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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended December 31, 1995 or
[_]Transition Report Pursuant to Section 12 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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
400 CALGON CARBON DRIVE
PITTSBURGH, PENNSYLVANIA 15205
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 787-6700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $0.01 per
share New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
- ----------------
As of March 4, 1996, there were outstanding 40,418,860 shares of Common Stock,
par value of $0.01 per share.
The aggregate market value of the voting stock held by non-affiliates as of
March 4, 1996 was $348,256,973.
The following documents have been incorporated by reference:
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<CAPTION>
FORM 10-K
DOCUMENT PART NUMBER
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Portions of Annual Report to Stockholders for the Year Ended Decem-
ber 31, 1995...................................................... II and IV
Proxy Statement filed pursuant to Regulation 14A in connection with
registrant's Annual Meeting of Stockholders to be held on April 23,
1996............................................................... III
</TABLE>
<PAGE>
INDEX
PART I
Item 1. Business..................................................... 1
Item 2. Properties................................................... 7
Item 3. Legal Proceedings............................................ 8
Item 4. Submission of Matters to a Vote of Security Holders.......... 8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters..................................................... 9
Item 6. Selected Financial Data...................................... 9
Item 7. Management's Discussion and Analysis......................... 9
Item 8. Financial Statements and Supplementary Data.................. 9
Item 9. Disagreements with Accountants............................... 9
PART III
Item 10. Directors and Executive Officers of the Registrant........... 9
Item 11. Executive Compensation....................................... 9
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 9
Item 13. Certain Relationships and Related Transactions............... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 10
SIGNATURES................................................................ 12
<PAGE>
PART I
ITEM 1. BUSINESS:
The Company:
The predecessor of the Company's activated carbon business was formed in
1942. In April 1985 the Company's predecessor business was purchased by its
management in a leveraged buyout. On June 9, 1987 the Company completed its
initial public offering of common stock. In May of 1988 the Company acquired
an activated carbon and charcoal business which provided the Company with two
additional manufacturing facilities located in Germany. The acquisition was
accounted for as a purchase. In September of 1990, the Company purchased the
assets of TMPC, Inc. (Vara International) in order to strengthen its vapor
phase equipment business. During the fourth quarter of 1994, it was decided to
close one of the German plants due to high operating costs. In accordance with
the plan, the Brilon-Wald plant was closed during 1995 and demolition of the
plant will be completed during 1996. During February of 1996, the Company
purchased the perox-pure/TM/ business operations of Vulcan Peroxidation
Systems, Inc. This acquisition will expand the Company's technology base to
include advanced oxidation.
Products and Services:
Calgon Carbon is engaged in the production and marketing of activated
carbons and related services and systems throughout the world.
The Company's activities consist of four integrally related areas: (1)
activated carbons--the production and sale of a broad range of untreated,
impregnated or acid washed carbons, in either powdered, granular or pellet form;
(2) services--the provision of carbon reactivation, handling and transportation
and on-site purification, filtration and extraction services; (3) systems--the
design, assembly and sales of activated carbon purification, filtration,
extraction and distillation systems; and (4) charcoal--the production and sale
of charcoal to consumer markets in Germany.
Activated Carbons. The Company's principal product is activated carbon.
Activated carbon is a porous material that removes organic compounds from
liquids and gases by a process known as "adsorption". In "adsorption" organic
molecules contained in a liquid or gas are attracted and bound to the surface
of the pores of the activated carbon as the liquid or gas is passed through
it. The Company also has a patented manufacturing process which enhances the
catalytic functionality of activated carbon expanding its capability to remove
inorganic compounds. The product was introduced in 1994 and is called
Centaur/TM/.
The primary raw material used in the production of the Company's activated
carbons is bituminous coal which is crushed, mixed with pitch, sized and
processed in low temperature bakers followed by high temperature furnaces.
This heating process is known as "activation" and develops the pore structure
of the carbon. Through adjustments in the "activation" process, pores of the
required size for a particular purification application are developed. The
Company's technological expertise in adjusting the pore structure in the
activation process has been one of the factors that has enabled the Company to
develop many special types of activated carbon. Currently, the Company offers
many types of activated carbon with most available in several particle sizes.
The Company also markets coconut-based activated carbons which it purchases
from independent suppliers.
Activated carbons are produced in granular, pellet and powdered forms,
although the Company has historically concentrated on granular and pelletized
activated carbon. The Company manufactures powdered activated carbon as a by-
product and/or by crushing granular activated carbons. Granular activated
carbon is generally used in fixed filter beds for continuous flow purification
processes, while powdered activated carbon is generally used in batch
purification processes. Use of fixed filter beds of activated carbon for
continuous flow processing of a liquid or gas achieves a lower cost of
operation and avoids the disposal costs associated with powdered carbon.
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Once activated carbon is saturated with organic materials and can no longer
adsorb any additional organic compounds, its adsorption capacity can be
restored by "reactivation". Reactivation is a process by which the organic
compounds are driven off activated carbon particles by passing the spent
activated carbon through a high temperature furnace. Granular activated carbon
is employed in reactivation applications for economic reasons or to destroy
hazardous adsorbed organic compounds.
Services. The principal service sold by the Company is the Calgon Carbon
Service/TM/ which supplies customers with a complete wastewater treatment
service, particularly suited for treating wastewater containing hazardous
organic chemicals at the customer's facility. The service is based primarily
on reactivation of spent carbon and transportation of activated carbon to and
from the reactivation facility, but also includes feasibility testing, process
design, on-site equipment, initial activated carbon supply, performance
monitoring and major maintenance of Company-owned equipment. The Company also
provides a number of service packages which include two or more elements of
the complete service. Services are provided under contract at a fixed minimum
monthly fee subject to additional charges for increased carbon usage. The
Company provides services in packages ranging from a fifty-five gallon drum to
truckload quantities.
The Company also offers services to clean water from contaminated aquifers
and surface impoundments and to clean accidental spills on a fee basis. The
Company maintains an inventory of mobile adsorption equipment which can be
dispatched on twenty-four hour notice and can be operational within forty-
eight hours after arrival on site.
Purification services provided by the Company are used to improve the
quality of food, chemical, pharmaceutical and petrochemical products. Such
services may be utilized in permanent installations or in temporary
applications as pilot studies for new manufacturing processes or recovery of
off-specification products.
The Company also provides custom reactivation services, primarily in Europe.
As part of this service, the Company picks up spent carbon at a customer's
site, transports it to the Company's reactivation facilities, reactivates it
and then returns the same carbon to the customer.
Systems. In 1978, the Company began marketing equipment which employs
activated carbon in various purification, filtration and extraction processes,
as a means for expanding the market for its products and for revenue growth.
At that time, the Company introduced a line of odor control systems which uses
one of the Company's patented impregnated activated carbons to remove odors
emanating from municipal sewage treatment plants.
In addition to the services described above, the Company sells a line of
adsorption and filtration equipment to clean water from contaminated aquifers
and surface impoundments. Equipment for these applications can be custom
designed and fabricated for a specific project or can be drawn from the
Company's inventory if speed of installation is important. The adsorption
equipment product line varies in size from fifty-five gallon to twelve-foot
diameter vessels. Through its Vara International Division, the Company sells
customized engineered systems for solvent recovery and volatile organic
compound abatement. The technologies provided include steam regenerable fixed
bed adsorption, distillation and adsorption/catalytic oxidation (CADRE).
Charcoal. This product is manufactured in Germany and used for barbecue
grilling by consumers and restaurants.
Markets:
The Company offers its activated carbon products, equipment and services to
the Industrial Process Market and the Environmental Market and charcoal
products to the Consumer Market. Industrial process applications include
purification, catalysis and product recovery within the food, chemical,
pharmaceutical, personnel protection, cigarette and precious metals
industries. Environmental applications include drinking water purification,
wastewater and sewage treatment, groundwater remediation and emissions control
in both industrial and municipal markets. Charcoal products are used primarily
in Germany for barbecue grilling. The following table details total net sales
by market for the past three years.
2
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PERCENTAGE OF TOTAL NET SALES
---------------------------------
1995 1994 1993
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<S> <C> <C> <C>
Industrial Process Market:
Food...................................... 12% 12% 12%
Original equipment manufacturers.......... 10 9 16
Chemical and pharmaceutical............... 14 14 10
Other..................................... 11 10 10
--- --- ---
Subtotal Industrial..................... 47 45 48
--- --- ---
Environmental Market:
Industrial................................ 25 27 26
Municipal................................. 21 21 19
--- --- ---
Subtotal Environmental.................. 46 48 45
--- --- ---
Consumer Market:............................ 7 7 7
--- --- ---
Total net sales......................... 100% 100% 100%
==== === ===
</TABLE>
Industrial Process Market:
The Industrial Process Market consists of customers that use the Company's
products either for purification, separation or concentration of their
products in the manufacturing process or direct incorporation into their
product. The Industrial Process Market includes four significant sub-markets:
the food market, the original equipment manufacturers market, the chemical and
pharmaceutical market and a group of other sub-markets.
Food Market. Sweetener manufacturers are the principal purchasers of the
Company's products in the industrial process market. In terms of revenues, the
Company is the major supplier of activated carbons used in the purification of
dextrose and high fructose corn syrup. Activated carbons are also sold for use
in the manufacture of artificial sweeteners and cane sugar.
Other food processing applications include decolorization of monosodium
glutamate and purification of citric acid, artificial sweeteners, soya oils,
protein hydrolysates, wine and spirits; for process water treatment in the
beverage industry; and for use in the water decaffeination process for coffee.
