<PAGE>
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, 1996 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
400 CALGON CARBON DRIVE 15205
PITTSBURGH, PENNSYLVANIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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
------------------- -----------------------------------------
<S> <C>
Common Stock, par value $0.01 per New York Stock Exchange
share
</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 3, 1997, there were outstanding 39,674,660 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 3, 1997 was $346,022,909.
The following documents have been incorporated by reference:
<TABLE>
<CAPTION>
FORM 10-K
DOCUMENT PART NUMBER
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<S> <C>
Portions of Annual Report to Stockholders for the Year Ended
December 31, 1996................................................. II and IV
Proxy Statement filed pursuant to Regulation 14A in connection with
registrant's Annual Meeting of Stockholders to be held on April 22,
1997............................................................... III
</TABLE>
<PAGE>
INDEX
<TABLE>
<C> <S> <C>
PART I
Item 1. Business..................................................... 1
Item 2. Properties................................................... 8
Item 3. Legal Proceedings............................................ 10
Item 4. Submission of Matters to a Vote of Security Holders.......... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder 10
Matters.....................................................
Item 6. Selected Financial Data...................................... 10
Item 7. Management's Discussion and Analysis......................... 10
Item 8. Financial Statements and Supplementary Data.................. 10
Item 9. Disagreements with Accountants............................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant........... 10
Item 11. Executive Compensation....................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and 11
Management..................................................
Item 13. Certain Relationships and Related Transactions............... 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 11
8-K.........................................................
SIGNATURES................................................................ 13
</TABLE>
<PAGE>
PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The statements contained in this Annual Report on Form 10-K, specifically
those contained in Item 1 "Business" and Item 7 "Management's Discussion and
Analysis" and statements incorporated by reference into this Form 10-K from
the 1996 Annual Report to Stockholders along with statements in other reports
filed with the Securities and Exchange Commission, external documents and oral
presentations, which are not historical are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements represent Calgon Carbon Corporation's (the
"Company") present expectations or beliefs concerning future events. The
Company cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the forward-
looking statements. Those factors which specifically relate to the Company's
business include the following: worldwide economy, competition, worldwide
environmental and drinking water regulations, weather conditions, customers'
growth, productivity improvements at its locations and new technologies that
could affect the use of the Company's products.
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 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 1990, the Company purchased the
assets of TMPC, Inc. (Vara International) in order to strengthen its vapor
phase equipment business. During the fourth quarter 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. In February 1996, the
Company acquired the business and operating assets of the perox-pure(TM)
operations of Vulcan Peroxidation Systems, Inc. and in June 1996 also acquired
the common stock of Solarchem Enterprises, Inc. Both of these transactions
were accounted for as purchases and provided the Company with an entry into
the oxidative water treatment market. In December 1996, the Company acquired
the common stock of Charcoal Cloth (International) Limited and Charcoal Cloth
Limited. This acquisition was also accounted for as a purchase. The acquired
companies produce activated carbon in cloth form for odor control in medical
and industrial applications where granular activated carbon is not feasible.
Also in December 1996, the Company purchased the common stock of Advanced
Separation Technologies Incorporated. This Company designs and assembles
proprietary separation equipment for use in the industrial process and
environmental markets.
Products and Services:
Calgon Carbon is engaged in the manufacture and marketing of products and
services employed for separation, concentration or purification of liquids and
gases.
The Company's activities consist of four areas: (1) activated carbons--the
production and sale of a broad range of untreated, impregnated or acid washed
carbons, in either powdered, granular, pellet or cloth form; (2) services--the
provision of carbon reactivation, handling and transportation and on-site
purification, separation and concentration services; (3) systems--the design,
assembly and sales of systems that employ activated carbon, advanced
oxidation, ion exchange or chromatographic separation technology for
purification, separation and concentration; and (4) charcoal--the production
and sale of charcoal to consumer markets in Germany.
1
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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(R).
