to be approximately $27.5 million and are
to include the continued construction of a carbon manufacturing plant in the
People's Republic of China, the establishment of a new Center of Excellence in
the Gulf Coast region of the United States, customer capital, and operations
improvement expenditures both in the United States and Europe.
The 2001 purchase of business expenditures of $3.4 million, as shown on the
statement of cash flows, represents the Company's increasing its equity
ownership in its Japanese joint venture from 60% to 100%. The purchase of the
remaining shares resulted in the Company recording additional goodwill of $1.5
million. The 1999 purchase of businesses amount represents the continuation of
cash expenditures for Advanced Separations Technologies Incorporated (a 1996
acquisition) project failures for projects completed before the acquisition.
These expenditures had been accrued as part of the original acquisition.
MARKET RISK
Commodity Price Risk
In the normal course of its business, the Company is exposed to market risk or
price fluctuations related to the purchase and production of carbon products
and its inventories of carbon products as well as the cost of natural gas used
in the production of its products. The Company obtains competitive prices for
its products and allows operating results to reflect market price movements
dictated by supply and demand where regulated prices do not exist. The Company
uses fixed price contracts to manage a portion of its coal and natural gas
commodity price risk.
Calgon Carbon Corporation 16
Interest Rate Risk
Substantially all current and long-term debt is based on rates that float with
Euro Dollar-based rates or prime rates, and the carrying value approximates
fair value.
Foreign Currency Exchange Risk
The Company is subject to risk of price fluctuations related to anticipated
revenues and operating costs, firm commitments for capital expenditures, and
existing assets and liabilities denominated in currencies other than U.S.
dollars. The Company has made use of forward currency contracts to manage these
exposures. At December 31, 2001, three forward contracts were outstanding.
Conversion to the Euro
In January 2001, the Company converted its business information system in
Europe to be able to transact business using the Euro as its functional
currency. To date, the Company has not experienced any problems or disruptions
in its business as a result of that conversion. The Company has now completed a
full operations and accounting cycle, and all processes and systems have been
run in production, thereby making the risk of potential problems related to the
conversion unlikely.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." These standards require that all business combinations be accounted
for using the purchase method, and that goodwill and intangible assets with
indefinite useful lives should not be amortized but should be tested for
impairment at least annually, and they provide guidelines for new disclosure
requirements. These standards outline the criteria for initial recognition and
measurement of intangibles, assignment of assets and liabilities including
goodwill to reporting units, and goodwill impairment testing. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
The provisions of SFAS No. 142 for existing goodwill and other intangible
assets are required to be implemented effective January 1, 2002. The Company is
currently evaluating the impact of SFAS No. 142 on the consolidated financial
statements. Goodwill amortization was approximately $2.0 million for each of
the years ended December 31, 2001, 2000, and 1999, respectively.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations,"
which addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated asset
retirement costs. Management has not yet evaluated the impact of the adoption
of SFAS No. 143 on the Company's financial statements. The Company plans to
adopt SFAS No. 143 on January 1, 2003 as required.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Management
has not yet evaluated the impact of the adoption of SFAS No. 144 on the
Company's financial statements. The Company plans to adopt SFAS No. 144 as of
January 1, 2002 as required.
FORWARD-LOOKING INFORMATION SAFE HARBOR
- -------------------------------------------------------------------------------
This Annual Report contains historical information and forward-looking
statements. Statements looking forward in time, including statements regarding
future growth and profitability, price increases, cost savings, broader product
lines, enhanced competitive posture, and acquisitions, are included in this
Annual Report pursuant to the "safe harbor" provision of the Private Securities
Litigation Reform Act of 1995. They involve known and unknown risks and
uncertainties that may cause the Company's actual results in future periods to
be materially different from any future performance suggested herein. Further,
the Company operates in an industry sector where securities values may be
volatile and may be influenced by economic and other factors beyond the
Company's control. In the context of the forward-looking information provided
in this Annual Report, please refer to the discussions of risk factors detailed
in, as well as the other information contained in, this Annual Report and the
Company's filings with the Securities and Exchange Commission.
Calgon Carbon Corporation 17
REPORT OF MANAGEMENT
Calgon Carbon Corporation
The consolidated financial statements and related notes have been prepared by
management, who are responsible for their integrity and objectivity. The
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America and include amounts based on
management judgments and estimates. All other financial information in this
Annual Report is consistent with that in the financial statements.
The Company maintains internal accounting control systems that are designed
to provide reasonable assurance that assets are safeguarded, that transactions
are executed in accordance with management's authorization and are properly
recorded, and that accounting records are adequate for preparation of financial
statements and other financial information. The design, monitoring, and
revision of internal accounting control systems involve management's judgments
with respect to the relative cost and expected benefits of specific control
measures.
In addition to the system of internal accounting controls, the Company
maintains guidelines of Company policy emphasizing proper overall business
conduct, possible conflicts of interest, compliance with laws, and
confidentiality of proprietary information. The financial statements have been
audited by Deloitte & Touche LLP, independent accountants. Their responsibility
is to audit the Company's financial statements in accordance with auditing
standards generally accepted in the United States of America and to express
their opinion with respect to the fairness of presentation of the financial
statements in conformity with accounting principles generally accepted in the
United States of America.
The members of the audit committee of the Board of Directors, none of whom
are employees of the Company, review the services performed by the independent
accountants and receive and review the reports submitted by them. The audit
committee meets several times during the year with management and the
independent accountants to discuss audit activities, internal controls, and
financial reporting matters. The independent accountants have full and free
access to the committee.
REPORT OF DELOITTE & TOUCHE LLP INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Calgon Carbon Corporation:
We have audited the accompanying consolidated balance sheets of Calgon Carbon
Corporation (the "Company") as of December 31, 2001 and 2000, and the related
consolidated statements of income and comprehensive income, shareholders'
equity, and cash flows for the years then ended. 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. The
financial statements of the Company for the year ended December 31, 1999 were
audited by other auditors whose report, dated February 8, 2000, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
2001 and 2000, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 30, 2002 (February 5, 2002 as to Note 8)
Calgon Carbon Corporation 18
C O N S O L I D A T E D S T A T E M E N T O F I N C O M E A N D
C O M P R E H E N S I V E I N C O M E
Calgon Carbon Corporation
Year Ended December 31
----------------------------------
(Dollars in thousands except per share data) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Net Sales $ 270,593 $ 268,983 $ 296,152
- -----------------------------------------------------------------------------------------------------------
Cost of products sold (excluding depreciation) 183,505 173,810 196,194
Depreciation and amortization 20,336 20,597 22,882
Selling, general and administrative expenses 45,490 49,542 55,145
Research and development expenses 5,601 7,431 7,742
Restructuring charges (credits) 324 (2,284) 29,838
- -----------------------------------------------------------------------------------------------------------
255,256 249,096 311,801
- -----------------------------------------------------------------------------------------------------------
Income (loss) from operations 15,337 19,887 (15,649)
Interest income 194 150 98
Interest expense (3,346) (4,970) (4,893)
Other expense--net (564) (375) (2,523)
- -----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and minority interest 11,621 14,692 (22,967)
Provision (benefit) for income taxes 3,594 4,496 (9,339)
- -----------------------------------------------------------------------------------------------------------
Income (loss) before minority interest 8,027 10,196 (13,628)
Minority interest (53) (344) (101)
- -----------------------------------------------------------------------------------------------------------
Net income (loss) 7,974 9,852 (13,729)
Other comprehensive (loss),
net of tax provision (benefit) of ($411), ($3,193)
and ($2,299), respectively (1,797) (173) (4,270)
- -----------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 6,177 $ 9,679 $ (17,999)
- -----------------------------------------------------------------------------------------------------------
Basic net income (loss) per common share $ .21 $ .25 $ (.35)
- -----------------------------------------------------------------------------------------------------------
Diluted net income (loss) per common share $ .20 $ .25 $ (.35)
- -----------------------------------------------------------------------------------------------------------
Weighted average shares outstanding, in thousands
Basic 38,811 38,807 38,779
Diluted 39,157 38,870 38,779
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
Calgon Carbon Corporation 19
C O N S O L I D A T E D B A L A N C E S H E E T
Calgon Carbon Corporation
December 31
----------------------
(Dollars in thousands) 2001 2000
- -----------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 3,567 $ 4,334
Receivables, net of allowance of $2,624 and $2,633 44,233 50,906
Revenue recognized in excess of billings on uncompleted contracts 10,623 6,046
Inventories 42,104 36,938
Other current assets 4,008 6,345
- -----------------------------------------------------------------------------------------------------------
Total current assets 104,535 104,569
Property, plant and equipment, net 143,661 151,350
Intangibles 73,615 74,308
Other assets 9,903 9,897
- -----------------------------------------------------------------------------------------------------------
Total assets $ 331,714 $ 340,124
===========================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 8,762 $ 9,120
Long-term debt due within one year 1,275 10,180
Accounts payable and accrued liabilities 24,976 26,465
Billings in excess of revenue recognized on uncompleted contracts 2,370 994
Restructuring reserve 1,480 3,298
Payroll and benefits payable 6,989 8,613
Accrued income taxes 1,890 5,193
- -----------------------------------------------------------------------------------------------------------
Total current liabilities 47,742 63,863