Original Equipment Manufacturers Market. Manufacturers of various types of
equipment purchase activated carbons for incorporation in such equipment. The
Company is the sole supplier of activated carbons to manufacturers of gas
masks and filters used by the United States military and is a major supplier
of activated carbons to manufacturers of such products used by the European
military. The Company sells activated carbons for use in protective
respirators and collective filters for both private industry and the military.
The Company sells activated carbons to manufacturers of air filters for civil
defense shelters and for use in chemical warfare defense uniforms. Other
purchasers in the market include manufacturers of home water filters, spill
cleanup equipment, commercial and residential water filters, solvent recovery
equipment, automotive evaporative loss control devices and gasoline vapor
recovery equipment.
Chemical and Pharmaceutical Market. The Company sells a wide range of
activated carbons to the chemical and pharmaceutical market for the
purification of organic and inorganic chemicals, by-product recovery, gas
treatment and catalysis. Applications of these activated carbons include
decolorization of hydrochloric acid, purification of soda ash, glycerine,
analgesics, antibiotics and vitamins and removal of trace impurities from
neon, carbon dioxide, acetylene and hydrogen.
Other Markets. The Company sells its products to a number of additional
industrial process markets. Petroleum refining and petrochemical processing
industries use activated carbons for the removal of sulfur compounds from
natural gas, amine purification and spirits decolorization. The liquified
natural gas industry uses activated carbons to remove mercury compounds which
would otherwise corrode process equipment. Cigarette manufacturers use
activated carbons in charcoal filters and precious metals producers use
activated carbons to recover gold and silver from low grade ore.
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Environmental Market:
The Environmental Market consists of customers that use the Company's
products to control air and water pollutants. The Environmental Market has two
sub-markets, the industrial market and the municipal market.
Industrial Market. The Company offers its products and services to private
industry to meet wastewater discharge requirements imposed by various
governmental entities. Most of the Company's sales to this market are sales of
the Calgon Carbon Service/TM/ for wastewater treatment. The reactivation
portion of this service is an important element if the contaminants in the
wastewater are hazardous organic chemicals. The hazardous organic chemicals
which are adsorbed from the water by the activated carbons are decomposed at
the high temperatures of the reactivation furnace and thereby removed from the
environment. Reactivation saves customers the difficulty of having to find a
method of long-term containment (such as a landfill) for hazardous organic
chemicals removed from their industrial wastewater.
The cleanup of contaminated groundwater, surface impoundments and accidental
spills comprise a significant market for the Company. The Company provides
emergency and temporary cleanup services for public and private entities.
Activated carbon is also used in the chemical, pharmaceutical and refining
industry for purification of air discharges to remove contaminants such as
benzene, toluene and other volatile organics. The Company offers carbon,
services and equipment for these applications.
Municipal Market. The Company sells activated carbons, systems and services
to municipal customers in connection with the treatment of potable water to
remove pesticides and other dissolved organic material to meet current
regulations and to remove tastes and odors to make the water aesthetically
acceptable to the public. The Company primarily sells granular activated
carbon products to this market and in many cases the granular carbon functions
both as the primary filtration media as well as an adsorption media to remove
the contaminants from the water.
Municipal sewage treatment plants purchase the Company's odor control
systems and activated carbon products to remove objectionable odors emanating
from the plant and to treat the wastewater to meet operating requirements.
Granular activated carbon is used in odor control applications but both
granular and powdered activated carbons are used to treat wastewater. The
granular activated carbon is used as a filtration/adsorption media and the
powdered activated carbon is used to enhance the performance of existing
biological waste treatment processes.
Consumer Market:
The Consumer Market consists of sales of charcoal (Grillis/R/ and Der
Sommer-Hit/R/) for outdoor barbecue grilling. The Company's charcoal is
primarily sold through distributors principally in Germany. This market is
weather dependent, with the majority of the sales in the spring and summer
months.
Sales and Marketing:
The Company sells activated carbons, systems and services throughout the
world and in Germany sells charcoal. In areas outside of the United States and
Europe, the Company's primary activity is the sale of activated carbons.
Approximately 90% of its products and services are sold through its direct
sales force, while 10% is through agents and distributors.
The Company has a direct sales force in the United States in offices located
in Pittsburgh, Pennsylvania; Burlingame, California; Lisle, Illinois; Houston,
Texas; and Bridgewater, New Jersey. The Company conducts sales in Canada
through a distributor under direction of its wholly owned subsidiary. The
Company maintains an office in Singapore to manage its business in Malaysia,
Thailand, Indonesia, India and Singapore.
In Europe the Company has sales offices in Brussels, Belgium; Paris, France;
Manchester, England; and Frankfurt, Germany. The Company also has a network of
agents and distributors that conduct sales in certain countries in Europe, the
Middle East, Africa, Latin America, the Far East, Australia and New Zealand.
4
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The following table details total net sales to customers by geographic areas
in the past three years:
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PERCENTAGE OF TOTAL NET SALES
---------------------------------
1995 1994 1993
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<S> <C> <C> <C>
United States................................. 54% 56% 53%
Europe........................................ 37 35 36
Other......................................... 9 9 11
--- --- ---
Total net sales........................... 100% 100% 100%
=== === ===
</TABLE>
Refer to Note 14 to the Consolidated Financial Statements for a discussion
of other financial information classified by major geographic areas in which
the Company operates.
Sales of the Company's products in Japan, South Korea, Taiwan and the
People's Republic of China are conducted exclusively by Calgon Far East Co.
Ltd., a joint venture in which the Company is a 50% participant. The joint
venture purchases the Company's products for resale in the four designated
countries. The joint venture also owns and operates a reactivation facility in
Japan and sells related services. Sales to the joint venture have not been a
significant portion of the Company's total net sales.
The Company's products and services were purchased by approximately 4,000
active customers in 1995. Over the past three years, no single customer
accounted for more than 10% of the total sales of the Company in any year.
Competition:
The Company has three principal competitors with respect to the production
and sale of activated carbons: Norit, N.V., a Dutch company; CECA and Atochem,
USA, subsidiaries of Elf-Aquitaine, a French company; and Westvaco
Corporation, a United States company. Recently, Chinese producers of coal-
based activated carbon and certain East Asian producers of coconut-based
activated carbon have entered the market on a worldwide basis and sell
principally through resellers. Competition in activated carbons, systems and
services is based both on price and performance. Other sources of competition
for the Company's activated carbon services and systems are purification,
filtration and extraction processes that do not employ activated carbons.
A number of other smaller competitors engage in the production and sale of
activated carbons in the United States and throughout the world. These
companies compete with the Company in the sale of specific types of activated
carbons, but do not generally compete with the Company in the worldwide
activated carbon business.
In the United States and Europe the Company competes with several small
regional companies for the sale of its reactivation services and equipment.
There are a number of competitors in the consumer charcoal market who are
located in the Eastern European countries, Spain, Portugal and South Africa.
These competitors offer inexpensive, low-quality products to the market.
Capital Expenditures:
In 1995, the Company invested $12.7 million for capital expenditures. The
Company's 1996 capital expenditure budget approximates $20.0 million and
includes the assets of the aforementioned "perox-pure/TM/ acquisition and
equipment for adsorption service customers. The Company believes that the
funds generated from operations, supplemented as necessary with funds from
lines of credit and its cash reserves, will provide sufficient funds required
for such capital expenditures.
Raw Materials:
The principal raw material purchased by the Company is bituminous coal from
mines in the Appalachian Region and mines outside the United States, under
annual supply contracts. The Company purchases the coal
5
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used in its Belgian production facility from a number of European and
worldwide coal companies under similar arrangements. The Company purchases
beech wood for its German charcoal operations through long-term contracts and
on the open market, either as fresh forest wood or as off-cuts from the
furniture industry. Most of the wood is sourced in Germany and the supply of
wood is adequate. Wood char is also purchased on the open market to supplement
the supply of beech wood.
The Company purchases significant amounts of natural gas from various
suppliers for use in its production facilities. In both the United States and
Europe, this natural gas is purchased pursuant to various annual contracts
with natural gas companies.
The only other raw material that is purchased by the Company in significant
quantities is coal tar pitch, which is used as a binder in the manufacturing
process. The Company purchases coal tar pitch from various suppliers in the
United States and Europe under annual supply contracts.
The Company does not presently anticipate any problems in obtaining adequate
supplies of any of its raw materials.
Research and Development:
The Company's research and development activities are conducted at a
research center near Pittsburgh, Pennsylvania, under the direction of an
Executive Director with a staff of 55 employees. A pilot plant located near
Pittsburgh is used for the production of experimental activated carbon
products for testing and applications development.
The principal goals of the Company's research program are maintaining the
Company as a technological leader in the production and utilization of
granular activated carbon, systems and services; developing new products and
services; and providing technical support to the manufacturing and marketing
operations of the Company.
The Company's research programs include investigation into new and improved
methods of activated carbon manufacturing and development of new and improved
customer applications, with special emphasis on its new Centaur/TM/ product
line, which provides catalytic in addition to adsorptive properties.
Research and development expenses were $5.6 million, $6.3 million and $6.5
million in 1995, 1994 and 1993, respectively.
Patent and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 56 United States patents and 67 patents in other countries.
The technology embodied in these patents, trade secrets and technical
knowledge applies to all phases of the Company's business including production
processes, product formulations and application engineering. The Company
considers this body of technology important to the conduct of its business,
although it considers no individual item material to its business.
