<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _______ to _______
Commission file number 0-15903
CALGON CARBON CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-0530110
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 717, Pittsburgh, PA 15230-0717
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(412) 787-6700
---------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
- ----------------------------- -----------------------------
Common Stock, $.01 par value 39,674,660 shares
<PAGE>
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED MARCH 31, 1997
The Quarterly Report on Form 10-Q contains historical information and forward-
looking statements. Statements looking forward in time are included in this
Form 10-Q pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. They involve known and unknown risks and
uncertainties that may cause the Company's actual results in the future to
differ from performance suggested herein. In the context of forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in the Company's filings with the Securities and Exchange Commission
during the past 12 months.
I N D E X
---------
PART 1 - FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements
-------
Page
----
Introduction to the Financial Statements........ 2
Consolidated Statement of Income and
Retained Earnings............................... 3
Consolidated Balance Sheet...................... 4
Consolidated Statement of Cash Flows............ 5
Selected Notes to Financial Statements.......... 6
Report of Independent Accountants on Review of
Unaudited Interim Financial Information......... 7
Item 2. Management's Discussion and Analysis of Results
------ -----------------------------------------------
of Operations and Financial Condition.............. 8
-------------------------------------
PART II - OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security
------- -------------------------------------------
Holders......................................... 11
-------
Item 6. Exhibits and Reports on Form 8-K................ 11
------ --------------------------------
SIGNATURES..................................................... 12
- ----------
- 1 -
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------- --------------------
INTRODUCTION TO THE FINANCIAL STATEMENTS
----------------------------------------
The consolidated financial statements included herein have been
prepared by Calgon Carbon Corporation (the Company), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes that the disclosures are adequate to make
the information presented not misleading when read in conjunction with the
Company's consolidated financial statements and the notes included therein for
the year ended December 31, 1996.
The financial information presented reflects all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management,necessary for a fair statement of the results for the interim
periods presented. The results for interim periods are not necessarily
indicative of results to be expected for the year.
Price Waterhouse LLP has made a review based on procedures adopted
by the American Institute of Certified Public Accountants of the unaudited
consolidated financial statements included in this filing on Form 10-Q. As
stated in its report on page 7, Price Waterhouse LLP did not audit and,
accordingly, does not express an opinion on the unaudited consolidated
financial statements. Price Waterhouse LLP is not subject to the liability
provisions of section 11 of the Securities Act of 1933 for their report on the
unaudited consolidated financial statements because their report is not a
"report" within the meaning of sections 7 and 11 of the Act.
- 2 -
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
------------------------------------------------------
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Net sales........................ $ 79,892 $ 68,989
-------- --------
Cost of products sold
(excluding depreciation)....... 49,019 43,229
Depreciation and amortization.. 5,398 4,858
Selling, general and
administrative expenses........ 13,551 11,830
Research and development
expenses....................... 1,901 1,471
-------- --------
69,869 61,388
-------- --------
Income from operations........... 10,023 7,601
Interest income.................. 99 327
Interest expense................. (929) (174)
Other income (expense)--net...... (474) (163)
-------- --------
Income before income taxes....... 8,719 7,591
Provision for income taxes....... 3,287 2,809
-------- --------
Net income....................... 5,432 4,782
Common stock dividends........... (3,174) (3,234)
Retained earnings, beginning
of period...................... 162,098 153,335
-------- --------
Retained earnings, end of
period......................... $164,356 $154,883
======== ========
Net income per common share...... $ .14 $ .12
======== ========
Weighted average shares
outstanding..................... 39,674,660 40,418,860