Long-term debt 54,360 48,077
Deferred income taxes 32,021 29,462
Other liabilities 13,782 11,789
- -----------------------------------------------------------------------------------------------------------
Total liabilities 147,905 153,191
- -----------------------------------------------------------------------------------------------------------
Minority interest - 1,944
- -----------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 7 and 15) - -
- -----------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000 shares authorized,
41,643,492 and 41,589,067 shares issued 416 416
Additional paid-in capital 63,813 63,410
Retained earnings 143,172 142,959
Accumulated other comprehensive income 3,538 5,335
- -----------------------------------------------------------------------------------------------------------
210,939 212,120
Treasury stock, at cost, 2,787,458 and 2,787,558 shares (27,130) (27,131)
- -----------------------------------------------------------------------------------------------------------
Total shareholders' equity 183,809 184,989
- -----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 331,714 $ 340,124
===========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
Calgon Carbon Corporation 20
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Calgon Carbon Corporation
Year Ended December 31
---------------------------------
(Dollars in thousands) 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) $ 7,974 $ 9,852 $ (13,729)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 20,336 20,597 22,882
Non-cash restructuring asset and liability write-downs -- (1,629) 11,127
Employee benefit plan provisions 1,806 1,267 2,161
Changes in assets and liabilities--net of effects from
purchase of businesses, foreign exchange and non-cash
restructuring asset and liability write-downs:
(Increase) decrease in receivables 5,688 6,418 (3,310)
(Increase) decrease in inventories (6,038) 6,152 11,759
(Increase) decrease in other current assets (2,790) (2,973) 3,508
Increase (decrease) in restructuring reserve (2,084) (15,442) 15,215
Increase (decrease) in accounts payable and accruals (3,365) 4,044 216
Increase (decrease) in long-term deferred income taxes (net) 2,404 2,663 (11,790)
Other items--net 567 104 923
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 24,498 31,053 38,962
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of businesses (3,400) -- (813)
Property, plant and equipment expenditures (12,563) (9,451) (8,582)
Proceeds from disposals of equipment 926 255 1,818
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (15,037) (9,196) (7,577)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net (repayments of) borrowings (2,041) (12,212) (13,243)
Treasury stock purchases -- (57) (129)
Common stock dividends (7,761) (7,761) (12,411)
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (9,802) (20,030) (25,783)
- -----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (426) (1,687) (2,733)
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (767) 140 2,869
Cash and cash equivalents, beginning of period 4,334 4,194 1,325
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 3,567 $ 4,334 $ 4,194
===========================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
Calgon Carbon Corporation 21
C O N S O L I D A T E D S T A T E M E N T O F S H A R E H O L D E R S '
E Q U I T Y
Calgon Carbon Corporation
Accumulated
Common Additional Other
(Dollars in thousands, Shares Common Paid-In Retained Comprehensive
except per share data) Issued Shares Capital Earnings Income Sub-Total
- ---------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 41,503,960 $ 415 $ 62,868 $ 163,911 $ 9,778 $ 236,972
1999
Net (loss) -- -- -- (13,729) -- (13,729)
Employee and director
stock plans 78,672 1 503 -- -- 504
Common stock dividends
Cash ($.29 per share) -- -- -- (11,246) -- (11,246)
Translation adjustments -- -- -- -- (4,270) (4,270)
Treasury stock purchased -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 41,582,632 416 63,371 138,936 5,508 208,231
- ---------------------------------------------------------------------------------------------------------
2000
Net income -- -- -- 9,852 -- 9,852
Employee and director
stock plans 6,435 -- 39 -- -- 39
Common stock dividends
Cash ($.15 per share) -- -- -- (5,821) -- (5,821)
Translation adjustments -- -- -- -- (173) (173)
Treasury stock issued -- -- -- (8) -- (8)
Treasury stock purchased -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 41,589,067 416 63,410 142,959 5,335 212,120
- ---------------------------------------------------------------------------------------------------------
2001
Net income -- -- -- 7,974 -- 7,974
Employee and director
stock plans 54,425 -- 403 -- -- 403
Common stock dividends
Cash ($.20 per share) -- -- -- (7,761) -- (7,761)
Translation adjustments -- -- -- -- (1,797) (1,797)
Treasury stock issued -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 41,643,492 $ 416 $ 63,813 $ 143,172 $ 3,538 $ 210,939
- ---------------------------------------------------------------------------------------------------------
Treasury Stock
(Dollars in thousands, ---------------------
except per share data) Shares Amount Total
- ------------------------------------------------------------------
Balance, December 31, 1998 2,761,500 $ (26,986) $ 209,986
1999
Net (loss) -- -- (13,729)
Employee and director
stock plans -- -- 504
Common stock dividends
Cash ($.29 per share) -- -- (11,246)
Translation adjustments -- -- (4,270)
Treasury stock purchased 19,000 (129) (129)
- ------------------------------------------------------------------
Balance, December 31, 1999 2,780,500 (27,115) 181,116
- ------------------------------------------------------------------
2000
Net income -- -- 9,852
Employee and director
stock plans -- -- 39
Common stock dividends
Cash ($.15 per share) -- -- (5,821)
Translation adjustments -- -- (173)
Treasury stock issued (4,242) 41 33
Treasury stock purchased 11,300 (57) (57)
- ------------------------------------------------------------------
Balance, December 31, 2000 2,787,558 (27,131) 184,989
- ------------------------------------------------------------------
2001
Net income -- -- 7,974
Employee and director
stock plans -- -- 403
Common stock dividends
Cash ($.20 per share) -- -- (7,761)
Translation adjustments -- -- (1,797)
Treasury stock issued (100) 1 1
- ------------------------------------------------------------------
Balance, December 31, 2001 2,787,458 $ (27,130) $ 183,809
- ------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
Calgon Carbon Corporation 22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Calgon Carbon Corporation
1. SUMMARY OF ACCOUNTING POLICIES
Operations
Calgon Carbon Corporation (the "Company") is a global leader in services and
solutions for purifying water and air, and food, beverage, and industrial
process streams. The Company's operations are principally conducted in four
business segments: Activated Carbon, Service, Engineered Solutions and
Consumer. Each of these segments includes the production, design and marketing
of products and services specifically developed for the purification,
separation and concentration of liquids and gases. The Activated Carbon and
Service segments rely on activated carbon as a base material, while Engineered
Solutions relies on a variety of other methods and materials that do not
involve activated carbon. The Consumer segment brings the Company's industrial
purification technologies directly to the consumer in the form of products and
services. The Company's largest markets are in the United States, Europe and
Japan. The Company also markets in Canada, Latin America and Asia.
Principles of Consolidation
The consolidated financial statements include the accounts of Calgon Carbon
Corporation and its wholly owned subsidiaries, Chemviron Carbon GmbH, Calgon
Carbon Canada, Inc., Chemviron Carbon Ltd., Calgon Carbon Investments Inc.,
Solarchem Environmental Systems Inc., Charcoal Cloth (International) Limited,
Charcoal Cloth Limited, Advanced Separation Technologies Incorporated, Calgon
Far East Co., Ltd., and the Company's foreign sales corporation. A portion of
the Company's international operations in Europe is owned directly by the
Company and is operated as branches. Intercompany accounts and transactions
have been eliminated.
Foreign Currency
Substantially all assets and liabilities of the Company's international
operations are translated at year-end exchange rates; income and expenses are
translated at average exchange rates prevailing during the year. Translation
adjustments represent other comprehensive income and are accumulated in a
separate component of shareholders' equity, net of tax effects. The Company
does not provide for the income tax effect on undistributed earnings of its
European and Canadian subsidiaries as management believes these earnings will
be reinvested in these subsidiaries for an indefinite period of time.
Transaction gains and losses are included in other expense--net.
Revenue Recognition
Revenue and related costs are recognized when goods are shipped or services are
rendered to customers except for major equipment projects where revenues are
recognized under the percentage of completion method by comparing actual costs
incurred to total estimated costs to complete the respective projects.
Inventories
Inventories are carried at the lower of cost or market. Inventory costs are
primarily determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment expenditures are recorded at cost. Repair and
maintenance costs are expensed as incurred. Depreciation for financial
statement purposes is computed on the straight-line method over the estimated
service lives of the assets, which are from 20 to 30 years for land
improvements and buildings, 15 years for furniture, machinery and equipment,
five to 10 years for customer capital and five years for transportation
equipment and computer hardware and software with the exception of the
capitalized portion of the Company's business information system, which is
depreciated over seven years.
Intangibles Resulting from Business Acquisitions
Intangible assets resulting from business acquisitions principally consist of
the excess of the acquisition cost over the fair value of the net assets of
businesses acquired (goodwill). Goodwill is amortized on a straight-line basis
over 40 years. Other intangible assets are amortized on a straight-line basis
over their estimated useful lives.
Long-Lived Assets
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
requires that long-lived assets, including goodwill, be reviewed for impairment
and written down to fair value whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. For
assets to be held and used, including related goodwill, the Company uses
expected cash flows (undiscounted and without interest charges) from the use of
the assets to assess the recoverability of the assets. If the sum of the
expected future cash flows is less than the carrying amount of the asset, a
fair value assessment of the asset would be completed using
Calgon Carbon Corporation 23
the best estimates of fair value available in the circumstances. Management of
the Company has determined that no impairment losses need to be recognized for
assets to be held and used. Assets to be disposed of are reported at the lower
of carrying amount or fair value less cost to sell.
Income Taxes
Income taxes are recognized during the year in which transactions enter into
the determination of financial statement income. Deferred tax assets and
liabilities are recognized for the future tax consequences of temporary
differences between the book carrying amounts and the tax basis of assets and
liabilities.
Pensions
Substantially all U.S. employees of the Company are covered by one of three
non-contributory defined benefit pension plans. It is the Company's policy to
annually fund these plans, subject to minimum and maximum amounts specified by
governmental regulations. In Europe, employees are also covered by various
defined benefit pension plans or government sponsored defined contribution
plans. The Company funds these plans according to local laws and practices.