Regulatory Matters:
Domestic. The Company is subject to extensive environmental laws and
regulations concerning emissions to the air, discharges to waterways and the
generation, handling, storage, transportation, treatment and disposal of waste
materials and is also subject to other federal and state laws regarding health
and safety matters. The Company believes it is presently in substantial
compliance with these laws and regulations. These laws and regulations are
constantly evolving and it is impossible to predict the effect these laws and
regulations may have on the Company in the future.
The Environmental Protection Agency (EPA) has issued certain regulations
under the Resource Conservation and Recovery Act (RCRA) dealing with the
transportation, storage and treatment of hazardous
6
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waste that impact the Company in its carbon reactivation services. Once
activated carbon supplied to a customer can no longer adsorb contaminating
organic substances, it is returned to the Company's facilities for
reactivation and subsequent reuse. If the substance(s) adsorbed by the spent
carbon is considered hazardous, under these EPA regulations the activated
carbon used in the treatment process is also considered hazardous. Therefore,
a permit is required to transport the hazardous carbon to the Company's
facility for reactivation. The Company possesses the necessary federal and
state permits to transport hazardous waste. Once at the Company's reactivation
site, the hazardous spent activated carbon is placed in temporary storage
tanks. Under the EPA regulations, the Company is required to have a hazardous
waste storage permit. The Company has obtained RCRA Part B permits to store
hazardous waste at its Pittsburgh and Catlettsburg facilities. The process of
reactivating the spent activated carbon, which destroys the hazardous organic
substances, is subject to permitting as a thermal treatment unit under RCRA.
The Company does not accept for reactivation carbons containing certain
hazardous materials, including PCBs, dioxins and radioactive materials.
Each of the Company's domestic production facilities has permits and
licenses regulating air emissions and water discharges. All of the Company's
domestic production facilities are controlled under permits issued by state
and federal air pollution control entities. The Company is presently in
substantial compliance with these permits. Continued compliance will require
administrative control and will be subject to any new or additional standards.
Europe. The Company is also subject to various environmental health and
safety laws and regulations at its facilities in Belgium, England and Germany.
These laws and regulations address substantially the same issues as those
applicable to the Company in the United States. The Company believes it is
presently in substantial compliance with these laws and regulations.
Indemnification. The Company has a limited indemnification agreement with
the previous owner of the Company which will fund certain environmental costs
if they are incurred at the Company's Catlettsburg, Kentucky plant. The
Company believes that the amount of the indemnification is sufficient to fund
these liabilities if they arise.
Employee Relations:
As of December 31, 1995, the Company employed 1,097 persons on a full-time
basis, 625 of whom were salaried production, office, supervisory and sales
personnel. The 278 hourly personnel in the United States are represented by
the United Steelworkers of America. The current contracts with the United
Steelworkers of America expire on February 1, 1999 with respect to the
Pittsburgh facility and on June 6, 1996 with respect to the Catlettsburg
facility. On June 26, 1995, the National Labor Relations Board decertified
Operating Engineers Local Union No. 3 as the collective bargaining
representative of the 12 salaried Blue Lake plant production and maintenance
employees. The 102 hourly personnel at the Bodenfelde plant in Germany are
represented by the German Chemical Industry Union. Agreements are reached
every two years between the National Chemical Union and the German Chemical
Federation. The current agreement expires on March 31, 1996. The 64 hourly
personnel at the Company's Belgian facility are represented by two national
labor organizations with contracts expiring on July 31, 1997. The Company has
16 hourly employees at its United Kingdom facility.
ITEM 2. PROPERTIES:
The Company owns nine production facilities, two of which are located in
Pittsburgh, Pennsylvania; and one each in the following locations:
Catlettsburg, Kentucky; Pearlington, Mississippi; Blue Lake, California;
Feluy, Belgium; Grays, England; Brilon-Wald and Bodenfelde, Germany. The
Company closed its Brilon-Wald plant in 1995 and demolition of this facility
will occur in 1996.
The Catlettsburg, Kentucky plant is the Company's largest facility, with
plant operations occupying approximately 50 acres of a 226-acre site. This
plant produces granular and powdered activated carbons, acid washed granular
activated carbons and reactivates spent granular activated carbons.
7
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The Pittsburgh, Pennsylvania carbon production plant occupies a four-acre
site. Operations at the plant include the reactivation of spent granular
activated carbons, the impregnation of granular activated carbons, the
grinding of granular activated carbons into powdered activated carbons and the
production of pelletized carbon. The plant also has the capacity to produce
coal-based or coconut-based granular activated carbons.
The Pearlington, Mississippi plant occupies a site of approximately 100
acres. The plant has one production line that produces granular activated
carbons and powdered carbons.
The Blue Lake plant, located near the city of Eureka, California occupies
approximately two acres. The primary operation at the plant includes
reactivation of spent granular activated carbons. The Company closed its
powdered carbon operation at this location in 1995 due to a shortage of
acceptable fly ash from the lumber industry.
The Pittsburgh, Pennsylvania equipment and assembly plant is located
approximately one mile from the carbon production plant and is situated within
a 16-acre site that includes a 300,000 square foot building. The equipment and
assembly plant occupies 95,000 square feet with the remaining space used as a
centralized warehouse for carbon inventory. The plant assembles fully
engineered equipment for purification, concentration and separation systems.
The Feluy plant occupies a site of approximately 21 acres located 30 miles
south of Brussels, Belgium. It has one production line which manufactures
granular activated carbons. In addition, operations at the plant include the
reactivation of spent granular activated carbons and the grinding of granular
activated carbons into powdered activated carbons.
The Grays plant occupies a three-acre site near London, England. Operations
at the plant include the reactivation of spent granular activated carbons and
the impregnation of granular activated carbon.
The Bodenfelde plant occupies a site of approximately 40 acres and is
situated in the State of Lower Saxony, Germany. Operations at the plant
include the manufacture of charcoal for the consumer market. Also a by-
product, acetic acid of various grades, is produced and sold.
The Brilon-Wald plant occupies a site of approximately 40 acres and is
situated in the North Rhine-Westphalia Region, Germany. This plant was closed
in 1995. Demolition of this plant will occur in 1996.
The Company believes that the plants are adequate and suitable for its
operating needs.
ITEM 3. LEGAL PROCEEDINGS:
There are no material pending legal proceedings to which the Company or any
of its subsidiaries is a party or of which any of their property is the
subject, except proceedings which arise in the ordinary course of business. In
the opinion of management, any ultimate liability arising from pending
litigation will not have a material adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
8
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
The information required for this Item 5 appears under the caption "Common
Shares and Market Information" on page 32 of the Annual Report to Stockholders
for the Year Ended December 31, 1995 and is incorporated in this Annual Report
by reference.
ITEM 6. SELECTED FINANCIAL DATA:
The information required by this Item 6 appears under the caption "Six-Year
Summary, Selected Financial and Statistical Data" on page 32 of the Annual
Report to Stockholders for the Year Ended December 31, 1995 and is
incorporated in this Annual Report by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS:
The Discussion and Analysis of Financial Condition required by this Item 7
appears on pages 17 through 19 of the Annual Report to Stockholders for the
Year Ended December 31, 1995 and is incorporated in this Annual Report by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The financial statements and related report on the consolidated financial
statements of Calgon Carbon Corporation and its subsidiaries for the Years
Ended December 31, 1995, 1994 and 1993 required by this Item 8 appear on pages
20 through 32 of the Annual Report to Stockholders for the Year Ended December
31, 1995 and are incorporated in this Annual Report by reference.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS:
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Information concerning the directors and executive officers of the
Corporation required by this item is incorporated by reference to the material
appearing under the heading "Election of Directors" in the Company's Proxy
Statement for the 1996 Annual Meeting of its Stockholders.
ITEM 11. EXECUTIVE COMPENSATION:
Information required by this item is incorporated by reference to the
material appearing under the heading "Executive Compensation" in the Company's
Proxy Statement for the 1996 Annual Meeting of its Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
Information required by this item is incorporated by reference to the
material appearing under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement for the 1996 Annual
Meeting of its Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Information required by this item is incorporated by reference to the
material appearing under the heading "Election of Directors" in the Company's
Proxy Statement for the 1996 Annual Meeting of its Stockholders.
9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
A. Financial Statements
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
PAGE(S) IN
ANNUAL REPORT TO
STOCKHOLDERS FOR THE YEAR
FINANCIAL STATEMENTS AND RELATED REPORT ENDED DECEMBER 31, 1995
---------------------------------------- --------------------------
<S> <C>
Report of Independent Accountants, dated February
13, 1996........................................... 31
Consolidated Statement of Income for the Years Ended
December 31, 1995, 1994 and 1993................... 20
Consolidated Balance Sheet as of December 31, 1995
and 1994........................................... 21
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993............. 22
Consolidated Statement of Shareholders' Equity for
the Years Ended December 31, 1995, 1994 and 1993... 23
Notes to the Consolidated Financial Statements...... 24-31
Quarterly Financial Data--Unaudited................. 32
</TABLE>
C.Exhibits
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.1 Amended Certificate of Incorporation.................. (e)
3.2 By-laws of the Registrant............................. (a)
4.0 Rights Agreement...................................... (g)
9.1 Voting Trust Agreement................................ (b)
9.2 Voting Trust Certificate of Amendment................. (c)
10.1* Calgon Carbon Corporation Stock Option Plan,
as Amended.......................................... (f)
10.3* Officers Incentive Plan of Calgon Carbon
Corporation, as Amended............................. (i)
10.4* 1993 Non-Employee, Directors' Stock Option Plan....... (h)
21.0 Subsidiaries of the Company........................... (d)
23.0 Consent of Independent Accountants.................... (14)
</TABLE>
Note: The Registrant hereby undertakes to furnish, upon request of the
Commission, copies of all instruments defining the rights of holders of long-
term debt of the Registrant and its consolidated subsidiaries. The total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis.
