SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______
Commission file number 0-15903
CALGON CARBON CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 25-0530110
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 717, Pittsburgh, PA 15230-0717
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(Address of principal executive offices)
(Zip Code)
(412) 787-6700
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 28, 1995
- ----------------------------- -----------------------------
Common Stock, $.01 par value 40,418,860 shares
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED MARCH 31, 1995
I N D E X
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PART 1 - FINANCIAL INFORMATION
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Item 1. Financial Statements
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Page
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Introduction to the Financial Statements . . . . . . . 2
Consolidated Statement of Income and
Retained Earnings . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows . . . . . . . . . 5
Selected Notes to Financial Statements . . . . . . . . 6
Report of Independent Accountants on Review of
Unaudited Interim Financial Information . . . . . . . 7
Item 2. Management's Discussion and Analysis of Results
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of Operations and Financial Condition . . . . . . . . . . 8
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PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders . . 11
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Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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1
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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INTRODUCTION TO THE FINANCIAL STATEMENTS
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The consolidated financial statements included herein have been prepared by
Calgon Carbon Corporation (the Company), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading when
read in conjunction with the Company's consolidated financial statements and the
notes included therein for the year ended December 31, 1994.
The financial information presented reflects all adjustments, consisting
only of normal recurring adjustments, which are, in the opinion of
management,necessary for a fair statement of the results for the interim periods
presented. The results for interim periods are not necessarily indicative of
results to be expected for the year.
Price Waterhouse LLP has made a review based on procedures adopted by the
American Institute of Certified Public Accountants of the unaudited consolidated
financial statements included in this filing on Form 10-Q. As stated in its
report on page 7, Price Waterhouse LLP did not audit and, accordingly, does not
express an opinion on the unaudited consolidated financial statements.
2
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
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(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1995 1994
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Net sales............................ $ 68,809 $ 62,503
----------- -----------
Cost of products sold
(excluding depreciation)........... 44,169 41,409
Depreciation......................... 4,522 4,802
Selling, general and
administrative expenses............ 12,039 10,437
Research and development
expenses........................... 1,324 1,646
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62,054 58,294
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Income from operations............... 6,755 4,209
Interest income...................... 360 155
Interest expense..................... (212) (130)
Other income (expense)--net.......... (640) (584)
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Income before income taxes........... 6,263 3,650
Provision for income taxes........... 2,344 1,306
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Net income........................... 3,919 2,344
Common stock dividends............... (23,241) (1,642)
Retained earnings, beginning
of period.......................... 164,325 179,427
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Retained earnings, end of
period............................. $ 145,003 $ 180,129
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Net income per common share......... $.10 $.06
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Weighted average shares outstanding.. 40,418,860 40,989,220
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The accompanying notes are an integral part of these
consolidated financial statements.
3
CALGON CARBON CORPORATION
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CONSOLIDATED BALANCE SHEET
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(Dollars in Thousands)
March 31, December 31,
1995 1994
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................... $ 26,465 $ 45,376
Receivables................................. 52,530 50,855
Inventories................................. 47,262 41,672
Other current assets........................ 11,819 11,225
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Total current assets...................... 138,076 149,128
Property, plant and equipment, net........... 181,336 179,148
Other assets................................. 16,822 15,208
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Total assets.............................. $336,234 $343,484
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 7,940 $ 3,273
Accounts payable and accrued liabilities.... 24,993 28,623
Restructuring reserve....................... 24,304 22,761
Payroll and benefits payable................ 11,485 10,691
Accrued income taxes........................ 706 501
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Total current liabilities................. 69,428 65,849
Long-term debt............................... 5,745 6,401
Deferred income taxes........................ 39,278 34,341
Other liabilities............................ 10,436 9,746
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Total liabilities......................... 124,887 116,337
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Shareholders' equity:
Common shares, $.01 par value, 100,000,000
shares authorized, 41,424,960
shares issued.............................. 414 414
Additional paid-in capital.................. 61,986 61,986
Retained earnings........................... 145,003 164,325
Cumulative translation adjustments.......... 16,272 12,750
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223,675 239,475
Treasury stock, at cost, 1,006,100 shares... (12,328) (12,328)
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Total shareholders' equity................ 211,347 227,147
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Total liabilities and
shareholders' equity..................... $336,234 $343,484
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The accompanying notes are an integral part of these
consolidated financial statements.