Net Income Per Common Share
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding plus all dilutive potential common
shares outstanding during the period. Dilutive common shares are determined
using the treasury stock method. Under the treasury stock method, exercise of
options is assumed at the beginning of the period when the average stock price
during the period exceeds the exercise price of outstanding options and common
shares are assumed issued. The proceeds from exercise are assumed to be used to
purchase common stock at the average market price during the period. The
incremental shares to be issued are considered to be the dilutive potential
common shares outstanding.
Statement of Cash Flows
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Derivative Instruments
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective
January 1, 2001. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Derivative financial
instruments are occasionally utilized by the Company to manage risk exposure to
movements in foreign exchange rates or interest rates. The Company, from time
to time, enters into forward exchange contracts to obtain foreign currencies at
specified rates based on expected future cash flows for each currency. The
premium or discount on the contracts is amortized over the life of the
contract. Changes in the value of derivative financial instruments are measured
at the balance sheet date and recognized in current earnings or other
comprehensive income depending on whether the derivative is designated as part
of a hedge transaction and, if it is, the type of transaction. The Company does
not hold derivative financial instruments for trading purposes. There were no
transition adjustments recorded as a result of the adoption of SFAS No. 133.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." These standards require that all business combinations be accounted
for using the purchase method and that goodwill and intangible assets with
indefinite useful lives should not be amortized but should be tested for
impairment at least annually, and they provide guidelines for new disclosure
requirements. These standards outline the criteria for initial recognition and
measurement of intangibles, assignment of assets and liabilities including
goodwill to reporting units and goodwill impairment testing. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
Calgon Carbon Corporation 24
The provisions of SFAS No. 142 for existing goodwill and other intangible
assets are required to be implemented effective January 1, 2002. The Company is
currently evaluating the impact of SFAS No. 142 on the consolidated financial
statements. Goodwill amortization was approximately $2.0 million for each of
the years ended December 31, 2001, 2000 and 1999, respectively.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Management has not yet evaluated the
impact of the adoption of SFAS No. 143 on the Company's financial statements.
The Company plans to adopt SFAS No. 143 on January 1, 2003 as required.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
SFAS No. 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. Management has not yet evaluated the impact of the adoption of SFAS No.
144 on the Company's financial statements. The Company plans to adopt SFAS No.
144 as of January 1, 2002 as required.
Reclassification
Certain prior year amounts have been reclassified to conform with the 2001
presentation.
2. RESTRUCTURING CHARGES
- -------------------------------------------------------------------------------
The Company currently has two separate restructuring plans requiring continued
cash outlays as of the year ended December 31, 2001. The latter of the two
initiatives was undertaken during the fourth quarter of 1999, while the former
commenced in the third quarter of 1998. The details of both restructuring plans
are outlined below.
During the fourth quarter of 1999, the Company adopted a strategy aimed
at lowering costs to serve the activated carbon markets, investing to grow its
service and solutions businesses and repositioning its proven technologies to
bring more value to consumers. In order to achieve these goals, the Company has
been reorganized as a globally integrated business with emphasis on becoming a
service business. As part of this strategy, three activated carbon production
lines have been shut down and dismantled. One of these lines was at the Feluy,
Belgium location, another was at Neville Island, Pennsylvania and the third was
at the Company's Catlettsburg, Kentucky facility. Associated with the cessation
of activated carbon production activity at the Feluy plant, office activity has
been moved from Brussels, Belgium to the Feluy plant. Operations at several
other locations were consolidated to gain global productivity and centralized
processes to promote corporate-wide sharing of technical, operational and
financial information. Included in this consolidation was the transfer of
production and administration activities from Markham, Ontario, Canada and
Lakeland, Florida to Pittsburgh, Pennsylvania. The implementation was begun in
December 1999 and is essentially complete except for contractual cash outlays
for employee severance payments to be made in 2002 and other contractual cash
outlays through the second quarter of 2006. The number of employee separations
from this restructuring was 152, which was in line with the planned separations
of 150. These separations have occurred primarily at the locations impacted by
the strategy and were spread between plant personnel and administrative
positions. A charge of $494,000 was recorded in the fourth quarter of 2001 to
reflect management's revised estimates of certain components of the 1999
restructuring plan. Additionally, an excess accrual in certain components of
the 1999 restructuring plan amounted to fourth quarter adjustments of $170,000
and $2,188,000 to reduce the restructuring accruals in 2001 and 2000,
respectively. The Company also recorded $1,778,000 of additional charges
related to the 1999 restructuring plan directly to cost of products sold and
selling, general and administrative expenses in the fourth quarter of 2000.
Calgon Carbon Corporation 25
In the third quarter of 1998, the Company initiated a worldwide plan to
reduce costs and realign the organization structure. The implementation was
begun in September 1998 and is essentially completed with the exception of some
minor contractual cash outlays that will continue through the first quarter of
2002. The number of planned employee separations from this restructuring was
131. All separations have been completed and were in line with the plan. An
excess accrual resulted in adjustments in the amount of $96,000 in 2000 and
$809,000 in 1999 to reduce the restructuring accrual.
Termination benefits paid and charged against the 1999 and 1998
restructuring liabilities amounted to $1,015,000, $12,565,000 and $2,543,000
for the years ended December 31, 2001, 2000 and 1999, respectively. Other costs
paid and charged against the 1999 and 1998 restructuring liabilities amounted
to $1,197,000, $2,428,000 and $148,000 for the years ended December 31, 2001,
2000 and 1999.
The following table sets forth the Company's restructuring charges for
the years ended December 31, 2001, 2000 and 1999:
Year Ended December 31
--------------------------------------
(Thousands) 2001 2000 1999
- --------------------------------------------------------------------------------------------
Employee severance and termination benefit costs $ 7 $ -- $ 13,754
Asset write-offs -- -- 11,997
Other costs 487 -- 4,957
- --------------------------------------------------------------------------------------------
$ 494 $ -- $ 30,708
Excess 1999 plan accrual (170) (2,188) --
Excess 1998 plan accrual -- (96) (809)
Excess Brilon Wald, Germany accrual -- -- (61)
- --------------------------------------------------------------------------------------------
Total $ 324 $(2,284) $ 29,838
- --------------------------------------------------------------------------------------------
The restructuring reserve balances at December 31,
2001 and 2000 included:
December 31
-------------------------
(Thousands) 2001 2000
- --------------------------------------------------------------------------------------------
1999 Plan
Employee severance and termination benefit costs $ 247 $ 974
Other costs 1,101 1,735
- --------------------------------------------------------------------------------------------
$ 1,348 $ 2,709
- --------------------------------------------------------------------------------------------
1998 Plan
Employee severance and termination benefit costs $ 95 $ 527
Other costs 37 62
- --------------------------------------------------------------------------------------------
$ 132 $ 589
- --------------------------------------------------------------------------------------------
Total $ 1,480 $ 3,298
- --------------------------------------------------------------------------------------------
Calgon Carbon Corporation 26
3. INVENTORIES
- -------------------------------------------------------------------------------
Inventories at December 31, 2001 and 2000 are recorded
net of a $453,200 and $390,000 reserve, respectively, for
obsolete and slow-moving items.
December 31
---------------------------
(Thousands) 2001 2000
- --------------------------------------------------------------------------------------------
Raw materials $ 7,575 $ 5,595
Finished goods 34,529 31,343
- --------------------------------------------------------------------------------------------
Total $ 42,104 $ 36,938
- --------------------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------------------------------------------------
December 31
---------------------------
(Thousands) 2001 2000
- --------------------------------------------------------------------------------------------
Land and improvements $ 10,143 $ 13,381
Buildings 22,340 22,917
Machinery, equipment, and computer hardware and software 274,979 266,155
Furniture and vehicles 20,990 20,960
Construction-in-progress 7,564 6,422
- --------------------------------------------------------------------------------------------
$ 336,016 $ 329,835
Less accumulated depreciation (192,355) (178,485)
- --------------------------------------------------------------------------------------------
Net $ 143,661 $ 151,350
- --------------------------------------------------------------------------------------------
5. INTANGIBLES
- -------------------------------------------------------------------------------
The following summarizes intangible assets, net of accumulated amortization of
$10,662,000 and $ 8,580,000 at December 31, 2001 and 2000, respectively:
December 31
---------------------------
(Thousands) 2001 2000
- --------------------------------------------------------------------------------------------
Goodwill $ 70,064 $ 70,885
Other 3,551 3,423
- --------------------------------------------------------------------------------------------
Total $ 73,615 $ 74,308
- --------------------------------------------------------------------------------------------
Calgon Carbon Corporation 27
6. BORROWING ARRANGEMENTS
- --------------------------------------------------------------------------------
Short-Term Debt
The Company's short-term debt consists entirely of borrowings under its Belgian
credit facility. The short-term portion of this facility expires on March 15,
2002 and provides for borrowings up to $8.8 million (9.8 million Euros). No
commitment fee is required on the unused portion of the credit line. The
interest rate is variable and based upon Euro-based rates with other interest
rate options available. The weighted average interest rate on the borrowings
under the Belgian credit facility at December 31, 2001 was 4.2%.