10
<PAGE>
(a) Incorporated herein by reference to Exhibit 3.2 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(b) Incorporated herein by reference to Exhibit 9.1 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(c) Incorporated herein by reference to Exhibit 9.2 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1987.
(d) Incorporated herein by reference to Exhibit 21.0 to the Company's report
on Form 10-K filed for the fiscal year ended December 31, 1988.
(e) Incorporated herein by reference to Exhibit 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(f) Incorporated herein by reference to Exhibit 10.1 to the Company's report
on Form 10-K filed for the fiscal year ended December 31, 1990.
(g) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(h) Incorporated herein by reference to Exhibit 10.4 to the Company's report
on Form S-8 dated February 16, 1996.
(i) Incorporated herein by reference to Exhibit 10.3 to material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 1996 Annual Meeting of its Stockholders.
* Executive compensation plans.
D. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1995.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/s/ COLIN BAILEY
March 19, 1996 By___________________________________
- -------------- COLIN BAILEY
(Date) PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
SIGNATURE TITLE DATE
/s/ Colin Bailey President, Chief Executive March 19, 1996
- ------------------------- Officer, Director
COLIN BAILEY
/s/ R. Scott Keefer Senior Vice President, March 19, 1996
- ------------------------- Chief Financial and
R. SCOTT KEEFER Accounting Officer
/s/ Ronald R. Tisch Executive Vice President, March 19, 1996
- ------------------------- Director
RONALD R. TISCH
/s/ Thomas A. McConomy Director, Chairman of the March 19, 1996
- ------------------------- Board
THOMAS A. MCCONOMY
Director March 19, 1996
/s/ Robert W. Cruickshank
- -------------------------
ROBERT W. CRUICKSHANK
/s/ Arthur L. Goeschel Director March 19, 1996
- -------------------------
ARTHUR L. GOESCHEL
/s/ Nick H. Prater Director March 19, 1996
- -------------------------
NICK H. PRATER
/s/ Seth E. Schofield Director March 19, 1996
- -------------------------
SETH E. SCHOFIELD
/s/ Harry H. Weil Director March 19, 1996
- -------------------------
HARRY H. WEIL
/s/ Robert L. Yohe Director March 19, 1996
- -------------------------
ROBERT L. YOHE
/s/ Roger H. Zanitsch Director March 19, 1996
- -------------------------
ROGER H. ZANITSCH
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT METHOD OF PAGE
NO. DESCRIPTION FILING NUMBER
------- ------------ --------- ----------
<S> <C> <C> <C>
3.1 Amended Certificate of Incorporation....... (e)
3.2 By-laws of the Registrant.................. (a)
4.0 Rights Agreement........................... (g)
9.1 Voting Trust Agreement..................... (b)
9.2 Voting Trust Certificate of Amendment...... (c)
10.1* Calgon Carbon Corporation Stock Option
Plan, as Amended.......................... (f)
10.3* Officers Incentive Plan of Calgon Carbon
Corporation, as Amended................... (i)
10.4* 1993 Non-Employee, Directors' Stock Option
Plan...................................... (h)
21.0 Subsidiaries of the Company................ (d)
23.0 Consent of Independent Accountants......... Filed herewith
</TABLE>
- --------
Note: The Registrant hereby undertakes to furnish, upon request of the
Commission, copies of all instruments defining the rights of holders of long-
term debt of the Registrant and its consolidated subsidiaries. The total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis.
(a) Incorporated herein by reference to Exhibit 3.2 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(b) Incorporated herein by reference to Exhibit 9.1 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(c) Incorporated herein by reference to Exhibit 9.2 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1987.
(d) Incorporated herein by reference to Exhibit 21.0 to the Company's report
on Form 10-K filed for the fiscal year ended December 31, 1988.
(e) Incorporated herein by reference to Exhibit 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(f) Incorporated herein by reference to Exhibit 10.1 to the Company's report
on Form 10-K filed for the fiscal year ended December 31, 1990.
(g) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(h) Incorporated herein by reference to Exhibit 10.4 to the Company's report
on Form S-8 dated February 16, 1996.
(i) Incorporated herein by reference to Exhibit 10.3 to the material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 1996 Annual Meeting of its Stockholders.
* Executive compensation plans.
13
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-8 (No. 33-34019
and No. 333-01019) of Calgon Carbon Corporation of our report dated February
13, 1996 appearing on page 31 of the Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-2793
March 25, 1996
14
<PAGE>
Exhibit 13
Management's Discussion and Analysis
Calgon Carbon Corporation
Overview
Industry
Economic conditions improved during 1995. Overall, demand increased for
activated carbon products both in the United States and in Europe with strong
activity noted in the worldwide chemical industry.
In the United States, there were occasional spot product shortages and prices
increased slightly. In Europe prices remained stable throughout the year.
The Company
The Company's results followed the patterns established in the industry.
Overall, sales increased by 6.4% with foreign currency changes accounting for
3.7% and volume representing increases of 2.1%.
In the United States, volume increases of approximately 5% were achieved for
activated carbon products and 4% in the service business. Equipment sales
decreased by 3%. Price increases for activated carbon products represented an
increase of 1%.
In Europe, activated carbon products experienced a volume loss of
approximately 5% due to the closing of the Brilon-Wald, Germany plant and the
equipment business volume was down by 18%. However, service volume increased by
9% and consumer charcoal sales volume increased by 9%.
The Company expects activated carbon and service sales to continue to increase
in volume in 1996. Price increases are also expected to be achieved at a greater
rate than in 1995. The Company has and will continue to pursue only high margin
equipment business. This will negatively impact the volume of the equipment
business, as it did in 1995, but will result in improved profitability.
With the restructuring activities completed, the Company continues to focus on
achieving its vision, which is to be the world's leading producer, supplier and
designer of innovative technologies, value-added products and services,
specifically developed for the purification, separation and concentration of
liquids and gases.
This vision will be achieved via six initiatives adopted by the Company:
. Rapidly introduce new products to differentiate Calgon Carbon from its
competition and better serve customer needs.
. Make acquisitions, form partnerships and license technology in areas
synergistic with the corporate vision.
. Maintain the low-cost position in supplying products and services to the
market.
. Establish custom/pool reactivation centers in emerging growth markets around
the world.
. Continuously improve the existing product line.
. Focus total quality efforts on first-time quality and customer satisfaction.
The Company has also established financial targets for the year 2000 as
follows:
. Double sales revenue to $600 million.
. Grow net income at a faster rate than sales.
. Improve return on shareholders' equity to 15%.
<PAGE>
. Maintain a conservative balance sheet.
. Increase dividends.
Results of Operations
Consolidated net sales in 1995 increased by $17.7 million or 6.4% versus 1994.
This increase was related to the carbon, service and consumer charcoal areas
which increased by 6.3%, 8.5% and 17.0%, respectively. Equipment sales decreased
by 5.5%. Of the net sales increase, $10.2 million resulted from currency rate
changes in Europe. The remainder of the increase was primarily volume related.
On a market basis, sales to the industrial category increased by $13.8 million
or 11.2% and consumer charcoal sales improved by $2.6 million or 17.0%. Sales to
the environmental area remained stable versus 1994. The industrial category
increase was primarily attributed to increased activities in the European
chemical industry, the United States original equipment manufacturer area and
the international energy market. The consumer charcoal improvement was related
to favorable weather conditions in Europe. The environmental area was stable
because improvements in the worldwide municipal category were offset by
equipment decreases in the industrial category. Net sales in 1994 increased by
$4.8 million or 1.8% versus 1993. The increase was the result of increased
volume in the United States and the positive effect of currency rate changes in
Europe of $2.4 million partially offset by the recession in Europe and price
decreases due to worldwide competitive pressures. On a market basis, net sales
to the environmental area increased by 8.6% while net sales in the industrial
category decreased by 4.3%. The environmental area increase was the result of
improved equipment sales by the Vara International unit. The industrial area
decrease was attributed to reductions in Europe in the original equipment
manufacturer personnel protection industry.
Gross profit before depreciation as a percentage of net sales was 36.9%, 35.3%
and 39.0% for 1995, 1994 and 1993, respectively. The 1995 improvement versus
1994 was the result of reduced production costs and sales of higher valued
products. The 1994 decline from 1993 was primarily the combination of lower
selling prices and sales of lower margin products.
Depreciation decreased by $.6 million in 1995 versus 1994 and increased by $.9
million in 1994 over 1993. The 1995 decrease versus 1994 was due to closing of
the Brilon-Wald, Germany plant and the writeoff of unproductive fixed assets in
1994 while the 1994 increase resulted from continued normal capital spending.
Selling, general and administration expenses increased by $3.7 million in 1995
over 1994 and by $1.0 million in 1994 versus 1993. The 1995 increase was caused
by the effect of foreign currency changes in Europe and by personnel related
cost increases, including a provision for the Employee Growth Sharing Plan of
$1.0 million. The 1994 increase was due to an increase in personnel related
costs.
Research and development expenses, as a percentage of sales, were 1.9%, 2.3%
and 2.4% in 1995, 1994 and 1993, respectively.
Interest income increased by $.4 million in 1995 over 1994 and by $.5 million
in 1994 versus 1993. The increases were due to increased cash investments in
both years and improved rates of return in 1995 versus 1994.
Interest expense decreased in 1995 by $.1 million from 1994 and by $.2 million
from 1993.
