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 September 30, 1995 or [ ] Transition
report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from to
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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 October 31, 1995
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Common Stock, $.01 par value 40,418,860 shares
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED September 30, 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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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.
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CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
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(Dollars in Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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1995 1994 1995 1994
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Net sales.................................................. $ 71,283 $ 69,354 $216,060 $201,013
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Cost of products sold
(excluding depreciation).................................. 44,279 45,821 136,524 129,972
Depreciation............................................... 4,898 4,871 14,052 14,424
Selling, general and
administrative expenses................................... 12,256 11,577 36,690 33,837
Research and development
expenses.................................................. 1,420 1,481 4,200 4,693
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62,853 63,750 191,466 182,926
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Income from operations..................................... 8,430 5,604 24,594 18,087
Interest income............................................ 325 237 1,032 646
Interest expense........................................... (154) ( 91) (566) (320)
Other income (expense)--net................................ (256) (383) (1,334) (1,416)
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Income before income taxes................................. 8,345 5,367 23,726 16,997
Provision for income taxes................................. 2,756 1,652 8,167 5,716
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Net income................................................. 5,589 3,715 15,559 11,281
Common stock dividends..................................... (3,032) (1,616) (29,304) (4,876)
Retained earnings, beginning
of period................................................. 148,023 183,733 164,325 179,427
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Retained earnings, end of
period.................................................... $150,580 $185,832 $150,580 $185,832
========== ========== ========== ==========
Net income per common share................................ $.14 $.09 $.38 $.28
========== ========== ========== ==========
Weighted average shares
outstanding ............................................. 40,418,860 40,393,502 40,418,860 40,713,598
========== ========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
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CALGON CARBON CORPORATION
CONSOLIDATED BALANCE SHEET
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(Dollars in Thousands)
September 30, December 31,
1995 1994
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................... $ 34,213 $ 45,376
Receivables................................. 46,531 50,855
Inventories................................. 45,780 41,672
Other current assets........................ 11,234 11,225
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Total current assets...................... 137,758 149,128
Property, plant and equipment, net........... 177,712 179,148
Other assets................................. 15,441 15,208
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Total assets.............................. $330,911 $343,484
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 6,838 $ 3,273
Accounts payable and accrued liabilities.... 23,490 28,623
Restructuring reserve....................... 13,240 22,761
Payroll and benefits payable................ 13,226 10,691
Accrued income taxes........................ 2,614 501
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Total current liabilities................. 59,408 65,849
Long-term debt............................... 5,727 6,401
Deferred income taxes........................ 40,533 34,341
Other liabilities............................ 9,515 9,746
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Total liabilities......................... 115,183 116,337
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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........................... 150,580 164,325
Cumulative translation adjustments.......... 15,076 12,750
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228,056 239,475
Treasury stock, at cost, 1,006,100 shares... (12,328) (12,328)
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Total shareholders' equity................ 215,728 227,147
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Total liabilities and
shareholders' equity..................... $330,911 $343,484
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The accompanying notes are an integral part of these
consolidated financial statements.
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CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
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Increase (decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
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1995 1994
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Cash flows from operating activities
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Net income......................................... $ 15,559 $ 11,281
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................... 14,125 14,823
Employee benefit plan provisions................. 580 513
Changes in assets and liabilities
(net of exchange):
Decrease in receivables........................ 5,164 1,354
(Increase) decrease in inventories............. ( 2,015) 373
Decrease in other current assets............... 281 315
(Decrease) in restructuring reserve............ (11,304) -
(Decrease) in accounts payable
and accruals.................................. ( 1,319) ( 1,821)
Increase in long-term deferred
income taxes (net)............................ 5,225 3,131
Other items--net................................. ( 1,393) ( 1,326)
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Net cash provided by
operating activities........................... 24,903 28,643
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Cash flows from investing activities
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Property, plant and equipment expenditures........ ( 9,159) ( 5,383)
Proceeds from disposals of equipment.............. 174 537
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Net cash (used in) investing activities......... ( 8,985) ( 4,846)
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Cash flows from financing activities
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Net proceeds from (repayments of) borrowings...... 2,258 ( 2,238)
Treasury stock purchases.......................... - ( 9,868)
Common stock dividends............................ (29,304) ( 4,876)
Other............................................. - 154
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Net cash (used in)
financing activities........................... (27,046) (16,828)
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Effect of exchange rate changes on cash............ ( 35) 2,366
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Increase (decrease) in cash and cash equivalents. (11,163) 9,335
Cash and cash equivalents, beginning
of period......................................... 45,376 21,792
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Cash and cash equivalents, end of period........... $ 34,213 $ 31,127
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The accompanying notes are an integral part of these
consolidated financial statements.