Long-Term Debt
December 31
---------------------------
(Thousands) 2001 2000
- --------------------------------------------------------------------------------------------
United States credit facilities $ 44,300 $ 37,800
Term loan -- 9,328
Pollution control debt and Industrial revenue bonds 8,100 8,100
Other 3,235 3,029
- --------------------------------------------------------------------------------------------
Total $ 55,635 $ 58,257
Less current maturities of long-term debt (1,275) (10,180)
- --------------------------------------------------------------------------------------------
Net $ 54,360 $ 48,077
- --------------------------------------------------------------------------------------------
United States Credit Facilities
The Company is in the third year of a multi-bank credit agreement that consists
of a five-year $86.8 million revolving credit facility expiring in May 2004 and
a 364-day $26.6 million revolving credit facility expiring in May 2002. All
borrowings outstanding under the United States credit facility are outstanding
under the five-year portion of the agreement. Included in the credit agreement
is a letter of credit sub-facility that may not exceed $30.0 million. Annual
facility fees are paid on the committed amount. Availability under this credit
facility at December 31, 2001 was $46.8 million, which is net of $22.3 million
in outstanding letters of credit. The interest rate is based upon Euro-based
rates with other interest rate options available. The weighted average interest
rate on the outstanding balance less the effect of the interest rate swap
agreement (see Note 14) was 2.4% at December 31, 2001.
Term Loan
In June 1996, the Company entered into a five-year unsecured $9.3 (14.0 million
Canadian dollars) term loan with a Canadian bank, which matured on July 1,
2001. This term loan commitment was repaid on June 29, 2001.
Pollution Control Debt and Industrial Revenue Bonds
The City of Ashland, Kentucky Floating Rate Pollution Control and Industrial
Revenue Bonds totaling $5.1 million bear interest at a variable rate and are
due October 1, 2006. As of December 31, 2001, the interest rate was 2.0%. These
pollution control bonds are secured by certain pollution control assets located
at the Company's Catlettsburg, Kentucky plant.
The Mississippi Industrial Revenue Bonds totaling $3.0 million bear
interest at a variable rate and mature in May 2009. The interest rate as of
December 31, 2001 was 2.0%. These bonds were issued to finance certain
equipment acquisitions at the Company's Pearl River, Mississippi plant.
German Credit Facility
The Company maintains a bank credit facility in Germany that provides for
borrowings up to $2.3 million (2.6 million Euros or 5 million deutsche marks).
The facility has no set maturity date and is made available on an "until
further notice" basis. No commitment fee is required on the unused portion of
the credit line. Loans bear interest at the German Bank Rate with other
interest options available. At December 31, 2001 and 2000, no amounts were
outstanding under this facility.
Calgon Carbon Corporation 28
Other
Other consists of borrowings primarily from Japanese banks and the long-term
portion of the Belgian credit facility. The Japanese borrowings are at various
interest rates ranging from 1.0% to 4.1% and various maturities through 2007.
The weighted average interest rate on the Japanese borrowings outstanding was
2.2% at December 31, 2001. The long-term portion of the Belgian credit facility
provides for borrowings up to $2.2 million (2.5 million Euros) and can be
utilized until further notice from the lender. There was $0.7 million
outstanding under this facility at December 31, 2001 at a weighted average
interest rate of 4.2%.
Restrictive Covenants
The United States credit facilities' covenants impose financial restrictions on
the Company, including maintaining certain ratios of debt to capital, operating
income to interest expense and cash flow to debt. At December 31, 2001, the
Company was in compliance with all covenants relating to the credit facilities
in the United States. The German and Belgian credit facilities have no
financial covenants.
Fair Value of Long-Term Debt
Substantially all long-term debt is based on rates that float with Euro
Dollar-based rates or prime rates and accordingly the carrying value of these
obligations approximates their fair value.
Maturities of Debt
The Company is obligated to make principal payments on long-term debt
outstanding at December 31, 2001 of $1.3 million in 2002, $0.5 million in 2003,
$44.5 million in 2004, $0.2 million in 2005, $5.3 million in 2006 and $3.8
million thereafter.
7. COMMITMENTS
- -------------------------------------------------------------------------------
The Company has entered into leases covering principally office, research and
warehouse space, office equipment and vehicles. Future minimum rental payments
required under all operating leases that have remaining noncancelable lease
terms in excess of one year are $4,988,000 in 2002, $4,257,000 in 2003,
$4,131,000 in 2004, $1,711,000 in 2005, $1,121,000 in 2006, and $3,262,000
thereafter. Total rental expenses on all operating leases were $6,894,000,
$7,034,000, and $7,598,000 for the years ended December 31, 2001, 2000, and
1999, respectively.
The Company has in place a long-term supply contract for the purchase
of raw materials for one of its manufacturing facilities. Future minimum
purchase requirements under the terms of that contract are $4,052,000 in 2002,
$4,186,000 in 2003, $4,324,000 in 2004, $4,467,000 in 2005, $4,614,000 in 2006,
and $25,457,000 thereafter.
Total payments made for raw materials purchased under the
aforementioned supply contract were $6,939,000, $6,556,000, and $4,099,000 for
the years ended December 31, 2001, 2000, and 1999, respectively.
Calgon Carbon Corporation 29
8. SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
On August 24, 1998, the Board of Directors authorized the Company to purchase
up to 2,000,000 shares, or approximately 5% of its common stock. This
authorization resulted in the purchase of 1,019,200 shares during the course of
1998 and 1999, which are held as treasury stock. The 1998 program was suspended
by the Board on October 17, 2000, at which time the Board of Directors
authorized the purchase of up to 500,000 shares of the Company's stock. As of
December 31, 2001, 11,300 shares have been purchased under the 2000
authorization which are held as treasury stock.
The Board of Directors adopted a Stockholder Rights Plan in January
1995 designed to guard against (1) coercive and abusive tactics that might be
used in an attempt to gain control of the Company without paying all
stockholders a fair price for their shares or (2) the accumulation of a
substantial block of stock without Board approval. The Rights Plan will not
prevent takeovers, but is designed to encourage anyone attempting to acquire
the Company to first negotiate with the Board. The Plan awards one Right for
each outstanding share of common stock held by stockholders of record on
February 14, 1995 and thereafter. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of Calgon Carbon common stock at
a purchase price of $50 per share. The Rights will be exercisable only if a
person or group acquires beneficial ownership of 20% or more of the Company's
outstanding common stock. If one of those events occurs, each stockholder (with
the exception of the person or group who owns 20% or more of the outstanding
stock) can exchange the Rights for shares with a market value equal to the
then-current exercise price or three shares, whichever has the greater value.
The Rights can be redeemed by the Board of Directors under certain
circumstances, in which case the Rights will not be exchangeable for shares.
On February 5, 2002, the Board of Directors declared a dividend of $.03
per common share, which was issued to shareholders of record as of February 20,
2002, and was paid on March 5, 2002.
9. STOCK COMPENSATION PLANS
- -------------------------------------------------------------------------------
At December 31, 2001, the Company had two stock-based compensation plans that
are described below.
Employee Stock Option Plan
The Company has an Employee Stock Option Plan for officers and other key
employees of the Company. Stock options may be "nonstatutory," with a purchase
price not less than 80% of fair market value on the date of the grant, or
"incentive" with a purchase price of not less than 100% of the fair market
value on that date. Stock appreciation rights may be granted at date of option
grant or at any later date during the term of the option.
"Incentive" stock options granted since 1986 become exercisable no less
than six months after the date of grant and are no longer exercisable after the
expiration of four to ten years from the date of grant. Of the options granted
in 1999, 197,250 were performance-based options that vest in various increments
based upon the Company's achievement of four key 1999 measures. Thirty percent
of these options vested in January 2000. No compensation cost was recorded in
relation to the performance shares since the fair market value of the Company's
stock was less than the option price of the related shares as of December 31,
1999.
Calgon Carbon Corporation 30
A summary of the Plan activity for the years ended
December 31, 2001, 2000, and 1999 is presented below:
2001 2000 1999
-------------------------- --------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 1,751,100 $ 7.36 1,219,250 $ 8.66 691,500 $ 11.11
Granted 879,700 7.69 881,500 6.14 657,250 6.43
Exercised (54,425) 7.42 (3,075) 6.06 -- --
Canceled (157,525) 7.85 (346,575) 8.85 (129,500) 10.42
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 2,418,850 7.45 1,751,100 7.36 1,219,250 8.66
Options exercisable at year-end 1,143,900 712,700 575,500
Weighted-average fair value of
options granted during the year $ 2.68 $ 2.03 $ 1.74
- -----------------------------------------------------------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding
at December 31, 2001:
Options Outstanding Options Exercisable
------------------------------------------------------ --------------------------------
Weighted-Average
Number Remaining Weighted-Average Number Weighted-Average
Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------
$5.19 to $17.88 2,418,850 7.5 Years $7.45 1,143,900 $7.77
- ------------------------------------------------------------------------------------------------------------------------
Non-Employee Directors' Stock Option Plan
The 1993 Non-Employee Directors' Stock Option Plan, as amended in 1997,
provides for an annual grant on the day following the Annual Meeting of
Stockholders of option shares equal to a number of shares which will result in a
Black-Scholes calculated value of $25,000 per Director on the date of grant. The
options vest and become exercisable six months after the date of grant and, in
general, expire ten years after the date of grant. No options were granted under
the amended Plan until 1999. There are previously issued options that are still
outstanding.