The effective tax rate for 1995 was 33.8% compared to a benefit of 53.7% in
1994. The benefit recorded in 1994 was primarily due to the recognition of tax
benefits associated with the 1994 restructuring charge. Excluding the effect of
this restructuring charge, the adjusted income tax rate for 1994 was 32.5%. The
increase, as adjusted, was due to reduced utilization of foreign tax credits,
partially offset by a benefit arising from the conversion of the German
operations from corporate to partnership status for U.S. tax purposes. The
<PAGE>
1993 effective tax rate was 37.8%. The 1994 change versus 1993 was the result of
the restructuring effect and the carryback to prior years of foreign tax credits
for U.S. tax purposes in 1994.
The Company does not believe that inflation has had a significant effect on
its business during the periods discussed.
Restructuring of Operations
From 1991 through 1994, income from operations declined in absolute dollars
and as a percentage of net sales. These declines were attributed principally to
lower gross margins before depreciation reflecting lower average selling prices
and a less favorable mix of products. In assessing what could be done to halt
this decline and to stabilize net income, the Company looked at the efficiency
of its facilities, the type of products produced and the magnitude of selling,
general and administrative and research and development expenses. It was
projected that market conditions could improve for certain products. Based on
this, the Company's initial thrust involved the reduction of certain plant
period costs and operating expenses and the writeoff of certain non-productive
assets.
In 1993 a charge of $1.7 million was incurred for a voluntary retirement
incentive program and other staff terminations on a worldwide basis. This cash
outlay for employee separations was paid in 1993 and 1994 from internally
generated funds.
After idling certain producing units at several facilities due to lack of
demand, it was determined in 1994 that additional restructuring of the Company's
operations was necessary. Based upon the continued review of facilities and
products and the strategic initiatives developed in 1994, the Company committed
to a plan to close its Brilon-Wald, Germany plant due to the high costs
associated with the plant's operation. The Company also made the decision to
dispose of certain assets and terminate employees at other locations. The
details of this $41.8 million restructuring charge are outlined in Note 2 to the
Consolidated Financial Statements.
The Company did not withdraw from the German activated carbon market and is
currently supplying its German customers with products from Belgium, the United
Kingdom and the U.S. The closing of the Brilon-Wald plant did not materially
affect consolidated sales revenues in 1995 and the profitability of its German
operations improved. The Company also increased utilization of its other
manufacturing facilities.
During 1996, the Company expects to complete the restructuring plan begun in
the fourth quarter of 1994. The restructuring reserve at December 31, 1995 was
$11.6 million. Cash outlays for the remaining restructuring costs will be paid
from internally generated funds during 1996.
Working Capital and Liquidity
Net cash flows from operating activities totalled $35.6 million in 1995, $43.6
million in 1994 and $41.1 million in 1993. The 1995 decrease from 1994 includes
payments for the restructuring costs of $12.9 million. The Company expects to be
a net generator of cash, providing sufficient funding on an annual basis for
debt service, working capital, payment of dividends and a normal historic level
of capital expenditures.
The Company has two United States credit facilities in the amounts of $10
million each, expiring as of April 30, 1996 and May 30, 1996 and a German credit
facility in the amount of $17.4 million (deutsche mark 25 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, coupled
with cash flow from operations, will provide sufficient liquidity to cover debt
service and any reasonable working capital, capital expenditure, stock
repurchase and dividend requirements.
<PAGE>
In July of 1993, the board of directors authorized the purchase of up to two
million shares, or approximately 5% of the Company's common stock. Purchases
will be made from time to time and the repurchased shares will be held as
treasury stock. No purchases were made in 1995. Since 1993, 1,006,100 shares
were purchased at a cost of $12.3 million.
It is the current intention of the Company to declare and pay quarterly cash
dividends on its common stock. The Company has paid cash dividends since the
third quarter of 1987, the quarter succeeding the one in which the Company went
public. The declaration and payment of dividends is at the discretion of the
Board of Directors of the Company. The declaration and payment of future
dividends and the amounts thereof will be dependent upon the Company's results
of operations, financial condition, cash requirements for its business, future
prospects and other factors deemed relevant by the Board of Directors. During
January of 1995, the Board of Directors announced the payment of a one-time
special dividend of $.50 per share. This payment required a cash outlay of $20.2
million. At the same time, the regular quarterly dividend was increased from
$.04 to $.075 which represented an increase of 87.5%. At the February 1996 Board
of Directors meeting, the regular quarterly dividend was increased by $.005 per
share per quarter to $.08 to be paid on April 2, 1996. This represents an
increase of 6.7%.
Capital Expenditures and Investments
Capital expenditures were $12.7 million in 1995, $7.1 million in 1994 and
$15.1 million in 1993. Significant 1995 expenditures were for improvements at
one of the Big Sandy, Kentucky production lines ($6.7 million) and for domestic
service customer capital ($1.1 million). The 1994 expenditure amount included
improvements at the Bodenfelde, Germany plant ($1.8 million) and domestic
service customer capital ($1.4 million). Capital expenditures for 1996 are
projected to be approximately $20.0 million.
New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
employee stock-based compensation plans but allows companies to continue to
apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting
For Stock Issued to Employees," provided certain pro forma disclosures are made.
The Company intends to continue its present accounting policy relating to stock
options and will provide required pro forma disclosures, as permitted by the
Standard.
Report of Management
The consolidated financial statements and related notes have been prepared by
management, who are responsible for their integrity and objectivity. The
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on management judgments and estimates. All
other financial information in this annual report is consistent with that in the
financial statements.
The Company maintains internal accounting control systems that are designed to
provide reasonable assurance that assets are safeguarded, that transactions are
executed in accordance with management's authorization and are properly recorded
and that accounting records are adequate for preparation of financial statements
and other financial information. The design, monitoring and revision of internal
accounting control systems involve management's judgments with respect to the
relative cost and expected benefits of specific control measures.
In addition to the system of internal accounting controls, the Company
maintains guidelines of Company policy emphasizing proper overall business
conduct, possible conflicts of interest, compliance with laws and
confidentiality of proprietary information.
The financial statements have been audited by Price Waterhouse LLP,
independent accountants. Their responsibility is to examine the Company's
financial statements in accordance with generally accepted auditing standards
and to express their opinion with respect to the fairness of presentation of the
statements.
The members of the audit committee of the Board of Directors, none of whom are
employees of the Company, review the services performed by the independent
accountants and receive and review the reports submitted by them. The audit
committee meets several times during the year with management and the
independent accountants to discuss audit activities, internal controls and
financial reporting matters. The independent accountants have full and free
access to the committee.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Income
Calgon Carbon Corporation
Year Ended December 31
(Dollars in thousands except per share data) 1995 1994 1993
<S> <C> <C> <C>
Net Sales $291,898 $274,244 $269,424
Cost of products sold (excluding depreciation) 184,219 177,370 164,482
Depreciation 18,450 19,027 18,157
Selling, general and administrative expenses 50,195 46,522 45,526
Research and development expenses 5,593 6,291 6,511
Restructuring charges -- 41,761 1,733
258,457 290,971 236,409
Income (loss) from operations 33,441 (16,727) 33,015
Interest income 1,474 1,079 584
Interest expense (620) (752) (984)
Other (expense)--net (2,041) (2,186) (1,824)
Income (loss) before income taxes 32,254 (18,586) 30,791
Provision (benefit) for income taxes 10,909 (9,977) 11,638
Net Income (Loss) $ 21,345 $ (8,609) $ 19,153
Net income (loss) per common share $.53 $(.21) $.47
Weighted average shares, in thousands 40,419 40,637 40,999
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
Calgon Carbon Corporation
December 31
(Dollars in thousands) 1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 40,089 $ 45,376
Receivables 55,779 50,855
Inventories 43,643 41,672
Other current assets 8,518 11,225
Total current assets 148,029 149,128
Property, plant and equipment, net 175,952 179,148
Other assets 14,020 15,208
Total assets $338,001 $343,484
Liabilities and Shareholders' Equity
Current liabilities:
Long-term debt due within one year $ 8,514 $ 3,273
Accounts payable and accrued liabilities 28,252 28,623
Restructuring reserve 11,616 22,761
Payroll and benefits payable 13,546 10,691
Accrued income taxes 1,517 501
Total current liabilities 63,445 65,849
Long-term debt 5,608 6,401
Deferred income taxes 41,959 34,341
Other liabilities 8,802 9,746
Total liabilities 119,814 116,337
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 153,335 164,325
Cumulative translation adjustments 14,780 12,750
230,515 239,475
Treasury stock, at cost, 1,006,100 shares (12,328) (12,328)
Total shareholders' equity 218,187 227,147
Total liabilities and shareholders' equity $338,001 $343,484
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<S> <C> <C> <C>
Calgon Carbon Corporation
Year Ended December 31
(Dollars in thousands) 1995 1994 1993
Cash flows from operating activities
Net income (loss) $ 21,345 $ (8,609) $ 19,153