4
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
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Increase (decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
------------------
1995 1994
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Cash flows from operating activities
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Net income......................................... $ 3,919 $ 2,344
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................... 4,582 4,941
Employee benefit plan provisions................. 187 163
Changes in assets and liabilities
(net of exchange):
(Increase) decrease in receivables............. ( 84) 853
(Increase) in inventories...................... ( 2,327) ( 1,609)
(Increase) decrease in other current
assets....................................... ( 406) 726
(Decrease) in restructuring reserve............ ( 1,017) -
(Decrease) in accounts payable
and accruals.................................. ( 4,265) ( 181)
Increase in long-term deferred
income taxes (net)............................ 3,253 1,042
Other items--net................................. ( 1,009) ( 1,333)
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Net cash provided by
operating activities........................... 2,833 6,946
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Cash flows from investing activities
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Property, plant and equipment expenditures........ ( 1,807) ( 2,049)
Proceeds from disposals of equipment.............. 91 74
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Net cash (used in) investing activities......... ( 1,716) ( 1,975)
Cash flows from financing activities
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Net proceeds from borrowings...................... 3,151 354
Treasury stock purchases.......................... - ( 515)
Common stock dividends............................ (23,241) ( 1,642)
Other............................................. - 100
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Net cash (used in)
financing activities........................... (20,090) ( 1,703)
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Effect of exchange rate changes on cash............ 62 913
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Increase (decrease) in cash and cash equivalents. (18,911) 4,181
Cash and cash equivalents, beginning
of period......................................... 45,376 21,792
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Cash and cash equivalents, end of period........... $ 26,465 $ 25,973
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The accompanying notes are an integral part of these
consolidated financial statements.
5
CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
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(Dollars in Thousands)
(Unaudited)
1. Inventories:
March, 31, 1995 December 31, 1994
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Raw materials $ 8,851 $ 7,119
Finished goods 38,411 34,553
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$47,262 $41,672
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2. Supplemental Cash Flow Information:
Three Months Ended March 31,
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1995 1994
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Cash paid during the period for:
Interest $ 31 $ 65
Income taxes (refunds) net $ (106) $(1,057)
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Bank debt:
Borrowings $10,537 $ 8,588
Repayments (7,386) (8,234)
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Net proceeds from
borrowings $ 3,151 $ 354
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3. Common stock dividends declared during the quarter ended March 31, 1995
were $.575 per common share. This consisted of a special dividend of
$.50 per common share and a normal dividend of $.075 per common share.
Common stock dividends declared during the quarter ended March 31, 1994
were $.04 per common share.
4. Restructuring Reserve:
The Company recorded restructuring charges in each of the years 1994,
1993 and 1992 (details of such charges are shown in the "Restructuring
Charges" note to the 1994 financial statements in the annual report).
Activity and adjustments to the Restructuring Reserve for the period of
January 1 through March 31, 1995 are as follows:
Currency
Balance Translation Balance
January 1, 1995 Payments Adjustments March 31, 1995
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Employee separations $10,313 $ (807) $1,161 $10,667
Demolition, disposition,
site protection and environ-
mental costs - Brilon Wald 12,448 (210) 1,399 13,637
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Total $22,761 $(1,017) $2,560 $24,304
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6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Calgon Carbon Corporation
We have reviewed the consolidated balance sheet of Calgon Carbon Corporation
and its subsidiaries as of March 31, 1995 and the related consolidated
statements of income and retained earnings and of cash flows for the three-
month periods ended March 31, 1995 and 1994. This financial information is
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial information for it to be
in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994, and the
related consolidated statements of income, shareholders' equity and cash
flows for the year then ended (not presented herein), and in our report dated
February 10, 1995, except as to Note 7, which was as of March 1, 1995, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the accompanying consolidated balance sheet information as of
December 31, 1994 is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE LLP
Pittsburgh, PA
May 12, 1995
7
Item 2. Management's Discussion and Analysis of Results of
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Operations and Financial Condition
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This discussion should be read in connection with the information
contained in the Consolidated Financial Statements and Selected Notes to
Financial Statements.
