<PAGE>
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, 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
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-0530110
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 717, Pittsburgh, PA 15230-0717
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(412) 787-6700
---------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------
(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
---- -----
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
---- -----
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, 1996
- ----------------------------- -------------------------------
Common Stock, $.01 par value 39,841,160 shares
<PAGE>
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
I N D E X
---------
PART 1 - FINANCIAL INFORMATION
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Item 1. Financial Statements
------- --------------------
Page
----
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
------ -----------------------------------------------
of Operations and Financial Condition................ 8
-------------------------------------
PART II - OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders.... 11
------- ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K ...................... 11
------ --------------------------------
SIGNATURES........................................................ 12
- ----------
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<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------- --------------------
INTRODUCTION TO THE FINANCIAL STATEMENTS
----------------------------------------
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.
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<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
------------------------------------------------------
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales................................................ $ 69,451 $ 71,283 $213,385 $216,060
-------- -------- -------- --------
Cost of products sold
(excluding depreciation)............................... 43,212 44,279 133,635 136,524
Depreciation............................................. 4,883 4,898 14,484 14,052
Selling, general and
administrative expenses................................ 12,732 12,256 36,649 36,690
Research and development
expenses............................................... 1,651 1,420 4,775 4,200
-------- -------- -------- --------
62,478 62,853 189,543 191,466
-------- -------- -------- --------
Income from operations................................... 6,973 8,430 23,842 24,594
Interest income.......................................... 526 325 1,172 1,032
Interest expense......................................... (222) (154) (550) (566)
Other income (expense)--net.............................. (340) (256) (413) (1,334)
-------- -------- -------- --------
Income before income taxes............................... 6,937 8,345 24,051 23,726
Provision for income taxes............................... 2,531 2,756 8,778 8,167
-------- -------- -------- --------
Net income............................................... 4,406 5,589 15,273 15,559
Common stock dividends................................... (3,234) (3,032) (9,701) (29,304)
Retained earnings, beginning
of period.............................................. 157,735 148,023 153,335 164,325
-------- -------- -------- --------
Retained earnings, end of
period................................................. $158,907 $150,580 $158,907 $150,580
======== ======== ======== ========
Net income per common share.............................. $.11 $.14 $.38 $.38
======== ======== ======== ========
Weighted average shares
outstanding ........................................... 40,417,022 40,418,860 40,418,243 40,418,860
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-3-
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED BALANCE SHEET
--------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 34,967 $ 40,089
Receivables................................. 50,790 55,779
Inventories................................. 36,661 43,643
Other current assets........................ 13,125 8,518
-------- --------
Total current assets..................... 135,543 148,029
Property, plant and equipment, net............ 172,189 175,952
Other assets.................................. 24,212 14,020
-------- --------
Total assets............................. $331,944 $338,001
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 415 $ 8,514
Accounts payable and accrued liabilities.... 23,203 28,252
Restructuring reserve....................... 8,397 11,616
Payroll and benefits payable................ 11,226 13,546
Accrued income taxes........................ 386 1,517
-------- --------
Total current liabilities................ 43,627 63,445
Long-term debt................................ 15,663 5,608
Deferred income taxes......................... 44,197 41,959
Other liabilities............................. 8,024 8,802
-------- --------
Total liabilities........................ 111,511 119,814
-------- --------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000
shares authorized, 41,435,960 and
41,424,960 shares issued.................. 414 414
Additional paid-in capital.................. 62,102 61,986
Retained earnings........................... 158,907 153,335
Cumulative translation adjustments.......... 12,608 14,780
-------- --------
234,031 230,515
Treasury stock, at cost,1,130,300 and
1,006,100 shares......................... (13,598) (12,328)
-------- --------
Total shareholders' equity............... 220,433 218,187
-------- --------
Total liabilities and
shareholders' equity................... $331,944 $338,001
======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
Increase (decrease) in Cash and Cash Equivalents
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1996 1995
------------ ------------------
<S> <C> <C>
Cash flows from operating activities
- ------------------------------------
Net income........................................ $15,273 $ 15,559
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization................... 14,643 14,125