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Non-cash restructuring charges and asset write downs -- 19,210 --
Depreciation and amortization 18,527 19,555 18,676
Employee benefit plan provisions 448 695 1,373
Changes in assets and liabilities--
net of restructuring and exchange:
(Increase) decrease in receivables (3,957) (1,957) 2,897
(Increase) decrease in inventories (205) 1,855 (4,304)
Decrease in other current assets 2,761 1,239 1,770
Increase (decrease) in restructuring reserve (12,850) 21,967 --
Increase (decrease) in accounts payable and accruals 3,362 4,850 (2,894)
Increase (decrease) in long-term deferred income
taxes (net) 7,226 (14,838) 3,124
Other items--net (1,051) (405) 1,275
Net cash provided by operating activities 35,606 43,562 41,070
Cash flows from investing activities
Property, plant and equipment expenditures (12,676) (7,113) (15,114)
Proceeds from disposals of equipment 698 1,357 1,082
Net cash (used in) investing activities (11,978) (5,756) (14,032)
Cash flows from financing activities
Net proceeds from (repayments of) borrowings 3,999 598 (3,771)
Treasury stock purchases -- (10,713) (1,615)
Common stock dividends (32,335) (6,493) (6,561)
Other -- 225 138
Net cash (used in) financing activities (28,336) (16,383) (11,809)
Effect of exchange rate changes on cash (579) 2,161 (1,662)
Increase (decrease) in cash and cash equivalents (5,287) 23,584 13,567
Cash and cash equivalents, beginning of period 45,376 21,792 8,225
Cash and cash equivalents, end of period $ 40,089 $ 45,376 $ 21,792
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Shareholders' Equity
Calgon Carbon Corporation
Common Additional Cumulative
Shares Common Paid-in Retained Translation Sub- Treasury Stock
(Dollars in thousands) Issued Shares Capital Earnings Adjustments Total Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 40,903,760 $409 $60,762 $166,835 $10,810 $238,816 -- $ -- $238,816
1993
Net income -- -- -- 19,153 -- 19,153 -- -- 19,153
Employee stock plans 198,600 2 577 -- -- 579 -- -- 579
Common stock dividends
Cash ($.16 per share) -- -- -- (6,561) -- (6,561) -- -- (6,561)
Translation adjustments -- -- -- -- (3,306) (3,306) -- -- (3,306)
Treasury stock purchased -- -- -- -- -- -- 153,600 (1,615) (1,615)
Balance,
December 31, 1993 41,102,360 411 61,339 179,427 7,504 248,681 153,600 (1,615) 247,066
1994
Net (loss) -- -- -- (8,609) -- (8,609) -- -- (8,609)
Employee stock plans 322,600 3 647 -- -- 650 -- -- 650
Common stock dividends
Cash ($.16 per share) -- -- -- (6,493) -- (6,493) -- -- (6,493)
Translation adjustments -- -- -- -- 5,246 5,246 -- -- 5,246
Treasury stock purchased -- -- -- -- -- -- 852,500 (10,713) (10,713)
Balance,
December 31, 1994 41,424,960 414 61,986 164,325 12,750 239,475 1,006,100 (12,328) 227,147
1995
Net income -- -- -- 21,345 -- 21,345 -- -- 21,345
Common stock dividends
Cash ($.80 per share) -- -- -- (32,335) -- (32,335) -- -- (32,335)
Translation adjustments -- -- -- -- 2,030 2,030 -- -- 2,030
Balance,
December 31, 1995 41,424,960 $414 $61,986 $153,335 $14,780 $230,515 1,006,100 $(12,328) $218,187
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
Notes to the Consolidated Financial Statements
Calgon Carbon Corporation
1. Statement of Accounting Policies
Operations
The Company's operations are conducted in one business segment, the production
and marketing of activated carbons and related products and services. The
markets are primarily in the United States and in Europe.
Principles of Consolidation
The consolidated financial statements include the accounts of Calgon Carbon
Corporation and its wholly-owned subsidiaries, Chemviron Carbon GmbH, Calgon
Carbon Canada, Inc., Chemviron Carbon Ltd., Calgon Carbon Investments Inc. and
the Company's foreign sales corporation. A portion of the Company's
international operations in Europe are owned directly by the Company and are
operated as branches. The Company's 50% investment in Calgon Far East Co., Ltd.
is accounted for by the equity method. Intercompany accounts and transactions
have been eliminated.
Foreign Currency Translation
Substantially all assets and liabilities of the Company's international
operations are translated at year-end exchange rates; income and expenses are
translated at average exchange rates prevailing during the year. Translation
adjustments are accumulated in a separate component of shareholders' equity, net
of tax effects. Transaction gains and losses are included in income.
Revenue Recognition
Revenue and related costs are recognized when goods are shipped or services
are rendered to customers.
Inventories
Inventories are carried at the lower of cost or market. Inventory costs are
determined using the last in, first out (LIFO) method except at Chemviron Carbon
GmbH and Calgon Carbon Canada, Inc., where cost is determined by the first in,
first out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment expenditures are recorded at cost. Repair and
maintenance costs are expensed as incurred. Depreciation for financial statement
purposes is computed on the straight-line method over the estimated remaining
service lives of the assets, which are from twenty to thirty years for buildings
and land improvements, fifteen years for machinery and equipment and seven years
for vehicles.
Pensions
Substantially all U.S. employees of the Company are covered by one of three
non-contributory defined benefit pension plans. It is the Company's policy to
annually fund net pension cost accrued to these plans, subject to minimum and
maximum amounts specified by regulations. In Europe, employees are also covered
by various defined benefit pension plans or government sponsored defined
contribution plans. The Company funds these plans according to local laws and
practices.
Statement of Cash Flows
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
<PAGE>
Use of Estimates
The preparation of financial statements in confomity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Restructuring Charges
During 1994 and 1993, the Company initiated various activities to restructure
its worldwide operations in order to reduce its cost structure, control expenses
and eliminate unproductive or unnecessary facilities.
In the fourth quarter of 1994 the Company recorded a charge of $41,761,000
from a restructuring of operations. Included in the charge were costs totaling
$10,592,000 relating to the separation of employees, writeoffs of inventories
and other assets, closing of an office and the writeoff of patents in the United
States and Canada and in Europe, other than in Germany. At the December 1994
Board of Directors meeting the Company committed to a plan to close the Brilon-
Wald, Germany plant. A charge of $31,169,000 was made to cover legally required
employee termination costs, asset writeoffs and the demolition, disposition,
site protection and environmental costs involved with this plant. In accordance
with the Company's plan, the Brilon-Wald plant was closed and employees
separated in 1995 and the demolition of the plant is planned to be completed
during 1996. With the exception of the writedowns of assets, these restructuring
charges will result in cash outlays.
A charge of $1,733,000 was taken in 1993, consisting of worldwide personnel
costs associated with a voluntary incentive retirement program and other staff
terminations. These restructuring charges resulted in cash outlays.
The following table sets forth the Company's restructuring charges for the
years ended December 31, 1994 and 1993 (there were no such charges in 1995):
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1994 1993
<S> <C> <C>
Employee separations $10,480 $1,733
Property, plant and equipment writeoffs 10,363 --
Patent writeoffs 3,710 --
Inventory writedowns 5,711 --
Demolition, disposition, site
protection and environmental costs--Brilon-Wald 11,497 --
Total $41,761 $1,733
</TABLE>
The reserve balance for employee separations at December 31, 1995 and 1994 was
$1,900,000 and $10,312,000, respectively. The reserve balance for demolition,
disposition and environmental costs totaled $9,306,000 at December 31, 1995 and
$11,497,000 at December 31, 1994.
During 1996, the Company expects to complete the restructuring plan begun in
the fourth quarter of 1994.
There were 156, 21 and 23 employees terminated in 1995, 1994 and 1993,
respectively.
<PAGE>
3. Inventories
<TABLE>
<CAPTION>
December 31
(Thousands) 1995 1994
<S> <C> <C>
Raw materials $13,960 $ 7,119
Finished goods 29,683 34,553
Total $43,643 $41,672
</TABLE>
Approximately 71% and 59% of total inventories at December 31, 1995 and 1994,
respectively, are valued using the LIFO method. The LIFO carrying value of
inventories exceeded the related current cost by $4,232,000 and $2,848,000 at
December 31, 1995 and 1994, respectively.
4. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31
(Thousands) 1995 1994
<S> <C> <C>
Land and improvements $ 13,054 $ 12,694
Buildings 21,499 20,792
Machinery and equipment 253,608 237,616
Furniture and vehicles 8,236 8,335
$ 296,397 $ 279,437
Less accumulated depreciation (120,445) (100,289)
Net $ 175,952 $ 179,148
</TABLE>
5. Long-Term Debt
<TABLE>
<CAPTION>
December 31
(Thousands) 1995 1994
<S> <C> <C>
Pollution control debt
Ashland, Kentucky bonds $ 5,100 $ 5,100
German pollution control loans 737 894
German wastewater control loans -- 648
German credit facility 8,285 3,032
Total $ 14,122 $ 9,674
Less current maturities of long-term debt (8,514) (3,273)
Net $ 5,608 $ 6,401
</TABLE>
Pollution Control Debt
The City of Ashland, Kentucky Floating Rate Pollution Control Revenue bonds
bear interest at a defined floating rate and are due October 1, 2006. During the
year ended December 31, 1995, the Company paid interest on these bonds at an
average rate of 4.1%. These pollution control bonds are secured by certain
pollution control assets located at the Company's Big Sandy, Kentucky plant.
The German pollution control loans consist of three loans, due March 31, 1997,
1998 and 2000 and have fixed interest rates of 5.0%, 6.5% and 6.0%,
respectively.
The German wastewater control loans were repaid during 1995.
<PAGE>
United States Credit Facilities
The Company's two credit facilities totalling $20 million expire in April and
May of 1996. The Company pays annual facility fees of one-eighth percent on the
unused portion of each credit line. The facilities provide for interest rates
based upon prime rates with other interest options available. As of December 31,
1995, no amounts were outstanding related to these credit facilities.
German Credit Facility
The Company currently has a bank credit facility in Germany which provides for
borrowing up to $17,440,000. The facility has no set maturity date and is made
available on an until further notice basis. No commitment fee is required on
unborrowed funds. The facility bears interest at the German bank rate with other
interest options available. As of December 31, 1995, the weighted average
interest rate was 5.1% on loans outstanding.