========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
- 3 -
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED BALANCE SHEET
--------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 10,206 $ 15,439
Receivables................................. 66,651 63,762
Inventories................................. 48,418 46,471
Other current assets........................ 10,913 9,247
-------- --------
Total current assets..................... 136,188 134,919
Property, plant and equipment, net............ 171,836 173,564
Intangibles................................... 72,092 72,658
Other assets.................................. 14,705 16,110
-------- --------
Total assets............................. $394,821 $397,251
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 7,418 $ 4,451
Accounts payable and accrued liabilities.... 34,245 35,846
Restructuring reserve....................... 7,163 7,847
Payroll and benefits payable................ 12,380 12,903
Accrued income taxes........................ 5,685 5,202
-------- --------
Total current liabilities................ 66,891 66,249
Long-term debt................................ 65,697 65,837
Deferred income taxes......................... 38,691 40,522
Other liabilities............................. 7,048 7,748
-------- --------
Total liabilities........................ 178,327 180,356
-------- --------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000
shares authorized, 41,435,960
shares issued............................. 414 414
Additional paid-in capital.................. 62,102 62,102
Retained earnings........................... 164,356 162,098
Cumulative translation adjustments.......... 9,688 12,347
-------- --------
236,560 236,961
Treasury stock, at cost, 1,761,300 shares... (20,066) (20,066)
-------- --------
Total shareholders' equity............... 216,494 216,895
-------- --------
Total liabilities and
shareholders' equity................... $394,821 $397,251
======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
- 4 -
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
------- --------
<S> <C> <C>
Cash flows from operating activities
- ------------------------------------
Net income....................................... $ 5,432 $ 4,782
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization.................. 5,398 4,884
Employee benefit plan provisions............... 121 138
Changes in assets and liabilities - net of
effects from purchase of businesses and
exchange:
(Increase) decrease in receivables......... (3,798) 2,246
(Increase) decrease in inventories......... (3,904) 1,467
(Increase) in other current assets......... (1,626) (2,074)
(Decrease) in restructuring reserve........ (90) (1,049)
(Decrease) in accounts payable
and accruals............................. (472) (4,822)
Increase (decrease) in long-term deferred
income taxes (net)....................... (56) 961
Other items--net............................... 523 (857)
------- --------
Net cash provided by
operating activities..................... 1,528 5,676
------- --------
Cash flows from investing activities
- ------------------------------------
Purchase of businesses......................... (500) (7,804)
Property, plant and equipment expenditures..... (6,082) (2,247)
Proceeds from disposals of equipment........... 180 40
------- --------
Net cash (used in) investing activities..... (6,402) (10,011)
------- --------
Cash flows from financing activities
- ------------------------------------
Net proceeds from borrowings................... 3,325 442
Common stock dividends......................... (3,174) (3,234)
------- --------
Net cash provided by (used in)
financing activities...................... 151 (2,792)
------- --------
Effect of exchange rate changes on cash.......... (510) (52)
------- --------
(Decrease) in cash and cash equivalents.......... (5,233) (7,179)
Cash and cash equivalents, beginning
of period...................................... 15,439 40,089
------- --------
Cash and cash equivalents, end of period......... $10,206 $ 32,910
======= ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
- 5 -
<PAGE>
CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
--------------------------------------
(Dollars in Thousands)
(Unaudited)
1. Inventories:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Raw materials $13,652 $16,122
Finished goods 34,766 30,349
------- -------
$48,418 $46,471
======= =======
</TABLE>
2. Supplemental Cash Flow Information:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------- -------
<S> <C> <C>
Cash paid during the period for:
Interest $ 684 $ 160
Income taxes, net of refunds $ 2,251 $ 306
------- -------
Bank debt:
Borrowings $ 7,224 $ 5,339
Repayments (4,399) (4,897
------- -------
Net proceeds from borrowings $ 3,325 $ 442
======= =======
</TABLE>
3. Common stock dividends declared during both quarters ended March 31, 1997
and 1996 were $.08 per common share.