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 produces activated carbon in cloth form, using rayon as the
primary raw material. The Company also markets other activated carbons
including products based on coconut or wood which it purchases from
independent suppliers.
Activated carbons are produced in granular, pellet, powdered and cloth
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.
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. These
services include both activated carbon and advanced oxidation processes. The
Company maintains an inventory of mobile adsorption equipment which can be
dispatched on twenty-four hours 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.
2
<PAGE>
Systems. In 1978, the Company began marketing equipment which employs
activated carbon in various purification, separation and concentration
processes, as a means for expanding the market for its products and for
revenue growth. In 1996, the Company added, through acquisition, the
manufacture and marketing of advanced oxidation equipment, continuous ion
exchange and chromatographic separation equipment.
The Company sells a line of adsorption and filtration equipment to clean
water from contaminated aquifers, industrial wastewater and surface
impoundments, to eliminate odors from municipal wastewater plants
(Phoenix(TM)) and other equipment to purify gases and liquids in industrial
process applications. Equipment for these applications can be custom designed
and fabricated for a specific project or can be drawn from the Company's
inventory. 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(TM)). The Company also designs and markets systems that
employ advanced oxidation technology, specifically ultraviolet irradiation in
conjunction with hydrogen peroxide and/or other oxidizing agents, to destroy
waterborne organic contaminants. Through its wholly owned subsidiary, Advanced
Separation Technologies Incorporated (AST), the Company also designs and
markets proprietary ISEP--(Ionic Separator) continuous ion exchange units for
separation of organic and inorganic compounds, principally for process
applications in the food, pharmaceutical and biotechnology industries. AST
also designs and markets the CSEP--(Chromatographic Separator), a continuous
chromatography separation system for applications in the food, pharmaceutical
and fine chemicals market segments.
Charcoal. This product is manufactured in Germany and used for barbecue
grilling by consumers and restaurants.
Markets:
The Company offers its activated carbon products and services, as well as
its adsorption systems (activated carbon and ion exchange) to the Industrial
Process Market and the Environmental Market. Its advanced oxidation systems
are used primarily in the Environmental Market with increasing activity in the
process water market. Applications involving advanced oxidation include the
treatment of ultra pure water for the semi-conductor industry and the
recycling of heavy water in the nuclear industry. Industrial process
applications include purification, catalysis and product recovery within the
food, chemical, pharmaceutical, biotechnology, medical, 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.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL NET SALES
---------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Industrial Process Market:
Food.................................................. 14% 12% 12%
Original equipment manufacturers...................... 16 10 9
Chemical and pharmaceutical........................... 7 14 14
Other................................................. 10 11 10
----- ----- -----
Subtotal Industrial................................. 47 47 45
----- ----- -----
Environmental Market:
Industrial............................................ 26 25 27
Municipal............................................. 20 21 21
----- ----- -----
Subtotal Environmental.............................. 46 46 48
----- ----- -----
Consumer Market:........................................ 7 7 7
----- ----- -----
Total net sales..................................... 100% 100% 100%
===== ===== =====
</TABLE>
3
<PAGE>
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 revenue, 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; purification of citric acid, artificial sweeteners, soya oils,
protein hydrolysates and wine and spirits; process water treatment in the
beverage industry; and decaffeination of coffee utilizing the water process.
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.
Other purchasers in the market include manufacturers of home water filters,
spill cleanup equipment, commercial and residential water filters, solvent
recovery equipment 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 liquefied
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.
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.
4
<PAGE>
Activated carbon is also used in the chemical, pharmaceutical and refining
industries 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 medium 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; Tucson, Arizona; Richmond, California; Lakeland,
Florida; Vero Beach, Florida; 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 also
has a sales office in Toronto, Ontario, Canada. 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.