Restrictive Covenants
The United States credit facilities' covenants impose financial restrictions
on the Company, including maintaining certain ratios of total liabilities to
tangible net worth and operating income to interest expense. At December 31,
1995 the Company was in compliance with all financial covenants relating to the
credit facilities in the United States.
The German credit facility has no covenants.
Maturities of Debt
The Company is obligated to make principal payments on debt outstanding at
December 31, 1995 of $8,514,000 in 1996, $206,000 in 1997, $145,000 in 1998,
$105,000 in 1999 and $52,000 in 2000.
6. Lease Commitments
The Company has entered into leases covering principally office, research and
warehouse space, office equipment and vehicles.
Future minimum rental payments required under all operating leases that have
remaining noncancelable lease terms in excess of one year are $6,297,000 in
1996, $5,070,000 in 1997, $4,258,000 in 1998, $3,939,000 in 1999, $3,783,000 in
2000 and $18,598,000 thereafter.
Total rental expenses on all operating leases were $6,829,000, $6,489,000 and
$4,996,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
7. Shareholders' Equity
On March 1, 1995, a voting trust covering 11,898,508 shares of Class A stock
outstanding at December 31, 1994 was terminated. These Class A shares were
automatically converted to common stock on a share-for-share basis effective
this date.
On July 13, 1993, the Board of Directors authorized the Company to purchase up
to two million shares, or approximately 5% of its common stock. Purchases will
be made from time to time and the repurchased shares will be held as treasury
stock. No shares were purchased during 1995. As of December 31, 1995, the
Company had purchased 1,006,100 shares of its common stock at an aggregate cost
of $12,328,000.
The Board of Directors adopted a Stockholder Rights Plan in January 1995
designed to (1) guard against coercive and abusive tactics that might be used in
an attempt to gain control of the Company without paying all stockholders a fair
price for their shares or (2) the accumulation of a substantial block of stock
without
<PAGE>
Board approval. The Rights Plan will not prevent takeovers, but is
designed to encourage anyone attempting to acquire the Company to first
negotiate with the Board. The Plan awards one Right for each outstanding share
of common stock held by stockholders of record on February 14, 1995, and
thereafter. Each right entitles the holder to purchase from the Company one one-
hundredth of a share of Calgon Carbon common stock at a purchase price of $50
per share. The Rights will be exercisable only if a person or group acquires
beneficial ownership of 20% or more of the Company's outstanding common stock.
If one of those events occurs, each stockholder (with the exception of the
person or group who owns 20% or more of the outstanding stock) can exchange the
right for shares with a market value equal to the then-current exercise price or
three shares, whichever has the greater value.
8. Stock Option Plans
The Company has an Employee Stock Option Plan for officers and other key
employees of the Company. Stock options may be "nonstatutory," with a purchase
price not less than 80% of fair market value on the date of the grant, or
"incentive" with a purchase price of not less than 100% of the fair market value
on that date. Stock appreciation rights may be granted at date of option grant
or at any later date during the term of the option.
There were 4,138,640 shares available for issuance under the Plan. In 1985,
2,096,000 options were granted and were exercised in 1985 and 1986. "Incentive"
stock options granted since 1986 become exercisable no less than six months
after the date of grant primarily in five equal annual installments and are no
longer exercisable after the expiration of ten years from the date of grant.
Transactions for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Options outstanding January 1 62,000 396,600 604,600
Granted 755,000 49,120 --
Exercised -- 322,600 198,600
Cancelled 50,000 61,120 9,400
Options outstanding at December 31 767,000 62,000 396,600
Option price range at December 31 $ 10.50 $ 17.13 $.70
to to to
$ 23.13 $ 23.13 $23.13
Options exercisable at December 31 43,600 28,700 167,300
Options available for grant at December 31 358,040 1,063,040 1,051,040
</TABLE>
The Company also has a Non-Employee Directors' Stock Option Plan for outside
directors. The aggregate number of shares that may be issued under the plan is
100,000. If the Company's "Income From Operations" in the applicable fiscal year
is greater than the "Income From Operations" of the previous year, options
granted in the current year vest. During 1995, 6,500 shares were granted and
subsequently became vested. The option price for these shares is $15.50.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
employee stock-based compensation plans but allows companies to continue to
apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," provided certain pro forma disclosures are made.
The Company intends to continue its present accounting policy relating to stock
options and will provide required pro forma disclosures, as permitted by the
Standard.
<PAGE>
9. Employee Growth Sharing Plan
Under the Plan, an employee growth sharing plan pool is calculated as a
percentage of the increase in year-to-year pre-tax income. All full time
employees not included in any other incentive compensation plan of the Company
are eligible. This plan pool may be adjusted by the Board of Directors at its
sole discretion in any plan year in order to reflect any material events that
would impact the calculation in either a positive or negative manner. The pool
for distribution for the year ending December 31, 1995 was $1,009,000 and there
was no pool for distribution for the years ending December 31, 1994 and 1993.
10. Pensions
The Company has a number of non-contributory defined benefit pension plans for
its U.S. employees which provide benefits based upon the greater of a fixed rate
per month or a percentage of average compensation. Prior service and
compensation of employees formerly covered by pension plans of the previous
owners of the Company's operations are considered in the determination of
benefits payable under Company plans. By agreement with previous owners,
benefits payable under Company plans are reduced by the benefit amounts
attributable to the previous owners which are computed utilizing a 2.5%
compensation increase assumption.
Domestic plan assets are invested primarily in commingled equity and
government security trust funds administered by a bank. Prior service cost for
all plans is amortized on a straight-line basis over the remaining average
service period of employees expected to receive benefits under the plans. For
U.S. plans, net pension costs, amounts recognized in the balance sheet and
significant assumptions are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 1,332 $ 1,505 $ 1,615
Interest cost on projected benefit obligation 1,822 1,739 1,898
Net amortization 222 223 290
3,376 3,467 3,803
Return on plan assets:
Actual loss (return) (5,126) 186 (1,090)
Amount deferred 3,688 (1,504) 22
Recognized return on plan assets (1,438) (1,318) (1,068)
Net pension cost for the period $ 1,938 $ 2,149 $ 2,735
Discount rate 8.25% 7.50% 8.25%
Long-term rate of return on assets 8.50% 8.50% 8.50%
</TABLE>
In addition to the above pension cost for the year ended December 31, 1993,
the Company recognized $197,000 for pension curtailment and settlement losses
associated with the voluntary retirement incentive program.
<PAGE>
<TABLE>
<CAPTION>
December 31
(Thousands) 1995 1994
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefits $ 13,420 $ 9,205
Nonvested benefits 3,748 2,284
Accumulated benefit obligations $ 17,168 $ 11,489
Projected benefit obligation $ 30,175 $ 21,408
Plan assets at fair value (23,244) (15,339)
Projected benefit obligation in excess of plan assets $ 6,931 $ 6,069
Unrecognized net gain (loss) from past experience different from assumed (1,315) 1,067
Prior service cost not yet recognized in net periodic pension cost (2,902) (3,126)
Pension liability included in the balance sheet $ 2,714 $ 4,010
Discount rate 7.25% 8.25%
Rate of increase in compensation levels 4.00% 4.25%
</TABLE>
There are several defined benefit plans covering certain employees of
Chemviron Carbon GmbH for which the obligations are accrued but not funded in
accordance with local practice. Benefits under these plans are generally based
on a percentage of average compensation.
The European employees in the branches and United Kingdom subsidiary
participate in certain contributory defined benefit pension plans which
guarantee a pension over the state pension level. These plans are funded by
employee contributions calculated as a percentage of their compensation with the
balance of the plan funding provided by Company contributions. Funds are managed
by an insurance company under a deposit administration contract. Benefits under
these plans are generally based upon a percentage of final earnings subject to
an upper earnings limit.
For European plans, net pension costs, amounts recognized in the balance sheet
and significant assumptions are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 678 $ 608 $ 620
Interest cost on projected benefit obligation 937 799 769
Net amortization 36 68 72
1,651 1,475 1,461
Return on plan assets:
Actual (return) (282) (249) (221)
Amount deferred (33) 18 (13)
Recognized return on plan assets (315) (231) (234)
Net pension cost for the period $ 1,336 $ 1,244 $ 1,227
Discount rate 7.5-9.0% 7.0-8.0% 8.0-9.0%
Long-term rate of return on assets 7.0-7.8% 8.0-9.0% 7.0-8.0%
</TABLE>
In addition to the above pension cost for the year ended December 31, 1995,
the Company recognized $268,000 for pension curtailment gains associated with
employee terminations in Germany related to the Brilon-Wald plant shut down in
1995.
<PAGE>
<TABLE>
<CAPTION>
December 31
(Thousands) 1995 1994
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefits $ 8,781 $ 6,760
Nonvested benefits 446 536
Accumulated benefit obligations $ 9,227 $ 7,296
Projected benefit obligation $ 13,364 $ 11,544
Plan assets at fair value (4,402) (3,554)
Projected benefit obligation in excess of plan assets $ 8,962 $ 7,990
Unrecognized net gain from past
experience different from assumed 320 331
Unrecognized net transition obligation,
net of amortization (847) (979)
Pension liability included in the balance sheet $ 8,435 $ 7,342
Discount rate 7.0-7.8% 7.5-9.0%
Rate of increase in compensation levels 4.0-5.5% 4.5-7.0%
</TABLE>
11. Provision for Income Taxes
The components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1995 1994 1993
<S> <C> <C> <C>
Current
Federal $ 3,004 $ 1,937 $ 2,703
State and local (58) 172 564
Foreign 54 1,994 2,983
3,000 4,103 6,250
Deferred
Federal 6,880 (795) 3,981
State and local (948) (194) 969
Foreign 1,977 (13,091) 438
7,909 (14,080) 5,388
Provision (benefit) for income taxes $10,909 $ (9,977) $ 11,638
</TABLE>
Income (loss) before income taxes for 1995, 1994 and 1993 includes $7,846,000,
($28,879,000) and $7,531,000, respectively, generated by operations outside the
United States.