Results of Operations
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Net sales increased by $6.3 million or 10.1% for the three month period
ended March 31, 1995 versus the corresponding period in 1994. Net sales to
the industrial process market of $34.6 million for the three months ended
March 31, 1995 increased by $4.0 million or 12.9% from the comparable period
in 1994. This increase was broad based, reflecting strong results in the
food category both in the United States and in Europe along with increases in
the European chemical/pharmaceutical and the United States original equipment
manufacturers areas. Net sales to the environmental markets were $30.1
million for the quarter ended March 31, 1995. This represented an increase
of $1.8 million or 6.3% versus the corresponding quarter of 1994. This
increase was primarily related to sales of large industrial equipment in the
United States. The consumer area reported sales of $3.2 million for the
three month period ended March 31, 1995 and represented an increase of $.2
million or 8.4% versus the three month period ended March 31, 1994. The
overall sales increase was primarily due to worldwide volume increases due to
improved economic conditions and to increases due to exchange rate changes of
$3.0 million.
Gross profit, before depreciation, as a percentage of net sales was 35.8% for
the three months ended March 31, 1995 versus 33.7% for the comparable period
in 1994. This improvement was primarily due to a more profitable mix of
products sold but did reflect some price increases.
Depreciation expense for the three months ended March 31, 1995 decreased by
$.3 million versus the three months ended March 31, 1994 due to the write off
of unproductive fixed assets in the 1994 restructuring charge.
Selling, general and administrative expenses increased by $1.6 million or
15.3% during the quarter ended March 31, 1995 versus the comparable 1994
quarter. This increase was primarily the result of the effect of exchange
rate changes but also includes a provision for Company's Employee Growth
Sharing Plan in 1995 of $.3 million due to the Company's improved
performance. There was no 1994 provision.
Research and Development expenses decreased by $.3 million or 19.6% during
the three months ended March 31, 1995 versus the corresponding 1994 period.
The effective tax rate for the three month period ended March 31, 1995 was
37.4% versus 35.8% for the similar three month period in 1994. This increase
was due to reduced foreign tax benefits.
8
Financial Condition
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Working Capital and Liquidity
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Historically, the Company has been a net generator of cash, providing
sufficient funds on an annual basis for its debt service, working capital,
normal capital expenditures and dividend requirements. The Company expects
to continue to generate significant cash from operations in the foreseeable
future. The Company has two United States credit facilities in the amounts
of $10 million each, expiring at the end of May 1995 and at the end of April
1996, respectively, and a German credit facility in the amount of $10.9
million with a duration of "until further notice". The Company regularly
monitors its available credit facilities and is currently in the process of
obtaining an extension of the United States facility that expires at the end
of May 1995. Based upon its present financial position and history of
operations, it is contemplated that these credit facilities, coupled with
cash flow from operations, will provide sufficient liquidity to cover its
debt service and any reasonably foreseeable working capital, capital
expenditure, stock repurchase and dividend requirements.
Net cash provided by operating activities was $2.8 million for the three
month period ended March 31, 1995. This represented a decrease of $4.1
million from the three month period ended March 31, 1994. This overall
decrease was the net effect of a greater increase in working capital in the
1995 period versus 1994 partially offset by increased net income and a larger
increase in long-term deferred income taxes--net.
Restructuring of Operations
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The Company continued to execute the plan to close the Brilon Wald plant
and to pay other liabilities recognized as of December 31, 1994. Production
at this plant will be permanently discontinued by June 30, 1995. More
detailed evaluations of demolition, disposition, site protection and
environmental costs were made during this quarter and the existing reserves
were determined to be sufficient.
Cash outlays to cover restructuring costs are projected to be paid as
follows:
Projected Payments
---------------------------------------
1995 1996
Reserve at ------------------ ------------------
Millions March 31, 1995 2nd Qtr. 2nd Half 1st Half 2nd Half
-------------- -------- -------- -------- --------
Employee separations $10.7 $2.5 $ 7.2 $1.0 $ -
Demolition, disposition,
site protection and
environmental costs 13.6 0.6 8.9 2.6 1.5
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Total $24.3 $3.1 $16.1 $3.6 $1.5
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9
Capital Expenditures and Investments
------------------------------------
Capital expenditures for property, plant and equipment totaled $1.8
million for the three months ended March 31, 1995. This compares to
expenditures of $2.0 million for the same period in 1994. The major portion
of the 1995 expenditure amount was related to domestic service customer
capital ($.5 million) and production improvements at the Big Sandy, Kentucky
plant ($.7 million). Capital expenditures for the year 1995 are currently
projected to be approximately $20 million.
10
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended March 31, 1995.
11
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALGON CARBON CORPORATION
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(REGISTRANT)
Date: May 12, 1995 By /s/C.P. Shannon
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C. P. Shannon
Sr. Vice President-Finance
(Chief Financial Officer)
12