- 6 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Calgon Carbon Corporation
We have reviewed the consolidated balance sheet of Calgon Carbon Corporation
and its subsidiaries as of March 31, 1997 and the related consolidated
statements of income and retained earnings and of cash flows for the three-
month periods ended March 31, 1997 and 1996. This financial information is
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial information for it to be
in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein), and in our report dated
February 3, 1997, except as to Note 7, which is as of March 3, 1997, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the accompanying consolidated balance sheet information as of
December 31, 1996 is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE LLP
Pittsburgh, PA
May 9, 1997
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
------ --------------------------------------------------
Operations and Financial Condition
----------------------------------
This discussion should be read in connection with the information
contained in the Consolidated Financial Statements and Selected Notes to
Financial Statements.
Results of Operations
---------------------
Consolidated net sales for the three months ended March 31, 1997 increased
by $10.9 million or 16% versus the three-month period ended March 31, 1996.
Net sales to the industrial process markets of $42.2 million for the three
months ended March 31, 1997 increased by $8.2 million or 24% over the
comparable 1996 period. This increase was primarily due to increases in the
food and chemical - pharmaceutical areas associated with the Company's
Advanced Separation Technologies business, which was acquired at the end of
1996. Net sales to the environmental markets were $33.7 million for the three
months ended March 31, 1997. This represented an increase of $2.6 million or
8% compared to the three months ended March 31, 1996. The increase resulted
from sales gains in the European municipal category and by the Advanced
Oxidative group, another 1996 acquisition, partially offset by lower initial
fills in the United States municipal category. The consumer area reported
sales of $4.0 million for the three-month period ended March 31, 1997, an
increase of $.1 million or 3% over the comparable 1996 period. Overall, the
net sales increase for the quarter resulted from businesses acquired during
1996, partially offset by a foreign currency transaction decline of $1.7
million related to the strengthening of the U.S. dollar relative to the
European currencies.
Gross profit, before depreciation, as a percentage of net sales, for the three
months ended March 31, 1997 was 38.6% compared to 37.3% for the three-month
period ended March 31, 1996. This 1.3 percentage point improvement was the
net effect of sales increases for higher margin products and reduced natural
gas costs, partially offset by lower margin equipment sales by the Company's
recently acquired businesses.
Depreciation and amortization for the three months ended March 31, 1997
increased by $.5 million due to amortization of intangibles (primarily
goodwill) associated with the Company's 1996 acquisitions.
Selling, general and administrative and research and development expenses for
the three-month period ended March 31, 1997 increased by $2.2 million versus
the comparable 1996 period primarily because of costs associated with the
acquired businesses.
During the quarter ended March 31, 1997, interest income decreased $.2 million
and interest expense increased $.8 million versus the comparable 1996 period.
This net difference of $1.0 million is related to the Company's 1996
acquisition program which resulted in lower surplus cash and the addition of
approximately $60 million of long-term debt.
The effective income tax rate for the three-month period ended March 31, 1997
was 37.7% versus 37.0% for the three months ended March 31, 1996. This
increase was the result of a shift in income to locations with a higher
statutory tax rate than in the United States.
- 8 -
<PAGE>
Financial Condition
-------------------
Working Capital and Liquidity
-----------------------------
Net cash provided by operating activities was $1.5 million for the three
months ended March 31, 1997. This represented a $4.1 million decrease from
the three-month period ended March 31, 1996. This decrease was the result of
increased working capital invested in accounts receivable, inventory, other
current assets and accounts payable.
On February 27, 1997, the Company entered into a $50 million five-year bank
credit facility. Proceeds under this credit facility were used to repay the
borrowings outstanding under the Company's one-year U.S. credit facilities.
Historically, the Company has provided sufficient cash on an annual basis for
its debt service, working capital, capital expenditures, restructuring,
dividend and treasury stock purchase requirements. Based on its present
financial position, including its cash and cash equivalents, and history of
operations, the Company anticipates that cash from operating activities
combined with other available external financial resources will provide
sufficient liquidity to fund its 1997 net cash obligations.