The following table details total net sales to customers by geographic areas
in the past three years:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL NET SALES
---------------------------------
1996 1995 1994
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<S> <C> <C> <C>
United States................................. 57% 54% 56%
Europe........................................ 34 37 35
Other......................................... 9 9 9
---- ---- ----
Total net sales............................ 100% 100% 100%
==== ==== ====
</TABLE>
Refer to Note 16 to the Consolidated Financial Statements for a discussion
of other financial information classified by major geographic areas in which
the Company operates.
5
<PAGE>
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 1996. 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, a
subsidiary 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.
In North America, the Company has competition for its advanced oxidation
product line from products not involving oxidation and from a number of
smaller firms offering some form of advanced oxidation. In Europe, competition
comes primarily from manufacturers of ozone generation equipment, principally
Ozonia, a division of Lyonnaise des Eaux, Trailigaz, a subsidiary of Compagnie
General des Eaux and Wedeco, a German-based supplier of ozone and
ozone/ultraviolet based systems.
In the advanced separation technologies market, competitors range from a few
large companies such as U.S. Filter and Applexion to hundreds of small local
companies, with a few competitors providing a full range of
filtration/separation equipment, technologies and service.
There are a number of competitors in the consumer charcoal market who are
located in Eastern European countries, Spain, Portugal, South Africa and South
America. These competitors offer inexpensive, low-quality products to the
market.
Capital Expenditures:
In 1996, the Company invested $14.4 million for capital expenditures. The
Company's 1997 capital expenditure budget approximates $40.0 million and
includes carbon production capacity increases at the Big Sandy, Kentucky,
Pearl River, Mississippi and Feluy, Belgium plants and an improved coal
handling system at the Big Sandy, Kentucky plant. 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
both long-term and annual supply contracts. The Company purchases the coal
used in its Belgian production facility from a number of coal companies
throughout the world under similar arrangements. The Company purchases beech
wood for its German charcoal operations through
6
<PAGE>
long-term contracts and on the open market, primarily waste slabs from saw
mills or as off-cuts from the furniture industry. Most of the wood is sourced
in Germany and the supply of wood is adequate.
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 Company purchases hydrogen peroxide via long-term fixed-price contracts.
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 purchase of key equipment components for all areas is coordinated
through agreements with various suppliers.
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 63 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
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 new and improved methods of
activated carbon manufacturing, new and improved activated carbons for
applications as physical adsorbents and adsorptive catalysts and other
emerging purification/separation/concentration technologies. The Centaur(R)
product line represents a new family of activated carbons developed for
adsorptive catalytic applications.
Research and development expenses were $6.5 million, $5.6 million and $6.3
million in 1996, 1995 and 1994, respectively.
Patent and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 70 United States patents and 98 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.
7
<PAGE>
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 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, 1996, the Company employed 1,297 persons on a full-time
basis, 774 of whom were salaried production, office, supervisory and sales
personnel. The 302 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, 2001 with respect to the Catlettsburg
facility. The 98 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, 1998. The 69 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
54 hourly employees at its three non-union United Kingdom facilities.
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. The Company leases four
production facilities as follows: Lakeland, Florida; Tucson, Arizona; Markham,
Ontario, Canada; Houghton Le Spring, England.
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.
8
<PAGE>
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 carbons. 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 Tucson, Arizona equipment and assembly plant occupies approximately two
acres. The site includes a 15,000 square foot building with the remaining site
space used for service equipment storage. The plant designs and assembles
fully engineered advanced oxidative process purification equipment.
The Markham, Ontario, Canada assembly facility is housed in a 19,000 square
foot building near Toronto, Ontario, Canada. Assembly of ultraviolet oxidation
equipment takes place at this location. In addition, this facility houses a
testing laboratory and pilot plant operations.
The Lakeland, Florida ion separation equipment plant occupies a 26,400
square foot building on approximately one and a half acres of property. The
primary operations are the assembly of both small size ion exchange systems
and components of larger ion exchange systems, plus the operation of pilot
plant testing of customer ion exchange processes.