<PAGE>
The difference between the U.S. federal statutory tax rate and the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
U.S. federal statutory rate 35.0% (35.0)% 35.0%
State income taxes, net of federal
income tax benefit (2.0) (.1) 3.2
Foreign tax credit carryback -- (9.3) --
Higher tax (benefit) rate on foreign income (loss) 3.9 (8.9) .5
Other--net (3.1) (.4) (.9)
Effective income tax rate 33.8% (53.7)% 37.8%
</TABLE>
Operating loss carryforwards of $32,442,000 in foreign jurisdictions at
December 31, 1995 have no expiration dates.
The Company's U.S. income tax returns have been examined by the Internal
Revenue Service through 1993. Management believes that adequate provisions for
taxes have been made through December 31, 1995.
The components of deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1995 1994
<S> <C> <C>
Deferred tax assets
Foreign tax loss carryforwards $13,513 $14,032
U.S. tax benefits on deferred foreign income 2,428 3,095
Accruals 8,782 1,980
Intangibles 1,381 1,619
Pensions 2,126 1,239
Organization costs 690 690
Other 422 662
Total deferred tax assets $29,342 $23,317
Deferred tax liabilities
Property, plant and equipment $39,861 $36,738
U.S. liability on German deferred tax assets 10,952 --
Cumulative translation adjustment 7,958 7,723
Inventories 890 503
Other 688 1,042
Total deferred tax liabilities $60,349 $46,006
</TABLE>
<PAGE>
12. Other Information
Repair and maintenance expenses were $19,330,000, $19,693,000 and $20,008,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
Other (expense)-net includes net foreign currency transaction losses of
($358,000), ($548,000) and ($486,000) for the years ended December 31, 1995,
1994 and 1993, respectively. Also included are taxes other than on income of
($1,162,000), ($1,335,000) and ($1,049,000) for the years ended December 31,
1995, 1994 and 1993, respectively.
Deferred taxes included in the translation adjustments for 1995, 1994 and 1993
were $1,093,000, $2,824,000 and ($1,528,000), respectively.
<TABLE>
<CAPTION>
13. Supplemental Cash Flow Information
(Thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash paid during the year for
Interest $ 918 $ 430 $ 994
Income taxes (net of refunds) $ 802 $ 4,007 $ 4,305
Bank debt
Borrowings $ 38,300 $ 19,891 $ 28,118
Repayments (34,301) (19,293) (31,889)
Net proceeds from (repayment of) borrowings $ 3,999 $ 598 $( 3,771)
</TABLE>
<PAGE>
14. Geographic Information
Net sales by the Company's operations in certain geographic areas, transfers
between geographic areas and income from operations for 1995, 1994 and 1993 and
identifiable assets, at the end of each year, classified by major geographic
areas in which the Company operates, were as follows:
<TABLE>
<CAPTION>
(Thousands) 1995 1994 1993
Sales to unaffiliated customers
<S> <C> <C> <C>
U.S. $182,414 $174,461 $172,422
Europe 109,484 99,783 97,002
$291,898 $274,244 $269,424
Transfers between areas
U.S. $ 9,340 $ 11,001 $ 12,613
Europe 6,958 5,152 11,544
$ 16,298 $ 16,153 $ 24,157
Income (loss) from operations
U.S. $ 27,714 $ 13,050 $ 28,049
Europe 7,011 (28,865) 5,808
Eliminations (1,284) (912) (842)
$ 33,441 $(16,727) $ 33,015
Identifiable assets, end of year
U.S. $229,740 $235,300 $232,438
Europe 109,234 108,959 105,791
Eliminations (973) (775) (900)
$338,001 $343,484 $337,329
</TABLE>
Transfers between geographic areas are at prices in excess of cost and the
resultant income is assigned to the geographic area of manufacture. Interarea
income remaining in inventories is eliminated in consolidation.
<PAGE>
Report of Price Waterhouse LLP Independent Accountants
To the Board of Directors and Shareholders of Calgon Carbon Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Calgon
Carbon Corporation (the Company) and its subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Pittsburgh, Pennsylvania
February 13, 1996
<PAGE>
<TABLE>
<CAPTION>
Six-Year Summary
Selected Financial And Statistical Data
Year Ended December 31
(Thousands except per share data) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $291,898 $274,244 $269,424 $298,371 $308,373 $284,900
Income (loss) from operations $ 33,441 $(16,727) $ 33,015 $ 46,653 $ 61,258 $ 62,424
Interest expense $ 620 $ 752 $ 984 $ 1,347 $ 1,040 $ 1,336
Net income (loss)(a)(b) $ 21,345 $ (8,609) $ 19,153 $ 17,983 $ 38,102 $ 38,309
Percent of pretax income
(loss) to sales 11.0% (6.8)% 11.4% 14.7% 19.7% 22.2%
Net income (loss) per
common share(a)(b) $ .53 $ (.21) $ .47 $ .44 $ .94 $ .94
Dividends declared per
common share $ .80 $ .16 $ .16 $ .16 $ .16 $ .15
Balance Sheet Data (at year end):
Working capital $ 84,584 $ 83,279 $ 94,664 $ 74,659 $ 77,050 $ 82,145
Total assets $338,001 $343,484 $337,329 $334,518 $335,964 $285,084
Long-term debt $ 5,608 $ 6,401 $ 6,477 $ 6,797 $ 27,652 $ 11,215
Treasury stock, at cost $ 12,328 $ 12,328 $ 1,615 -- -- --
Other Selected Data (at year end):
Return (loss) on average
shareholders' equity 10% (4)% 8% 8% 18% 21%
Ratio of total debt to
total capitalization 6% 4% 4% 5% 11% 5%
Current ratio 233% 226% 347% 266% 266% 275%
Tax rate 33.8% (53.7)% 37.8% 34.9% 37.2% 37.4%
Treasury stock 1,006 1,006 154 -- -- --
Shares outstanding 40,419 40,419 40,949 40,904 40,749 40,637
Book value per outstanding
common share $ 5.40 $ 5.62 $ 6.03 $ 5.84 $ 5.67 $ 4.92
Market value of common stock $ 12.00 $ 10.00 $ 13.00 $ 17.63 $ 21.38 $ 21.63
Price earnings ratio of stock prices 22.64 -- 27.66 40.07 22.74 22.88
Capital expenditures $ 12,676 $ 7,113 $ 15,114 $ 24,046 $ 70,571 $ 47,594
Number of registered shareholders 1,102 1,306 1,470 1,503 1,410 966
Number of employees 1,097 1,267 1,320 1,480 1,513 1,499
</TABLE>
(a) After extraordinary charges in 1990 resulting from prepayment of debt
obligations of $1.24 million or $.03 per share net of tax.
(b) After a charge in 1992 of $10.65 million or $.26 per share resulting from
the cumulative effect of a change in accounting principle for income taxes.
Quarterly Financial Data--Unaudited
<TABLE>
<CAPTION>
(Thousands except per share data) 1995 1994
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $68,809 $75,968 $71,283 $75,838 $62,503 $69,156 $69,354 $ 73,231
Gross profit $24,640 $27,892 $27,004 $28,143 $21,094 $26,414 $23,533 $ 25,833
Net income (loss) $ 3,919 $ 6,051 $ 5,589 $ 5,786 $ 2,344 $ 5,222 $ 3,715 $(19,890)
Common Stock Data:
Net income (loss)
per common share $.10 $.15 $ .14 $.14 $.06 $ .13 $ .09 $ (.49)
Average common
shares outstanding 40,419 40,419 40,419 40,419 40,989 40,765 40,394 40,409
</TABLE>
Common Shares and Market Information
Common shares are traded on the New York Stock Exchange under the trading
symbol CCC. There were 1,102 registered shareholders at year end.
Quarterly Common Stock Price Ranges and Dividends
<TABLE>
<CAPTION>
1995 1994
Fiscal Quarter High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C>
First(a) 11 1/2 10 $.575 15 3/8 11 5/8 $.040
Second 13 3/4 11 3/8 $.075 13 7/8 12 3/8 $.040
Third 12 5/8 11 $.075 13 5/8 11 $.040
Fourth 12 7/8 11 1/4 $.075 11 7/8 9 7/8 $.040
</TABLE>
(a) In February of 1995, the Company paid a one-time special dividend of $.50
per share.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 40,089
<SECURITIES> 0
<RECEIVABLES> 55,779
<ALLOWANCES> 0
<INVENTORY> 43,643
<CURRENT-ASSETS> 148,029
<PP&E> 296,397
<DEPRECIATION> 120,445
<TOTAL-ASSETS> 338,001
<CURRENT-LIABILITIES> 63,445
<BONDS> 0
0
0
<COMMON> 50,072
<OTHER-SE> 168,115
<TOTAL-LIABILITY-AND-EQUITY> 338,001
<SALES> 291,898
<TOTAL-REVENUES> 291,898
<CGS> 184,219
<TOTAL-COSTS> 258,457
<OTHER-EXPENSES> 2,041
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 620
<INCOME-PRETAX> 32,254
<INCOME-TAX> 10,909
<INCOME-CONTINUING> 21,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,345
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
