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, 1996 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 30, 1996
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Common Stock, $.01 par value 40,418,860 shares
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED March 31, 1996
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. . 10
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Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10
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SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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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, 1995.
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. Price
Waterhouse LLP is not subject to the liability provisions of section 11 of the
Securities Act of 1933 for their report on the unaudited consolidated financial
statements because their report is not a "report" within the meaning of sections
7 and 11 of the Act.
2
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
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(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
-----------------------
1996 1995
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Net sales.................................... $ 68,989 $ 68,809
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Cost of products sold
(excluding depreciation)................... 43,229 44,169
Depreciation................................. 4,858 4,522
Selling, general and
administrative expenses.................... 11,830 12,039
Research and development
expenses................................... 1,471 1,324
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61,388 62,054
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Income from operations....................... 7,601 6,755
Interest income.............................. 327 360
Interest expense............................. (174) (212)
Other income (expense)--net.................. (163) (640)
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Income before income taxes................... 7,591 6,263
Provision for income taxes................... 2,809 2,344
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Net income................................... 4,782 3,919
Common stock dividends....................... (3,234) (23,241)
Retained earnings, beginning
of period.................................. 153,335 164,325
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Retained earnings, end of
period..................................... $154,883 $145,003
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Net income per common share.................. $.12 $.10
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Weighted average shares
outstanding................................ 40,418,860 40,418,860
========== ==========
The accompanying notes are an integral part
of these financial statements.
3
CALGON CARBON CORPORATION
CONSOLIDATED BALANCE SHEET
--------------------------
(Dollars in Thousands)
March 31, December 31,
1996 1995
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................... $ 32,910 $ 40,089
Receivables................................. 54,160 55,779
Inventories................................. 42,249 43,643
Other current assets........................ 10,665 8,518
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Total current assets...................... 139,984 148,029
Property, plant and equipment, net........... 175,823 175,952
Other assets................................. 15,856 14,020
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Total assets.............................. $331,663 $338,001
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 8,693 $ 8,514
Accounts payable and accrued liabilities.... 23,762 28,252
Restructuring reserve....................... 10,261 11,616
Payroll and benefits payable................ 11,190 13,546
Accrued income taxes........................ 3,122 1,517
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Total current liabilities................. 57,028 63,445
Long-term debt............................... 5,594 5,608
Deferred income taxes........................ 41,914 41,959
Other liabilities............................ 8,440 8,802
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Total liabilities......................... 112,976 119,814
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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........................... 154,883 153,335
Cumulative translation adjustments.......... 13,732 14,780
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231,015 230,515
Treasury stock, at cost, 1,006,100 shares... (12,328) (12,328)
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Total shareholders' equity................ 218,687 218,187
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Total liabilities and
shareholders' equity..................... $331,663 $338,001
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The accompanying notes are an integral part
of these 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,
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1996 1995
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Cash flows from operating activities
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Net income....................................... $ 4,782 $ 3,919
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................. 4,884 4,582
Employee benefit plan provisions............... 138 187
Changes in assets and liabilities - net of
exchange:
(Increase) decrease in receivables........... 2,246 (84)
(Increase) decrease in inventories........... 1,467 (2,327)
(Increase) in other current assets........... (2,074) (406)
(Decrease) in restructuring reserve.......... (1,049) (1,017)
(Decrease) in accounts payable
and accruals................................ (4,822) (4,265)
Increase in long-term deferred
income taxes (net).......................... 961 3,253
Other items--net............................... (857) (1,009)
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Net cash provided by
operating activities......................... 5,676 2,833
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Cash flows from investing activities
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Purchase of business........................... (7,804) -
Property, plant and equipment expenditures..... (2,247) (1,807)
Proceeds from disposals of equipment........... 40 91
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Net cash (used in) investing activities ..... (10,011) (1,716)
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Cash flows from financing activities
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Net proceeds from borrowings................... 442 3,151
Common stock dividends......................... (3,234) (23,241)
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Net cash (used in)
financing activities........................ (2,792) (20,090)
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Effect of exchange rate changes on cash.......... (52) 62
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(Decrease) in cash and cash equivalents.......... (7,179) (18,911)
Cash and cash equivalents, beginning
of period ...................................... 40,089 45,376
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Cash and cash equivalents, end of period......... $32,910 $26,465
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The accompanying notes are an integral part
of these financial statements.
5
CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
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(Dollars in Thousands)
(Unaudited)
1. Inventories:
March 31, 1996 December 31, 1995
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Raw materials $12,861 $13,960
Finished goods 29,388 29,683
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$42,249 $43,643
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2. Supplemental Cash Flow Information:
Three Months Ended March 31,
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1996 1995
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Cash paid during the period for:
Interest $ 160 $ 31
Income taxes (refunds) net $ 306 $ (106)
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Bank debt:
Borrowings $ 5,339 $10,537
Repayments (4,897) (7,386)
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Net proceeds from borrowings $ 442 $ 3,151
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3. Common stock dividends declared during the quarter ended March 31, 1996
were $.08 per common share. 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.