A summary of the Plan activity for the years ended December 31, 2001, 2000,
and 1999 is presented below:
2001 2000 1999
-------------------------- --------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 178,200 $ 7.28 94,200 $ 7.83 13,700 $ 15.50
Granted 78,000 8.39 84,000 6.66 80,500 6.53
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 256,200 7.62 178,200 7.28 94,200 7.83
Options exercisable at year-end 256,200 164,200 94,200
Weighted-average fair value of
options granted during the year $ 3.02 $ 2.21 $ 2.17
- -----------------------------------------------------------------------------------------------------------------------------------
Calgon Carbon Corporation 31
The following table summarizes information about
stock options outstanding at December 31, 2001:
Options Outstanding Options Exercisable
----------------------------------------------------- --------------------------------
Weighted-Average
Number Remaining Weighted-Average Number Weighted-Average
Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------
$6.38 to $15.50 256,200 8.0 Years $7.62 256,200 $7.62
- ------------------------------------------------------------------------------------------------------------------------
The Company applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for these plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans, the Company's net income (loss) and net income (loss) per common share
would have been as follows:
Year Ended December 31
---------------------------------------------------------------------------
(Dollars in thousands except per share data) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) As reported $ 7,974 $ 9,852 $ (13,729)
Pro forma $ 7,279 $ 9,653 $ (14,196)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share
Basic As reported $ .21 $ .25 $ (.35)
Pro forma $ .19 $ .25 $ (.37)
Diluted As reported $ .20 $ .25 $ (.35)
Pro forma $ .19 $ .25 $ (.37)
- -------------------------------------------------------------------------------------------------------------------------
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
2001 2000 1999
------------------------------------------------------------
Dividend yield 2.37% 3.51% 4.94%
Risk-free interest rates 3.62%-4.90% 5.87%-6.79% 5.37%-6.00%
Expected volatility 43% 40%-48% 39%-54%
Expected lives of options 5 years 2-5 years 2-10 years
- --------------------------------------------------------------------------------------------------
Calgon Carbon Corporation 32
10. PENSIONS
- -------------------------------------------------------------------------------
The Company sponsors defined benefit plans covering substantially all
employees. For U.S. plans, the following tables provide a reconciliation of
changes in the plans' benefit obligations and fair value of assets over the
two-year period ending December 31, 2001 and a statement of the funded status
as of December 31 of both years:
December 31
----------------------------
(Thousands) 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Reconciliation of benefit obligation
Benefit obligations at January 1 $ 46,789 $ 40,035
Service cost 2,070 2,099
Interest cost 3,464 3,481
Plan amendments 148 1,965
Actuarial losses (gains) (460) 1,036
Benefits paid (2,414) (1,827)
- ------------------------------------------------------------------------------------------------------------------------
Benefit obligations at December 31 $ 49,597 $ 46,789
- ------------------------------------------------------------------------------------------------------------------------
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 45,522 $ 49,105
Actual return on plan assets (2,926) (1,782)
Employer contributions 35 26
Benefits paid (2,414) (1,827)
- ------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at December 31 $ 40,217 $ 45,522
- ------------------------------------------------------------------------------------------------------------------------
Funded status of plans at December 31 $ (9,380) $ (1,267)
Unrecognized net actuarial gains (1,594) (8,469)
Unrecognized prior service cost 3,842 4,053
- ------------------------------------------------------------------------------------------------------------------------
Accrued pension cost at December 31 $ (7,132) $ (5,683)
- ------------------------------------------------------------------------------------------------------------------------
For U.S. plans, the following table provides the components of net
periodic pension costs of the plans for the years ended December 31, 2001,
2000, and 1999:
Year Ended December 31
--------------------------------------------------
(Thousands) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
Service cost $ 2,070 $ 2,099 $ 2,521
Interest cost 3,464 3,481 3,183
Expected return on assets (4,054) (4,385) (4,103)
Prior service cost 359 359 250
Net amortization (355) (698) (145)
- ----------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 1,484 $ 856 $ 1,706
- ----------------------------------------------------------------------------------------------------------------
Calgon Carbon Corporation 33
For U.S. plans, the assumptions used in the measurement of the benefit
obligations are shown in the following table:
2001 2000
- -------------------------------------------------------------------------------
Weighted average actuarial assumptions at December 31:
Discount rate 7.25% 7.50%
Expected annual return on plan assets 9.00% 9.00%
Rate of increase in compensation levels 2.00-4.00% 2.00-4.00%
===============================================================================
For European plans, the following tables provide a reconciliation of
changes in the plans' benefit obligations and fair value of assets over the
two-year period ending December 31, 2001 and a statement of the funded status
as of December 31 of both years:
December 31
-------------------
(Thousands) 2001 2000
- ---------------------------------------------------------------------
Reconciliation of benefit obligation
Benefit obligations at January 1 $14,874 $16,627
Service cost 411 937
Interest cost 906 920
Employee contributions 118 189
Actuarial gains (1,067) (1,457)
Benefits paid (1,110) (1,179)
Foreign currency exchange rate changes (486) (1,163)
- ---------------------------------------------------------------------
Benefit obligations at December 31 $13,646 $14,874
=====================================================================
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 7,292 $ 8,162
Actual return on plan assets (191) (261)
Employer contributions 1,306 996
Employee contributions 118 189
Benefits paid (1,110) (1,179)
Foreign currency exchange rate changes (250) (615)
- ---------------------------------------------------------------------
Fair value of plan assets at December 31 $ 7,165 $ 7,292
- ---------------------------------------------------------------------
Funded status of plans at December 31 $(6,481) $(7,582)
Unrecognized net actuarial losses (gains) (143) 13
Unrecognized net transition obligation 320 374
- ---------------------------------------------------------------------
Accrued pension cost at December 31 $(6,304) $(7,195)
=====================================================================
Calgon Carbon Corporation 34
For European plans, the following table provides the components of net
periodic pension costs of the plans for the years ended December 31, 2001,
2000, and 1999:
Year Ended December 31
------------------------------------
(Thousands) 2001 2000 1999
- ---------------------------------------------------------------------
Service cost $ 411 $ 937 $ 907
Interest cost 906 920 921
Expected return on assets (542) (538) (430)
Net amortization 33 61 105
- ---------------------------------------------------------------------
Net periodic pension cost $ 808 $ 1,380 $ 1,503
=====================================================================
For European plans, the assumptions used in the measurement of the benefit
obligations are shown in the following table:
2001 2000
- ------------------------------------------------------------------------
Weighted average actuarial assumptions at December 31:
Discount rate 5.87% 6.36%
Expected annual return on plan assets 7.25% 7.35%
Rate of increase in compensation levels 3.46% 3.72%
========================================================================
The accumulated benefit obligation and fair value of plan assets for
European pension plans with accumulated benefit obligations in excess of plan
assets were $ 8,946,000 and $3,590,000, respectively, as of December 31, 2001
and $9,464,000 and $3,368,000, respectively, as of December 31, 2000.
11. PROVISION FOR INCOME TAXES
- -------------------------------------------------------------------------------
The components of the provision (benefit) for income taxes were as follows:
Year Ended December 31
-----------------------------------
(Thousands) 2001 2000 1999
- -------------------------------------------------------------------------------
Current
Federal $ 57 $(1,460) $ (1,203)
State and local -- (1,079) (369)
Foreign 1,326 1,439 820
- -------------------------------------------------------------------------------
1,383 (1,100) (752)
- -------------------------------------------------------------------------------
Deferred
Federal 2,601 7,175 (3,840)
State and local 232 1,540 (941)
Foreign (622) (3,119) (3,806)
- -------------------------------------------------------------------------------
2,211 5,596 (8,587)
- -------------------------------------------------------------------------------
Provision (benefit) for income taxes $ 3,594 $ 4,496 $ (9,339)
===============================================================================
Calgon Carbon Corporation 35
Income (loss) before income taxes for 2001, 2000, and 1999 includes
$1,980,000, ($5,045,000), and ($7,503,000) generated by operations outside the
United States.
The difference between the U.S. federal statutory tax rate and the
Company's effective income tax rate is as follows:
Year Ended December 31
----------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% (35.0)%
State income taxes, net of federal income tax benefit 5.5 2.0 (3.7)
Higher tax (benefit) rate on foreign income (loss) 1.3 6.4 (1.6)
Reversal of U.S. deferred tax liability on undistributed foreign income -- (5.9) --
Benefit of foreign sales corporation on U.S. federal statutory rate (6.6) (14.3) --
Benefit of research and development tax credits on
U.S. federal statutory rate (5.6) -- --
Revision of prior year's accruals -- 5.4 --
Other-net 1.3 2.0 (0.4)
- ----------------------------------------------------------------------------------------------------------------
Effective income tax rate 30.9% 30.6% (40.7)%
================================================================================================================
During 2001, the Company completed an analysis of its U.S. research and
development expenditures for the years 1998 through 2000. This analysis
resulted in a U.S. tax credit related to the years 1998 through 2000 that will
be available to offset future U.S. federal income tax of approximately $531,000.
During the fourth quarter of 2000, the Company ceased providing for the
income tax effect of the undistributed earnings of its European and Canadian
subsidiaries and reversed the previously recorded income tax effect of these
undistributed earnings, as management believes these earnings will be
reinvested in those European and Canadian subsidiaries for an indefinite period
of time. The effect of this change in estimate was an $862,000 reduction of tax
expense.
During 2000, the Company performed a redetermination of the foreign sales
corporation benefit for the years 1996 through 1999, which resulted in a refund
of approximately $728,000 of taxes paid for 1996 through 1998, and a reduction
in the 1999 tax accrual of $672,000. The effect of this refund and tax accrual
reduction is reflected as a reduction to current tax expense.
The Company has domestic operating loss carryforwards of approximately
$38.2 million as of December 31, 2001. These operating losses expire as follows:
Year (Thousands) Amount
- -------------------------
2004 $ 158
2005 273
2006 190
2007 176
2009 1,928
2010 1,890
2014 769
2015 401
2018 1,195
2019 15,456
2020 15,761
=========================
Calgon Carbon Corporation 36
The Company also has the following foreign operating loss carryforwards
and domestic tax credit carryforwards as of December 31, 2001:
Type (Thousands) Amount Expiration Date
- ------------------------------------------------------------------------
Tax credits--domestic $ 3,215 2002-2020
Operating loss carryforwards--foreign $ 31,110 None
========================================================================
The Company's U.S. income tax returns have been examined by the Internal
Revenue Service through 1993 and are closed to assessments. The statute of
limitations has lapsed with respect to the Company's federal income tax returns
for 1997 and prior years, and, as a result, these
returns are closed to assessments of additional tax. Management believes that
adequate provisions for taxes have been made through December 31, 2001.