Employee benefit plan provisions................ 396 580
Changes in assets and liabilities - net of
exchange:
Decrease in receivables..................... 5,887 5,164
(Increase) decrease in inventories.......... 6,999 (2,015)
(Increase) decrease in other
current assets............................ (3,967) 281
(Decrease) in restructuring reserve......... (2,588) (11,304)
(Decrease) in accounts payable
and accruals.............................. (9,507) (1,319)
Increase in long-term deferred
income taxes (net)........................ 5,038 5,225
Other items--net................................ (1,262) (1,393)
------- --------
Net cash provided by
operating activities...................... 30,912 24,903
------- --------
Cash flows from investing activities
- ------------------------------------
Purchase of businesses.......................... (18,594) -
Property, plant and equipment expenditures...... (9,518) (9,159)
Proceeds from disposals of equipment............ 273 174
------- --------
Net cash (used in) investing activities...... (27,839) (8,985)
------- --------
Cash flows from financing activities
- --------------------------------------------------
Net proceeds from borrowings.................... 2,441 2,258
Treasury stock purchases........................ (812) -
Common stock dividends.......................... (9,498) (29,304)
Other........................................... 116 -
Net cash (used in) ------- --------
financing activities...................... (7,753) (27,046)
------- --------
Effect of exchange rate changes on cash........... (442) (35)
------- --------
(Decrease) in cash and cash equivalents........... (5,122) (11,163)
Cash and cash equivalents, beginning
of period ....................................... 40,089 45,376
------ ------
Cash and cash equivalents, end of period.......... $34,967 $34,213
======= =======
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
--------------------------------------
(Dollars in Thousands)
(Unaudited)
1. Inventories:
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Raw materials $ 9,558 $ 13,960
Finished goods 27,103 29,683
-------- --------
$ 36,661 $ 43,643
======== ========
</TABLE>
2. Supplemental Cash Flow Information:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash paid during the period for:
Interest $ 565 $ 717
Income taxes, net of refunds $ 7,167 $ 936
-------- --------
Bank debt:
Borrowings $ 20,971 $ 31,648
Repayments (18,530) (29,390)
-------- --------
Net proceeds from borrowings $ 2,441 $ 2,258
======== ========
</TABLE>
3. Common stock dividends declared during the quarter ended September 30, 1996
were $.08 per common share. Common stock dividends declared during the
quarter ended September 30, 1995 were $.075 per common share. The nine
month period ended September 30, 1995 included a one time special dividend
of $.50 per common share.
4. During the three months ended September 30, 1996, the Company purchased
124,200 shares of its common stock at a cost of $1,270 as authorized by the
Board of Directors in 1993. Through September 30, 1996, the Company has
purchased a total of 1,130,300 shares at a total cost of $13,598.
5. 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 September 30, 1996
are as follows:
<TABLE>
<CAPTION>
Currency
Balance Translation Balance
Jan. 1, 1996 Payments Adjustments Sept. 30, 1996
------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Employee separations $ 1,900 $ (789) $ (93) $1,018
Demolition, disposition,
site protection and
environmental costs 9,716 (1,799) (538) 7,379
------- -------- ----- ------
Total $11,616 $ (2,588) $(631) $8,397
======= ======== ===== ======
</TABLE>
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<PAGE>
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, 1996 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, 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
November 12, 1996
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of
- ------ --------------------------------------------------
Operations and Financial Condition
----------------------------------
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
---------------------
Consolidated net sales for the three months ended September 30, 1996
decreased by $1.8 million or 2.6% and for the nine-month period then ended
decreased by $2.7 million or 1.2%. Net sales to the industrial process
markets of $32.8 million for the three months ended September 30, 1996
increased by $.9 million or 2.9% versus the comparable 1995 period, while net
sales for the nine-month period of $100.7 million decreased by $1.8 million or
1.8% compared to the nine-month period ended September 30, 1995. The increase
for the three-month period was the net result of gains in the world-wide food
(primarily sweeteners) category partially offset by declines in the European
chemical and original equipment manufacturers categories due to the loss of
products produced at the Brilon-Wald, Germany plant, which was closed in 1995.
The decrease for the nine-month period is also related to the Brilon-Wald,
Germany plant closure in addition to reduced sales in the United States
cigarette and Asia Pacific energy areas. Net sales to the environmental
markets for the three and nine-month periods ended September 30, 1996 were
$32.5 million and $95.5 million, respectively. The results for the three-
month period represent a decrease of $.7 million or 2.2% while the revenues
for the nine-month period increased by $.4 million or .5%. The net decline
for the three-month period ended September 30, 1996 was the result of reduced
sales in the worldwide municipal category offset by revenues from the
recently acquired perox-pure/TM/ business operations of Vulcan Peroxidation
Systems Inc. and Solarchem Enterprises Inc. (These acquisitions will be
discussed later in this report). The minor increase for the nine-month period
reflects the same conditions as the three-month period. The consumer area
reported sales for the quarter of $4.2 million, which resulted in a decrease
of $2.0 million or 32.6%, and $17.2 million for the nine months ended
September 30, 1996 resulting in a decrease of $1.3 million or 6.9%. Both
decreases were due to unfavorable barbecuing weather conditions in Germany.