Restructuring of Operations
---------------------------
During 1997, the Company expects to continue the restructuring plan begun
in the fourth quarter of 1994. The restructuring reserve at March 31, 1997 of
$7.2 million relates principally to the estimated costs for the demolition of
the Brilon-Wald, Germany plant. The Company has also been approached by
potential purchasers of the facility, however, at this time a suitable buyer
has not been identified. Evaluations of demolition, disposition, site
protection and environmental costs continue and the existing reserves are
believed to be adequate.
Capital Expenditures and Investments
------------------------------------
Capital expenditures for property, plant and equipment totaled $6.1
million for the three months ended March 31, 1997 compared to expenditures of
$2.2 million for the same period in 1996. The major portion of the 1997
expenditures was related to capacity expansion and cost reduction projects at
the Big Sandy, Kentucky plant ($3.2 million), the Pearl River, Mississippi
plant ($.6 million) and at the Feluy, Belgium facility ($1.1 million).
Capital expenditures for the year 1997 are projected to be approximately $40
million.
The 1997 purchase of businesses amount of $.5 million was an increase to the
purchase price for Advanced Separation Technologies Incorporated due to a
higher level of "Adjusted Closing Net Current Assets" than stated in the
purchase agreement. The 1996 purchase of businesses amount of $7.8 million
was related to the 1996 acquisition of the perox-pure/TM/ operations of Vulcan
Peroxidation Systems, Inc. For additional information associated with these
acquisitions, please refer to the Company's consolidated financial statements
and notes included therein (specifically Number 2) for the year ended December
31, 1996.
- 9 -
<PAGE>
New Accounting Pronouncements
-----------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." SFAS No. 128 establishes new standards for computing and presenting
earnings per share. The Company is required to adopt the provisions of SFAS
No. 128 for its consolidated financial statements for the year ended December
31, 1997 and subsequent interim periods. Upon adoption, the standard also
requires the restatement of all prior period earnings per share information
presented. The adoption of SFAS No. 128 is not expected to have a material
effect on the Company's earnings per share computations or disclosures.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits
15 Letter from Price Waterhouse LLP regarding
unaudited interim financial information.
(b) Reports on Form 8-K
There were three reports on Form 8-K filed during the quarter
ended March 31, 1997:
Current Report - Dated January 15, 1997 - Acquisition of
Advanced Separation Technologies, Inc.
Amendment to Application of Report - Dated March 12, 1997
- Acquisition of Advanced Separation Technologies, Inc.
Current Report - Dated March 18, 1997 - Safe Harbor
Related To Forward Looking Events
- 11 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALGON CARBON CORPORATION
-------------------------
(REGISTRANT)
Date: May 9, 1997 By /s/R. Scott Keefer
----------------------------
R. Scott Keefer
Sr. Vice President-Finance,
Chief Financial Officer
- 12 -
<PAGE>
Exhibit No. 15
May 9, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Ladies and Gentlemen:
We are aware that Calgon Carbon Corporation has included our report dated May
9, 1997 (issued pursuant to the provisions of Statement on Auditing Standards
No. 71) in the Prospectuses constituting part of its Registration Statements
on Forms S-8 (No. 33-34019 and No. 333-01019). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,206
<SECURITIES> 0
<RECEIVABLES> 66,651
<ALLOWANCES> 0
<INVENTORY> 48,418
<CURRENT-ASSETS> 136,188
<PP&E> 310,155
<DEPRECIATION> 138,319
<TOTAL-ASSETS> 394,821
<CURRENT-LIABILITIES> 66,891
<BONDS> 0
0
0
<COMMON> 42,450
<OTHER-SE> 174,044
<TOTAL-LIABILITY-AND-EQUITY> 394,821
<SALES> 79,892
<TOTAL-REVENUES> 79,892
<CGS> 49,019
<TOTAL-COSTS> 68,869
<OTHER-EXPENSES> 474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 929
<INCOME-PRETAX> 8,719
<INCOME-TAX> 3,287
<INCOME-CONTINUING> 5,432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,432
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