The components of deferred taxes comprise the following:
(Thousands) December 31
--------------------------
2001 2000
- ----------------------------------------------------------------------------
Deferred tax assets
Foreign tax loss and credit carryforwards $ 11,898 $ 11,852
U.S. net operating loss and credit carryforwards 9,352 12,933
Accruals 4,467 4,412
Inventories 875 751
Pensions 5,043 2,546
Other 66 235
Valuation reserve (2,564) (2,341)
- ----------------------------------------------------------------------------
Total deferred tax assets $ 29,137 $ 30,388
============================================================================
Deferred tax liabilities
Property, plant and equipment $ 32,800 $ 34,602
U.S. liability on Belgian net deferred tax assets 7,893 6,812
U.S. liability on German net deferred tax assets 3,764 3,861
U.S. liability on deferred foreign income 491 169
Cumulative translation adjustment 1,079 1,140
Intangibles 5,858 4,106
- ----------------------------------------------------------------------------
Total deferred tax liabilities $ 51,885 $ 50,690
- ----------------------------------------------------------------------------
Net deferred tax liability $ 22,748 $ 20,302
============================================================================
The Company's ability to utilize the U.S. foreign tax credit carryforwards
it has generated for the years 1998 through 2001 more than likely will be
limited due to restrictions within the Internal Revenue Code. These credits
total approximately $2.5 million and $2.3 million as of December 31, 2001 and
2000, respectively. The Company has recorded a valuation reserve for those
carryforward amounts that are expected to expire prior to being utilized as a
result of these restrictions.
Calgon Carbon Corporation 37
12. OTHER INFORMATION
- -----------------------------------------------------------------------
Repair and maintenance expenses were $10,204,000, $11,153,000, and $19,068,000
for the years ended December 31, 2001, 2000, and 1999, respectively.
Other expense--net includes net foreign currency transaction gains of
$111,000, $683,000, and $66,000 for the years ended December 31, 2001, 2000,
and 1999, tax (expense) benefit other than on income of $774,000, ($934,000),
and ($1,068,000) for the years ended December 31, 2001, 2000, and 1999, and an
unrealized derivative loss of ($336,000) for the year ended December 31, 2001.
Deferred tax (benefit) or expense included in the translation adjustments
for 2001, 2000, and 1999 were ($61,000), ($2,684,000), and ($2,299,000),
respectively. Deferred tax benefit included in the translation adjustments for
2000 include $1,517,000 related to the reversal of the deferred tax effect on
undistributed earnings of the Company's European and Canadian subsidiaries, as
management ceased providing for the income tax effect on these undistributed
earnings in 2000, as management does not believe these earnings will be
remitted to the parent company in the foreseeable future.
13. SUPPLEMENTAL CASH FLOW INFORMATION
- -----------------------------------------------------------------------
(Thousands) 2001 2000 1999
- -----------------------------------------------------------------------
Cash paid during the year for
Interest $ 3,420 $ 4,981 $ 5,142
Income taxes (refunded) paid--net $ 770 $ (1,561) $ (748)
- -----------------------------------------------------------------------
Bank debt
Borrowings on short--term debt $ 807 $ 9,120 $ --
Borrowings on long--term debt 23,103 7,771 9,443
Repayments (25,951) (29,103) (22,686)
- -----------------------------------------------------------------------
Net (repayments of) borrowings $ (2,041) $ (12,212) $ (13,243)
=======================================================================
14. DERIVATIVE INSTRUMENTS
- -----------------------------------------------------------------------
During 2001, the Company entered into an interest rate swap agreement to fix
the interest rate being paid on $10.0 million notional of borrowings under the
United States Credit Facility (see Note 6). As discussed in Note 6, interest
payments under the United States Credit Facility are based on a floating
Euro-rate plus a spread. The effect of the interest rate swap agreement is to
fix the interest payments for $10.0 million of borrowings under the United
States Credit Facility at 5.48%. This agreement expires in January 2003. In
accordance with SFAS No. 133, as amended, the Company recorded a liability at
December 31, 2001 for the fair value of this agreement of approximately $0.3
million. This amount is reflected in other expense--net on the statement of
income, as the Company did not receive hedge accounting treatment under SFAS
No. 133.
The Company has three foreign currency forward exchange contracts. These
contracts are recognized on the balance sheet at their fair value, which is the
estimated amount at which they could be settled based on forward market
exchange rates. The Company's corporate and foreign subsidiaries use forward
exchange contracts to limit the exposure of exchange rate fluctuations on
certain foreign currency receivables, payables, and other known and forecasted
transactional exposures for periods consistent with the expected cash flow of
the underlying transactions. The contracts generally mature within one year and
are designed to limit exposure to exchange rate fluctuations. The Company did
not receive hedge accounting treatment under SFAS No. 133 for these foreign
currency forward exchange contracts. The fair value of these contracts at
December 31, 2001 was not material.
Calgon Carbon Corporation 38
15. LITIGATION
- -------------------------------------------------------------------------------
On December 31, 1996, the Company purchased the common stock of Advanced
Separation Technologies Incorporated (AST) from Progress Capital Holdings, Inc.
and Potomac Capital Investment Corporation.
On January 12, 1998, the Company filed a claim for unspecified damages in
the United States District Court in the Western District of Pennsylvania
alleging among other things that Progress Capital Holdings and Potomac Capital
Investment Corporation materially breached various AST financial and
operational representations and warranties included in the Stock Purchase
Agreement. Based upon information obtained since the acquisition and
corroborated in the course of pre-trial discovery, the Company believes that it
has a reasonable basis for this claim and intends to vigorously pursue
reimbursement for damages sustained. Neither the Company nor its counsel can
predict with certainty the amount, if any, of recovery that will be obtained
from the defendants in this matter. Accordingly, the Company has not recorded a
receivable for this gain contingency pending further developments in the
litigation.
The Company is also currently a party in two cases involving alleged
infringement of its U.S. patent No. 6,129,893 ("893 patent") for the method of
preventing cryptosporidium infection in drinking water. In the first case,
Wedeco Ideal Horizons, Inc. (Wedeco) has filed suit against the Company
seeking a declaratory judgment that it does not infringe the Company's "893
patent". This matter is currently pending in the United States District Court
for the District of New Jersey. In the second case, the Company has pending
litigation against the Town of Ontario, NY and Robert Wykle, et al. in the
United States District Court for the Western District of New York alleging that
the defendant is practicing the method claimed within the "893 patent" without
a license. Neither the Company nor its counsel can predict with any certainty
the outcome of the two matters.
The Company is involved in various legal proceedings, lawsuits and claims,
including employment, product warranty and environmental matters of a nature
considered normal to its business. It is the Company's policy to accrue for
amounts related to these legal matters if it is probable that a liability has
been incurred and an amount is reasonably estimable. Management believes,
after consulting with counsel, that the ultimate liabilities, if any, resulting
from such lawsuits and claims will not materially affect the consolidated
results, liquidity or financial position of the Company.
16. BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
- -------------------------------------------------------------------------------
Computation of basic and diluted net income (loss) per common share is
performed as follows:
For the Year Ended 2001 For the Year Ended 2000
------------------------- --------------------------
Income Shares Income Shares
(Dollars in thousands, except per share amounts) (Numerator) (Denominator) (Numerator) (Denominator)
- ----------------------------------------------- -------------------------- ---------------------------
Basic Net Income (Loss) Per Common Share
Income (loss) available to common stockholders $ 7,974 38,811,339 $ 9,852 38,807,358
Effect of Dilutive Securities
Options 345,537 62,662
- ----------------------------------------------------------------------------------------------------------------
Diluted Net Income (Loss) Per Common Share
Income (loss) available to common
stockholders plus assumed conversion $ 7,974 39,156,876 $ 9,852 38,870,020
- ----------------------------------------------------------------------------------------------------------------
Basic Net Income (Loss) Per Common Share $ .21 $ .25
Diluted Net Income (Loss) Per Common Share $ .20 $ .25
- ----------------------------------------------------------------------------------------------------------------
For the Year Ended 1999
--------------------------
(Loss) Shares
(Dollars in thousands, except per share amounts) (Numerator) (Denominator)
- ----------------------------------------------------------------------------
Basic Net Income (Loss) Per Common Share
Income (loss) available to common stockholders $ (13,729) 38,778,974
Effect of Dilutive Securities
Options --
- ----------------------------------------------------------------------------
Diluted Net Income (Loss) Per Common Share
Income (loss) available to common
stockholders plus assumed conversion $ (13,729) 38,778,974
- ----------------------------------------------------------------------------
Basic Net Income (Loss) Per Common Share $ (.35)
Diluted Net Income (Loss) Per Common Share $ (.35)
- ----------------------------------------------------------------------------
Calgon Carbon Corporation 39
As of December 31, 2001, there were 2,675,050 options outstanding with an
exercise price range of between $5.19 and $17.88 per share. For the year ended
December 31, 2000, there were 1,929,300 options outstanding with exercise
prices ranging from $5.00 to $17.88 per share.
The 1999 diluted earnings per share calculation excluded the effect of 10,862
dilutive securities with an exercise price range of between $6.06 and $6.53 per
share depending on the average stock prices during the period, because the
effect was antidilutive.