The strengthening of the U.S. dollar relative to the European currencies
reduced sales revenues by $.9 million in the quarter and $3.1 million for the
nine-month period.
Gross profit, before depreciation, as a percentage of net sales for the three
and nine-month periods ended September 30, 1996 were 37.8% and 37.4%,
respectively. These rates compare to 37.9% and 36.8% for the comparable 1995
periods, respectively. Both periods in 1996 included improved pricing, higher
natural gas costs and higher manufacturing costs for coconut-based products.
Depreciation expense for the nine-month period ended September 30, 1996
increased by $.4 million due to normal, ongoing capital spending.
Selling, general and administrative and research and development expenses for
the three and nine months ended September 30, 1996 were $14.4 million and
$41.4 million, respectively. The $.7 million increase for the three-month
period ended September 30, 1996 and the $.5 million increase for the nine-
month period then ended was due to the aforementioned business acquisitions.
-8-
<PAGE>
Other income (expense) -- net for the nine months ended September 30, 1996 was
favorable versus the comparable period ended September 30, 1995 by $.9 million
due primarily to net foreign exchange transaction gains in 1996 versus losses
in 1995.
The effective tax rate for the three and nine months ended September 30, 1996
was 36.5%. This rate represented increases versus the three and nine-month
periods ended September 30, 1995 of 3.5% and 2.1%, respectively, due primarily
to increased taxable income in foreign jurisdictions with tax rates in excess
of the United States statutory rate.
Financial Condition
-------------------
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, dividend and treasury stock purchase requirements. The
Company expects to continue to generate significant cash from operations in
the future. During the nine months ended September 30, 1996, the Company
obtained a term loan from a Canadian bank in the amount of $10.3 million,
which is payable in July 2001. This borrowing was used to finance the
acquisition of Solarchem Enterprises Inc. The Company also has two United
States credit facilities of $25 million each, expiring in April 1997 and May
1997 and a German credit facility in the amount of $16.4 million with a
duration of "until further notice". The United States credit facilities were
increased from $10 million each during the quarter. 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, dividend
and treasury stock purchase requirements.
Net cash provided by operating activities was $30.9 million for the nine-month
period ended September 30, 1996. This represented an increase of $6.0 million
from the nine-month period ended September 30, 1995. This increase was the
result of reduced accounts receivable and inventory, and reduced payments
related to the restructuring reserve in the current period partially offset by
a decrease in accounts payable and accruals.
Restructuring of Operations
---------------------------
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 1997. 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 $9.5
million for the nine months ended September 30, 1996 compared to expenditures
of $9.2 million for the same period in 1995. The major portion of the
1996 expenditures was for continuing improvements to
-9-
<PAGE>
a production line at the Big Sandy, Kentucky plant ($2.0 million) and domestic
service customer capital ($2.2 million). Capital expenditures for the year
1996 are projected to be approximately $18 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 $7.6 million. On June 3, 1996, the Company purchased all the
outstanding common stock of Solarchem Enterprises Inc. of Markham, Ontario.
This purchase price was $11.0 million. Because these transactions were not
material to the consolidated financial position of the Company, no pro-forma
information has been included in this report.
-10-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits
15 Letter from Price Waterhouse LLP regarding
unaudited interim financial information.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended September 30, 1996.
-11-
<PAGE>
SIGNATURES
----------
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
-------------------------
(REGISTRANT)
Date: November 12, 1996 By /s/R. Scott Keefer
----------------------------
R. Scott Keefer
Sr. Vice President-Finance,
Chief Financial Officer
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<PAGE>
Exhibit No. 15
November 12, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Ladies and Gentlemen:
We are aware that Calgon Carbon Corporation has included our report dated
November 12, 1996 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectuses constituting part of its Registration
Statements on Forms S-8 (No. 33-34019 and No. 333-01019). We are also aware
of our responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 34,967
<SECURITIES> 0
<RECEIVABLES> 50,790
<ALLOWANCES> 0
<INVENTORY> 36,661
<CURRENT-ASSETS> 135,543
<PP&E> 305,225
<DEPRECIATION> 133,036
<TOTAL-ASSETS> 331,944
<CURRENT-LIABILITIES> 43,627
<BONDS> 0
0
0
<COMMON> 48,918
<OTHER-SE> 171,515
<TOTAL-LIABILITY-AND-EQUITY> 331,944
<SALES> 213,385
<TOTAL-REVENUES> 213,385
<CGS> 133,635
<TOTAL-COSTS> 189,543
<OTHER-EXPENSES> 413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 550
<INCOME-PRETAX> 24,051
<INCOME-TAX> 8,778
<INCOME-CONTINUING> 15,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,273
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