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. The Company has been approached by potential purchasers of this
facility; however, at this time a suitable buyer has not been identified.
The Houghton Le Spring plant, located near the city of Newcastle, England,
occupies approximately two acres. Operations at the plant include the
manufacture of woven and knitted activated carbon textiles and their
impregnation and lamination.
The Company believes that the plants are adequate and suitable for its
operating needs.
9
<PAGE>
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 1996.
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 36 of the Annual Report to Stockholders
for the Year Ended December 31, 1996 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 36 of the Annual
Report to Stockholders for the Year Ended December 31, 1996 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 20 of the Annual Report to Stockholders for the
Year Ended December 31, 1996 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, 1996, 1995 and 1994 required by this Item 8 appear on pages
21 through 36 of the Annual Report to Stockholders for the Year Ended December
31, 1996 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 1997 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 1997 Annual Meeting of its Stockholders.
10
<PAGE>
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 Management and
Certain Beneficial Owners" in the Company's Proxy Statement for the 1997 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 1997 Annual Meeting of its Stockholders.
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 ENDED
FINANCIAL STATEMENTS AND RELATED REPORT DECEMBER 31, 1996
--------------------------------------- ------------------
<S> <C>
Report of Independent Accountants, dated February 3,
1997 except as to Note 7, which is as of March 3, 1997. 20
Consolidated Statement of Income for the Years Ended
December 31, 1996, 1995 and 1994....................... 21
Consolidated Balance Sheet as of December 31, 1996 and
1995................................................... 22
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995
and 1994............................................... 23
Consolidated Statement of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994........... 24
Notes to the Consolidated Financial Statements.......... 25-35
Quarterly Financial Data--Unaudited..................... 36
C.Exhibits
<CAPTION>
PAGE
----
<C> <S> <C>
3.1 Amended Certificate of Incorporation.............. (d)
3.2 By-laws of the Registrant......................... (a)
4.0 Rights Agreement.................................. (f)
9.1 Voting Trust Agreement............................ (b)
9.2 Voting Trust Certificate of Amendment............. (c)
10.1* Calgon Carbon Corporation Stock Option Plan, as
Amended........................................... (e)
10.3* Officers Incentive Plan of Calgon Carbon
Corporation, as Amended........................... (h)
10.4* 1993 Non-Employee, Directors' Stock Option Plan... (g)
21.0 The wholly owned subsidiaries of the Company are
Chemviron Carbon GmbH, a German corporation;
Calgon Carbon Canada, Inc., a Canadian
corporation; Chemviron Carbon Ltd., a United
Kingdom corporation; Calgon Carbon Investments
Inc., a Delaware corporation; Solarchem
Environmental Systems Inc., a Nevada corporation;
Charcoal Cloth (International) Limited, a United
Kingdom corporation; Charcoal Cloth Limited, a
United Kingdom corporation; Advanced Separation
Technologies Incorporated, a Florida corporation;
and Calgon Carbon Export Inc., a Barbados
corporation. In addition, the Company owns 50% of
Calgon Far East Co. Ltd., a Japanese corporation.
23.0 Consent of Independent Accountants................ (15)
</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.
11
<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 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(e) 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.
(f) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(g) Incorporated herein by reference to Exhibit 10.4 to the Company's report
on Form S-8 dated February 16, 1996.
(h) 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 1997 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, 1996.