17. SEGMENT INFORMATION
- -------------------------------------------------------------------------------
Prior to January 1, 2000, the Company had two reportable segments:
Activated Carbon and Engineered Systems. Each of these segments produced,
designed and marketed products and services specifically developed for the
purification, separation and concentration of liquids and gases, and both sold
to the same markets.
The Company, as a result of a new strategy, effective January 1, 2000, to
transform the Company from a product supplier to a service and solutions
provider, has changed the structure of its internal organization in a manner
that caused the composition of its reportable segments to change. As a result,
the Company has four reportable segments: Activated Carbon, Service, Engineered
Solutions and Consumer. These reportable segments are composed of strategic
business units that offer different products and services. The Company
evaluates segment performance based primarily on economic profit (as defined by
the Company) and operating income.
The Activated Carbon segment manufactures granular activated carbon for
use in applications to remove organic compounds from liquids, gases, water and
air. The Service segment consists of reactivation of spent carbon and the
leasing, monitoring and maintenance of mobile carbon adsorption equipment. The
Engineered Solutions segment provides solutions to customers' air and water
process problems through the design, fabrication and operation of systems that
utilize a combination of the Company's enabling technologies: carbon
adsorption, ultraviolet light and advanced ion exchange separation. The
Consumer segment brings the Company's industrial purification technologies
directly to the consumer in the form of products and services. It also includes
the manufacture of carbon cloth and lump charcoal and briquettes. The Company
has restated the segment information for the year ended December 31, 1999 to
conform to the 2001 and 2000 presentation.
Year Ended December 31
- ---------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- ---------------------------------------------------------------------------
Net sales
Activated Carbon $ 109,317 $ 124,695 $ 144,478
Service 92,336 90,978 94,269
Engineered Solutions 48,227 32,724 37,704
Consumer 20,713 20,586 19,701
- ---------------------------------------------------------------------------
Consolidated net sales $ 270,593 $ 268,983 $ 296,152
- ---------------------------------------------------------------------------
Calgon Carbon Corporation 40
Year Ended December 31
- --------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
Income (loss) from operations before
amortization and restructuring charges
Activated Carbon $ 5,317 $ 12,016 $ 9,574
Service 13,651 12,906 12,730
Engineered Solutions 1,992 (1,743) (2,875)
Consumer (3,021) (3,292) (2,937)
- --------------------------------------------------------------------------------------------------------
$ 17,939 $ 19,887 $ 16,492
Reconciling items
Restructuring charges (324) 2,284 (29,838)
Amortization of intangibles and organization costs (2,278) (2,284) (2,303)
Interest income 194 150 98
Interest expense (3,346) (4,970) (4,893)
Other expense--net (564) (375) (2,523)
- --------------------------------------------------------------------------------------------------------
Consolidated income (loss) before income taxes and minority interest $ 11,621 $ 14,692 $ (22,967)
- --------------------------------------------------------------------------------------------------------
Year Ended December 31
- --------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
Depreciation
Activated Carbon $ 8,886 $ 9,753 $ 11,843
Service 7,173 6,837 6,110
Engineered Solutions 1,009 681 1,619
Consumer 990 1,042 1,007
- --------------------------------------------------------------------------------------------------------
$ 18,058 $ 18,313 $ 20,579
Amortization of intangibles and organization costs 2,278 2,284 2,303
- --------------------------------------------------------------------------------------------------------
Consolidated depreciation and amortization $ 20,336 $ 20,597 $ 22,882
- --------------------------------------------------------------------------------------------------------
December 31
- --------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- --------------------------------------------------------------------------------------------------------
Total assets
Activated Carbon $ 134,161 $ 150,527 $ 162,736
Service 90,953 88,581 89,064
Engineered Solutions 90,706 84,857 90,037
Consumer 15,894 16,159 19,668
- --------------------------------------------------------------------------------------------------------
Consolidated total assets $ 331,714 $ 340,124 $ 361,505
- --------------------------------------------------------------------------------------------------------
Calgon Carbon Corporation 41
Year Ended December 31
- -------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
Property, plant and equipment expenditures
Activated Carbon $ 5,771 $ 1,149 $ 5,212
Service 5,511 7,413 2,548
Engineered Solutions 691 351 442
Consumer 590 538 380
- -------------------------------------------------------------------------------------------------------
Consolidated property, plant and equipment expenditures $ 12,563 $ 9,451 $ 8,582
- -------------------------------------------------------------------------------------------------------
GEOGRAPHIC INFORMATION
Net sales are attributable to countries based on location
of customer.
Year Ended December 31
- -------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
Net sales
United States $ 164,995 $149,297 $ 163,098
Germany 22,151 25,236 29,115
United Kingdom 15,178 16,007 18,506
Japan 12,341 14,425 13,498
Other 55,928 64,018 71,935
- -------------------------------------------------------------------------------------------------------
Consolidated net sales $ 270,593 $268,983 $ 296,152
- -------------------------------------------------------------------------------------------------------
December 31
- -------------------------------------------------------------------------------------------------------
(Thousands) 2001 2000 1999
- -------------------------------------------------------------------------------------------------------
Long-lived assets
United States $ 182,153 $188,837 $ 197,139
Belgium 15,170 15,678 14,487
Germany 5,603 5,837 8,360
Canada 5,440 5,963 6,818
Japan 4,651 5,444 7,208
United Kingdom 4,825 4,655 5,314
France 64 84 111
- -------------------------------------------------------------------------------------------------------
$ 217,906 $226,498 $ 239,437
Deferred taxes 9,273 9,057 6,223
- -------------------------------------------------------------------------------------------------------
Consolidated long-lived assets $ 227,179 $235,555 $ 245,660
- -------------------------------------------------------------------------------------------------------
Calgon Carbon Corporation 42
S I X - Y E A R S U M M A R Y S E L E C T E D F I N A N C I A L A N D S T A T I S T I C A L D A T A
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data) 2001 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
Income Statement Data:
Net sales $270,593 $268,983 $296,152 $301,040 $327,500 $290,196
Income (loss) from operations $ 15,337 $ 19,887 $(15,649) $ 19,440 $ 38,212 $ 32,834
Interest expense $ 3,346 $ 4,970 $ 4,893 $ 4,771 $ 4,057 $ 752
Net income (loss) (a)(b)(c) $ 7,974 $ 9,852 $(13,729) $ 8,269 $ 21,484 $ 21,061
Percent of pre-tax income (loss) to sales 4.3% 5.5% (7.8)% 4.3% 10.1% 11.3%
Net income (loss) per common share--
basic (a)(b)(c) $ .21 $ .25 $ (.35) $ .21 $ .54 $ .52
Net income (loss) per common share--
diluted (a)(b)(c) $ .20 $ .25 $ (.35) $ .21 $ .54 $ .52
Dividends declared per common share $ .20 $ .15 $ .29 $ .32 $ .32 $ .32
- ----------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at year end):
Working capital $ 56,793 $ 40,706 $ 51,124 $ 58,022 $ 57,252 $ 64,925
Total assets $331,714 $340,124 $361,505 $406,994 $419,040 $392,983
Long-term debt $ 54,360 $ 48,077 $ 76,120 $ 71,101 $ 72,297 $ 65,837
Treasury stock, at cost $ 27,130 $ 27,131 $ 27,115 $ 26,986 $ 20,066 $ 20,066
- ----------------------------------------------------------------------------------------------------------------------------
Other Selected Data (at year end):
Return (loss) on average shareholders' equity 4% 5% (7)% 4% 10% 10%
Ratio of total debt to total capitalization 26% 27% 31% 31% 27% 25%
Current ratio 219% 164% 179% 181% 170% 198%
Effective tax rate 30.9% 30.6% (40.7)% 36.1% 35.3% 36.0%
Treasury stock, in thousands 2,787 2,788 2,781 2,762 1,761 1,761
Shares outstanding, in thousands 38,856 38,802 38,802 38,742 39,743 39,675
Book value per outstanding common share $ 4.73 $ 4.77 $ 4.67 $ 5.42 $ 5.52 $ 5.40
Market value of common stock $ 8.35 $ 5.69 $ 5.88 $ 7.50 $ 10.75 $ 12.25
Price earnings ratio of stock prices 41.8 22.8 - 35.7 19.9 23.6
Capital expenditures $ 12,563 $ 9,451 $ 8,582 $ 19,375 $ 34,481 $ 14,375
Number of registered shareholders 1,841 1,871 1,861 803 866 984
Number of employees 960 995 1,185 1,195 1,341 1,297
- ----------------------------------------------------------------------------------------------------------------------------
(a) After an after-tax charge in 1997 of $.95 million or $.03 per share
resulting from a restructuring of operations. (b) After an after-tax charge in
1998 of $4.70 million or $.12 per share resulting from a restructuring of
operations. (c) After an after-tax charge in 1999 of $18.02 million or $.46 per
share resulting from a restructuring of operations.
Calgon Carbon Corporation 43
Q U A R T E R L Y F I N A N C I A L D A T A -- U N A U D I T E D
The Company recorded certain adjustments during the fourth quarter of 2000
related to the Company's restructuring reserves and income taxes as disclosed
in Notes 2 and 11, respectively, to the Consolidated Financial Statements.