4. Restructuring Reserve:
The Company recorded restructuring charges in 1994 and 1993. (Details of
such charges are shown in the "Restructuring Charges" note to the 1995
financial statements in the annual report). Activity and adjustments to the
Restructuring Reserve for the period January 1 through March 31, 1996 are as
follows:
Currency
Balance Translation Balance
Jan. 1, 1996 Payments Adjustments March 31, 1996
------------ -------- ----------- --------------
Employee separations $ 1,900 $ (277) $ (46) $ 1,577
Demolition, disposition,
site protection and
environmental costs 9,716 (772) (260) 8,684
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Total $11,616 $(1,049) $ (306) $10,261
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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, 1996 and the related consolidated
statements of income and retained earnings and of cash flows for the three-
month periods ended March 31, 1996 and 1995. 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, 1995, 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 13, 1996, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the accompanying consolidated balance
sheet information as of December 31, 1995 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 10, 1996
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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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Consolidated net sales for the three months ended March 31, 1996
increased slightly versus the three months ended March 31, 1995. Net sales
to the industrial process markets of $34.0 million for the three months ended
March 31, 1996 were below the comparable period in 1995 by $.6 million or
1.6%. This decrease was the result of reductions in the European
pharmaceutical category, due to discontinued products associated with the
closure of the Brilon-Wald, Germany plant, and reduced sales in the United
States cigarette industry, partially offset by increased sales in the
worldwide food category and in the United States original equipment
manufacturer area. Net sales to the environmental markets were $31.1 million
for the three months ended March 31, 1996 and represented an increase of $1.0
million or 3.2% versus the comparable period in 1995. This increase resulted
from improvements in the domestic municipal category combined with revenues
from the recently acquired perox-pure/TM/ business operations of Vulcan
Peroxidation Systems Inc., partially offset by a decline in equipment sales.
The consumer/other area reported sales of $3.9 million for the quarter ended
March 31, 1996 representing a reduction of $.2 million or 5.4% from the same
quarter in 1995. This decline was the result of slower pre-season charcoal
sales.
Gross profit, before depreciation, as a percentage of net sales was 37.3% for
the three month period ended March 31, 1996 versus 35.8% for the comparable
period ended March 31, 1995. This 1.5 percentage point increase was the
result of increased activated carbon sales and reduced equipment sales,
partially offset by the impact of severe winter weather on the Company's
United States manufacturing operations which increased natural gas costs.
Depreciation expense for the three months ended March 31, 1996 increased by
$.3 million due to normal, ongoing capital spending.
Selling, general and administrative and research and development expenses for
the three months ended March 31, 1996 of $13.3 million were flat versus the
comparable period in 1995.
Other income (expense) -- net for the three months ended March 31, 1996 was
favorable versus the three months ended March 31, 1995 by $.5 million due
primarily to net foreign exchange transaction gains in 1996 versus losses in
1995.
The effective income tax rate for the period ended March 31, 1996 was 37.0%
versus 37.4% for the three months ended March 31, 1995.
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,
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 May 1996 and April 1997 and a German credit facility in the amount of
$16.9 million with a duration of "until further notice". 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 $5.7 million for the three
month period ended March 31, 1996. This represented an increase of $2.8
million from the three month period ended March 31, 1995. This increase was
the result of increased net income and reduced accounts receivable and
inventory in the current period, partially offset by a smaller increase in
long-term deferred income taxes.
Restructuring of Operations
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The Company continued to execute its plan to dismantle the Brilon-Wald
plant in Germany and to pay liabilities recognized as of December 31, 1994.
The plant was closed and employees were separated in 1995. The demolition of
the plant and cash outlays from internally generated funds are expected to be
completed substantially in 1996. Evaluations of demolition, disposition,
site protection and environmental costs continue and the existing reserves
are believed to be adequate.
Capital Expenditures and Investments
------------------------------------
Capital expenditures for property, plant and equipment totaled $2.2
million for the three months ended March 31, 1996 compared to expenditures
of $1.8 million for the same period in 1995. The major portion of the 1996
expenditures was for continuing improvements to a production line at the Big
Sandy, Kentucky plant ($.6 million) and domestic service customer capital
($.6 million). Capital expenditures for the year 1996 are currently
projected to be approximately $15 million.
On February 20, 1996, the Company completed the acquisition of the perox-
pure/TM/ business operations of Vulcan Peroxidation Systems Inc. The
purchase price was $7.8 million. Due to the relative immateriality of this
transaction, no pro-forma information is included. Also during the first
quarter of 1996, the Company signed an agreement in principle for the
purchase of Solarchem Enterprises Inc. of Markham, Ontario. This purchase is
expected to be completed in the second quarter.
9
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
15 Letter from Price Waterhouse LLP regarding
unaudited interim financial information.
(b) Reports on Form 8-K
A report on Form 8-K, dated February 16, 1996, was filed
to update the description of the registrant's Common Stock.
10
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 10, 1996 By /s/ R. Scott Keefer
--------------------------------
R. Scott Keefer
Sr. Vice President-Finance,
Chief Financial Officer
11