12
<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
March 17, 1997 /s/ COLIN BAILEY
- ------------------ By___________________________________
(Date) COLIN BAILEY
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 17, 1997
- --------------------------- Officer, Director
COLIN BAILEY
/s/ R. Scott Keefer Senior Vice President, March 17, 1997
- --------------------------- Chief Financial and
R. SCOTT KEEFER Accounting Officer
/s/ Thomas A. McConomy Director, Chairman of the March 17, 1997
- --------------------------- Board
THOMAS A. MCCONOMY
/s/ Robert W. Cruickshank Director March 17, 1997
- ---------------------------
ROBERT W. CRUICKSHANK
/s/ Arthur L. Goeschel Director March 17, 1997
- ---------------------------
ARTHUR L. GOESCHEL
/s/ Nick H. Prater Director March 17, 1997
- ---------------------------
NICK H. PRATER
/s/ Seth E. Schofield Director March 17, 1997
- ---------------------------
SETH E. SCHOFIELD
/s/ Harry H. Weil Director March 17, 1997
- ---------------------------
HARRY H. WEIL
/s/ Robert L. Yohe Director March 17, 1997
- ---------------------------
ROBERT L. YOHE
/s/ Roger H. Zanitsch Director March 17, 1997
- ---------------------------
ROGER H. ZANITSCH
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NO. DESCRIPTION FILING
------- ----------- --------------
<C> <S> <C>
3.1 Amended Certificate of Incorporation................. (d)
3.2 By-laws of the Registrant............................ (a)
4.0 Rights Agreement..................................... (f)
9.1 Voting Trust Agreement............................... (b)
9.2 Voting Trust Certificate of Amendment................ (c)
Calgon Carbon Corporation Stock Option Plan, as
10.1* Amended.............................................. (e)
Officers Incentive Plan of Calgon Carbon Corporation,
10.3* as Amended........................................... (h)
10.4* 1993 Non-Employee, Directors' Stock Option Plan...... (g)
21.0 The wholly owned subsidiaries of the Company are
Chemviron Carbon GmbH, a German corporation; Calgon
Carbon Canada, Inc., a Canadian corporation;
Chemviron Carbon Ltd., a United Kingdom corporation;
Calgon Carbon Investments Inc., a Delaware
corporation; Solarchem Environmental Systems Inc., a
Nevada corporation; Charcoal Cloth (International)
Limited, a United Kingdom corporation; Charcoal Cloth
Limited, a United Kingdom corporation; Advanced
Separation Technologies Incorporated, a Florida
corporation; and Calgon Carbon Export Inc., a
Barbados corporation. In addition, the Company owns
50% of Calgon Far East Co. Ltd., a Japanese
corporation.......................................... Filed herewith
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 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(e) 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.
(f) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(g) Incorporated herein by reference to Exhibit 10.4 to the Company's report
on Form S-8 dated February 16, 1996.
(h) 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 1997 Annual Meeting of its Stockholders.
* Executive compensation plans.
14
<PAGE>
Exhibit 13
Management's Discussion and Analysis
Calgon Carbon Corporation
Overview
Industry
Economic conditions continued to improve in the United States during 1996 as
demand for activated carbon products remained strong. The European economy
remained stable during the year.
In the United States, capacity utilization was high and prices were increased.
The economy in Europe prevented any significant price increases.
The Company
The Company's business followed the economic patterns established in the
industry but there were three factors that affected its 1996 results. The
Company's revenue comparisons continue to reflect the loss of sales of products
manufactured at the Brilon-Wald, Germany plant, which was closed in 1995, and
equipment sales reductions due primarily to the continuation of the Company's
decision to use its resources to pursue more profitable activities. Sales
revenues in 1996 were affected in a positive manner by the acquisition program
which was initiated during the year.
In the United States, volume increases of approximately 7% were achieved for
activated carbon products and 1% in the service business. Equipment sales
(exclusive of the acquisitions) decreased by 28%. Price increases for activated
carbon products represented an increase of 1%.
In Europe, activated carbon products experienced a volume loss of approximately
22%, due primarily to the closing of the Brilon-Wald, Germany plant, and the
equipment business volume was down by 22%. However, service volume increased by
24%.
As a result of these activities, consolidated revenues in 1996 were comparable
to 1995.
During 1996, the Company acquired four businesses. These acquisitions will
provide Calgon Carbon with technologies that are complementary to its existing
expertise and will have a significant impact on the Company's future. (See Note
2 to the Consolidated Financial Statements).