2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
(Thousands except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $ 66,918 $ 74,899 $ 64,743 $ 64,033 $ 65,878 $ 72,196 $ 64,275 $ 66,634
Gross profit $ 23,542 $ 25,094 $ 20,314 $ 18,138 $ 24,453 $ 27,088 $ 23,012 $ 20,620
Net income $ 2,334 $ 3,864 $ 1,546 $ 230 $ 1,855 $ 3,859 $ 1,565 $ 2,573
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock Data:
Net income per common share
(basic and diluted) $ .06 $ .10 $ .04 $ .01 $ .05 $ .10 $ .04 $ .07
- -------------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding 38,802 38,802 38,811 38,831 38,802 38,805 38,812 38,810
- -------------------------------------------------------------------------------------------------------------------------------
C O M M O N S H A R E S A N D M A R K E T I N F O R M A T I O N
Common shares are traded on the New York Stock Exchange under the trading
symbol CCC. There were 1,841 registered shareholders at year end.
Quarterly Common Stock Price Ranges and Dividends
2001 2000
------------------------- --------------------------
Fiscal Quarter High Low Dividend High Low Dividend
- -------------------------------------------------------------------------------------
First 7.50 5.63 $.050 8.88 6.00 --
Second 8.85 7.01 $.050 8.06 5.75 $.050
Third 8.85 6.91 $.050 9.44 6.25 $.050
Fourth 9.50 7.25 $.050 7.38 4.75 $.050
- -------------------------------------------------------------------------------------
Calgon Carbon Corporation 44
Glossary
Carbon Platform. Profit Center that includes production and sale of a variety
of granular and powdered activated carbons. Activated carbon is produced at
three manufacturing facilities in the United States. In 2001, $109 million of
activated carbon sales accounted for 40 percent of total CCC revenue.
Carbon Cloth. Unique form of activated carbon manufactured in the U.K.,
traditionally used in medical and industrial safety applications such as
protective suits and veterinary wound dressings.
Center of Excellence. Brings together at one location all key functions
necessary to provide faster, higher-quality customer service.
Consumer Platform. Profit Center that includes three distinct businesses:
carbon cloth; lump charcoal and briquettes; and new consumer products based on
the company's technologies already proven in large-scale industrial
applications. In 2001, Consumer sales of $21 million accounted for 8 percent of
total CCC revenue
Economic Profit. A financial measurement defined as net operating profit after
taxes (NOPAT), as compared to the cost of capital employed.
Engineered Solutions Platform. Profit Center that designs, builds, and operates
solutions that utilize a combination of technologies: carbon adsorption,
ultraviolet light, and advanced ion exchange separation. In 2001, Engineered
Solutions sales of $48 million accounted for 18 percent of CCC revenue.
Granular Activated Carbon (GAC).
A porous material principally made from coal, wood, and coconut. Calgon
Carbon's GAC is made from bituminous coal. Each carbon granule contains
microscopic pores that attract and retain organic molecules in liquids and
gases through a process called adsorption.
Platform. An economic profit center. Calgon Carbon's business is divided into
four platforms: Carbon, Service, Engineered Solutions, and Consumer.
Product Market. Specific application of a product, service, or solution in a
specific end use.
Service Platform. Profit Center that provides reactivation and other
carbon-related services. Includes six carbon reactivation facilities in Europe,
Japan, and the U.S., and the leasing, monitoring, and maintenance of mobile
carbon adsorption equipment. In 2001, Service sales of $92 million accounted
for 34 percent of total CCC revenue.
Rapid Change Technologies (RCT).
A leading firm in the science and methodologies to accelerate positive change.
Transformation Model. Proven model for change designed to produce optimum
financial results by providing a blueprint to integrate and modularize plans
for rapid implementation.
Calgon Carbon Corporation 45
Board of Directors
[Photo of James A. Cederna]
James A. Cederna
(3) has been President and Chief Executive Officer of CCC since April 1999. In
May 2001, Jim was elected Chairman of the Board. From September 1996 until
April 1999, he was President of Arizona Chemical Co., a manufacturer of
specialty chemicals and a company of International Paper. From July 1995 until
September 1996, Jim was President of Columbian Chemical Co., a manufacturer of
carbon black. Prior to that, he worked 22 years for Dow Chemical Co.
[Photo of Nick H. Prater]
Nick H. Prater
(2) has been a Director of CCC since August 1990. Until June 1990, when he
retired, he was President and Chief Executive Officer of Mobay Corporation (now
Bayer Corporation), a chemical producer. He is also a Director of Koppers
Industries, Inc.
[Photo of John P. Surma]
John P. Surma
(2) has been a Director of CCC since July 2000. Since January 2002, John has
been Vice Chairman and Chief Financial Officer of the United States Steel
Corporation (U.S. Steel), a major steel producer. From September to December
2001, he was Assistant to the Chairman of USX Corporation, the parent company
of U.S. Steel and Marathon Oil Corporation. Before joining USX, John was
President of Marathon Ashland Petroleum LLC. Prior to that, he was a Partner of
PriceWaterhouseCoopers LLC. He is also a Director of U.S. Steel.
[Photo of Thomas A. McConomy]
Thomas A. McConomy
(3) (4) has been a Director of CCC since its formation in 1985. He also served
as Chairman of the Board, President and Chief Executive Officer of CCC. Tom is
also a Director of Equitable Resources, Inc.
[Photo Julie S. Roberts]
Julie S. Roberts
(1) has been a Director of CCC since July 2000. Since September 2000, she has
been Chief Financial Officer of ExecuStay by Marriott, a division of Marriott
International Corporation, a leading hospitality company. From September 1998
until September 2000, Julie was Vice President Financial Planning and Analysis
of Marriott. Prior to that, she was a Vice President with USAirways Inc.
[Photo of Harry H. Weil]
Harry H. Weil
(1) (3) has been a Director of CCC since its formation in 1985. He is a retired
Partner of the law firm ReedSmith LLP.
[Photo of Robert W. Cruickshank]
Robert W. Cruickshank
(2) (4) has been a Director of CCC since November 1985. He is President of R.W.
Cruickshank & Co. and is also a Director of Friedmans, Inc. and Hurco, Inc.
[Photo of Seth E. Schofield]
Seth E. Schofield
(1) (2) has been a Director of CCC since December 1995. From February 1996
until July 2000, he was Chairman of Base International, a provider of corporate
protection and security. From June 1992 until January 1996, when he retired,
Seth was Chairman and Chief Executive Officer of USAir Group. He is a Director
of the United States Steel Corporation, Marathon Oil Corporation, and
Candlewood Hotels.
[Photo of Robert L. Yohe]
Robert L. Yohe
(4) has been a Director of CCC since December 1995. Until March 1994, when he
retired, Bob was Vice Chairman of Olin Corporation, a producer of chemicals,
copper alloys, and ammunition. He is also a Director of Airgas, Inc., Marsulex,
Inc., and The Middleby Corporation.
(1) Audit Committee
(2) Compensation Committee
(3) Executive Committee
(4) Corporate Governance Committee
Calgon Carbon Corporation 46
Corporate Officers
James A. Cederna
Chairman, President and Chief Executive Officer
William E. Cann
Senior Vice President, Chief Financial Officer
Joseph A. Fischette
Senior Vice President, General Counsel and Secretary
Robert P. O'Brien
Senior Vice President
John S. Stanik
Senior Vice President
Executive Leadership
Leroy M. Ball
Controller
Robert W. Courson
Executive Director, Invest in People
James G. Fishburne
Vice President, Global Sales
Gail A. Gerono
Director, Investor Relations and Corporate Communications
C.H.S. (Kees) Majoor
Vice President, Global Marketing
Corporate Office
Calgon Carbon Corporation
400 Calgon Carbon Drive
Pittsburgh, PA 15205
(412) 787-6700
Mailing Address: P.O. Box 717
Pittsburgh, PA 15230-0717
E-mail: ccc-info@calgoncarbon.com
Web site: www.calgoncarbon.com
Stock Market
Calgon Carbon Corporation's Common Stock is publicly traded on the New York
Stock Exchange under the symbol CCC.
Annual Meeting
The Calgon Carbon
Corporation Annual Meeting of Stockholders will be held on Tuesday,
April 23, 2002 at 1:00 p.m. EDST, in the Corporate Offices of Calgon
Carbon Corporation, 400 Calgon Carbon Drive, Pittsburgh, PA 15205.
Form 10-K
The Calgon Carbon Corporation Form 10-K for 2001 is available by written,
telephone, or e-mail request to Gail A. Gerono, Investor Relations, Calgon
Carbon Corporation, (412) 787-6795. gerono@calgoncarbon.com
Transfer Agent and Registrar
EquiServe Trust
Company, N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(201) 324-0313
Website: www.equiserve.com
Hearing Impaired #: TDD: (201)222-4955
Investor Relations
Gail A. Gerono
Investor Relations
Calgon Carbon Corporation
P.O. Box 717
Pittsburgh, PA 15230-0717
(412) 787-6795
gerono@calgoncarbon.com
Independent Accountants
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222
North American Sales Offices
Monterey, Calif., U.S.
Vero Beach, Fla., U.S.
Flemington, N.J., U.S.
Pittsburgh, Pa., U.S.
Houston, Texas, U.S.
European Sales Offices
Chemviron Carbon
Feluy, Belgium
Paris, France
Frankfurt, Germany
Chemviron Carbon GmbH
Frankfurt, Germany
Asian Sales Offices
Singapore
Tokyo, Japan
Plant Locations
Feluy, Belgium
Grays, England
Houghton Le Spring, England
Bodenfelde, Germany
Fukui, Fukui Prefecture, Japan
Blue Lake, Calif., U.S.
Catlettsburg , Ky., U.S. Pearlington , Miss., U.S.
Neville Island, Pa., U.S.
(three plants)
Printed in the United States
Calgon Carbon Corporation
P.O. Box 717
Pittsburgh, PA 15230-0717