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CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
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(Dollars in Thousands)
(Unaudited)
1. Inventories:
September 30, 1995 December 31, 1994
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Raw materials $ 15,070 $ 7,119
Finished goods 30,710 34,553
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$ 45,780 $ 41,672
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2. Supplemental Cash Flow Information:
Nine Months Ended September 30,
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1995 1994
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Cash paid during the period for:
Interest $ 717 $ 306
Income taxes net $ 936 $ 3,540
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Bank debt:
Borrowings $ 31,648 $ 11,611
Repayments (29,390) (13,849)
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Net proceeds from (repayments of)
borrowings $ 2,258 $ (2,238)
======== ========
3. Common stock dividends declared during the quarter ended September 30,
1995 were $.075 per common share. Common stock dividends declared during
the quarter ended September 30, 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 September 30, 1995 are as follows:
Currency
Balance Translation Balance
Jan. 1, 1995 Payments Adjustments Sept. 30, 1995
------------ -------- ----------- ---------------
Employee separations $10,313 $( 9,030) $ 765 $ 2,048
Demolition, disposition,
site protection and environ-
mental costs 12,448 ( 2,274) 1,018 11,192
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Total $22,761 $(11,304) $1,783 $13,240
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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 September 30, 1995 and the related consolidated
statements of income and retained earnings and of cash flows for the three-
month and nine-month periods ended September 30, 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
November 13, 1995
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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 for the three and nine months ended September 30, 1995
increased by $1.9 million or 2.8% and by $15.0 million or 7.5%, respectively,
versus the three and nine months ended September 30, 1994. Net sales to the
industrial process markets were $31.9 million for the three month period
ended September 30, 1995 and $102.6 million for the nine month period then
ended. These results represented increases of $3.0 million or 10.4% and
$11.4 million or 12.5% versus the comparable 1994 periods. The increases for
the quarter and nine month periods were primarily related to worldwide
increases in the chemical/pharmaceutical and original equipment manufacturer
areas while the increase for the nine month period also included increases in
the European energy category. Net sales to the environmental markets of
$33.2 million and $95.0 million for the three and nine month periods ended
September 30, 1995 resulted in a decrease of $2.1 million or 5.8% versus the
three month period ended September 30, 1994 and an increase of $.3 million or
.3% for the nine month period then ended. The decrease for the quarter was
related to reduced equipment sales to industrial customers in the United
States and in Europe. The increase for the nine month period was the net
effect of positive results in the European municipal category offset by
reduced equipment billings. The consumer charcoal area reported sales of
$5.4 million for the three month period ended September 30, 1995 and $15.7
million for the nine month period then ended, and represented increases of
$.9 million or 21.1% and $2.7 million or 21.1% versus the comparable 1994
periods. Increases for both periods were the result of favorable weather in
Central Europe during 1995. For the quarter, the net sales increase included
a positive effect from exchange rate changes of $1.7 million. The net sales
increase for the nine month period resulted from improved carbon, service and
charcoal sales and included an increase due to exchange rate changes of $8.8
million.
Gross profit, before depreciation, as a percentage of net sales was 37.9% for
the three month period ended September 30, 1995 and 36.8% for the nine month
period then ended compared to 33.9% and 35.3% for the comparable 1994
periods, respectively. The 1994 nine month period included a one-time tax
credit from the German government of approximately $1.0 million, and had this
credit not been received, gross profit, before depreciation, would have been
34.8%. The continuing gross profit increases are the result of efforts to
reduce production costs and improve product mix.
Depreciation expense for the nine months ended September 30, 1995 decreased
by $.4 million due to the writeoff of unproductive fixed assets in 1994.
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Selling, general and administrative expenses increased by $.7 million or 5.9%
during the quarter ended September 30, 1995 versus the comparable 1994
quarter and by $2.9 million or 8.4% compared to the same nine month period in
1994. Both increases were the result of the effect of exchange rate changes
and provisions for the Company's employee benefit plans.
The effective tax rates for the three and nine months ended September 30,
1995 were 33.0% and 34.4%, respectively. These rates represented an increase
of 2.2 percentage points versus the three month period ended September 30,
1994 and a .8 percentage point increase versus the nine month period then
ended. Both increases were the result of reduced foreign tax benefits
partially offset by increased tax exempt investment income.
Financial Condition
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Working Capital and Liquidity
-----------------------------
Historically, the Company has been a net generator of cash, providing
sufficient funds on an annual basis for its debt service, working capital,
capital expenditures and dividend requirements. The Company expects to
continue to generate significant cash from operations in the future. The
Company has two United States credit facilities of $10 million each, expiring
in April 1996 and May 1996, respectively, and a German credit facility in the
amount of $10.5 million with a duration of "until further notice". The
closing of the Brilon-Wald plant did not have any affect on the availability
or amounts available under the Company's German credit facility. Based upon
its present financial position and history of operations, it is believed that
these credit facilities and cash flow from operations will provide sufficient
liquidity to cover debt service and future working capital, capital
expenditure, and dividend requirements.
Net cash provided by operating activities was $24.9 million for the nine
month period ended September 30, 1995. This represented a decrease of $3.7
million from the nine month period ended September 30, 1994. This decrease
was caused by payments related to the December 31, 1994 restructuring reserve
partially offset by increased net income and an increase in long-term
deferred income taxes.
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Restructuring of Operations
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The Company continued to execute its plan to close the Brilon Wald plant
in Germany and to pay liabilities recognized as of December 31, 1994.
Production at this plant ceased at the end of June, 1995 and total shutdown
continues as scheduled. Evaluations of demolition, disposition, site
protection and environmental costs continue and the existing reserves are
believed to be adequate.
Cash outlays for restructuring costs are projected to be paid as follows:
Projected Payments
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Reserve at 1995 1996
Sept. 30, 1995 4th Qtr. 1st Half 2nd Half
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-------------------------- (Millions of $) -------------------------
Employee separations $ 2.0 $ - $2.0 $ -
Demolition, disposition,
site protection and
environmental costs 11.2 .8 3.3 7.1
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Total $13.2 $ .8 $5.3 $7.1
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Capital Expenditures and Investments
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Capital expenditures for property, plant and equipment totaled $9.2
million for the nine months ended September 30, 1995 compared to
expenditures of $5.4 million for the same period in 1994. The major portion
of the 1995 expenditures was for improvements to a production line at the Big
Sandy, Kentucky plant ($5.1 million). Capital expenditures for the year 1995
are currently projected to be approximately $15 million.
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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 September 30, 1995.
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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: November 13, 1995 By /s/R. Scott Keefer
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R. Scott Keefer
Sr. Vice President-Finance,
Chief Financial Officer
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