The Company expects activated carbon and service sales to continue to increase
in volume in 1997. This will result in an improved percentage increase because
the comparison will no longer be impacted by the loss of products associated
with the closed plant. Price increases are also expected to be achieved at a
similar rate as in 1996. The Company has and will continue to pursue only high
margin equipment business including equipment sales resulting from the recent
acquisitions.
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.
Progress is being achieved on all of the 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.
Beginning in 1997, the Company will initiate the "Shareholder Value Added"
technique of measuring progress towards its goals. This performance measurement
method compares cash-based operating results to the cost of capital employed to
determine if value is being added to the Company.
Results of Operations
1996 Versus 1995
Consolidated net sales in 1996 decreased by $1.7 million or 0.6% versus 1995.
This decrease was the result of decreases for carbon, equipment and charcoal of
3.9%, 10.7% and 4.4%, respectively, partially offset by an 11.7% increase for
service. The net sales decrease was primarily related to declines in the
European markets resulting from the closure of the Brilon-Wald, Germany plant in
1995 and the strengthening of the U.S. dollar relative to the European
currencies which resulted in a negative effect on revenues of $3.9 million. On a
market basis, sales to the industrial process area decreased by $1.0 million or
0.7% and sales of charcoal decreased by $.8 million or 4.4%. Sales to the
environmental category were flat. The reduction in the industrial process
category was the result of increases in the worldwide food category (primarily
sweeteners) and in the United States original equipment manufacturers area
more than offset by declines in the worldwide chemical pharmaceutical category,
the European original equipment manufacturer area and in the domestic cigarette
and worldwide energy categories. The consistent results in the environmental
area were due to decreases in the European municipal market and reduced
equipment sales in the industrial category offset by sales in the recently
acquired oxidation technologies business. The consumer charcoal area decrease
was due to unfavorable barbecuing weather conditions in Germany.
17
<PAGE>
Gross profit before depreciation as a percentage of net sales was 37.8% in 1996
versus 36.9% in 1995. The improvement was the result of increased prices, sales
of higher valued products and reduced manufacturing costs, partially offset by
increased natural gas costs and higher costs for coconut-based products.
Depreciation increased by $.6 million in 1996 due to normal, ongoing capital
spending.
Selling, general and administration expenses increased by $.1 million in 1996.
This increase was due to increases associated with the recently acquired
oxidation technologies business partially offset by personnel related decreases,
including a $.9 million reduction in the provision for the Employee Growth
Sharing Plan.
Research and development expenses, as a percentage of sales, were 2.2% in 1996
compared to 1.9% in 1995. The increase of $.9 million resulted from personnel
additions and the new oxidation technologies business.
Interest income increased by $.1 million in 1996 due to improved rates of
return. Interest expense increased in 1996 by $.1 million due to increased debt
incurred in June 1996 to fund the acquisition of the oxidation technologies
business.
Other (expense)-net reported a favorable variation in 1996 of $1.3 million. This
favorable variation was the result of net foreign currency transaction gains in
1996 versus net foreign currency transaction losses in 1995.
The effective tax rate in 1996 was 36.0% compared to an effective tax rate of
33.8% in 1995. This 2.2 percentage point increase was primarily due to reduced
state income tax benefits and to reduced research and development credits.
1995 Versus 1994
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.
Gross profit before depreciation as a percentage of net sales was 36.9% in 1995
versus 35.3% in 1994. The improvement was the result of reduced production costs
and sales of higher valued products.
Depreciation expense decreased by $.6 million in 1995 due to the closing of the
Brilon-Wald, Germany plant and the writeoff of unproductive fixed assets in
1994.
Selling, general and administrative expenses increased by $3.7 million in 1995.
The 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.
Research and development expenses were 1.9% of net sales in 1995 versus 2.3% of
net sales in 1994.
Interest income increased by $.4 in 1995 because of increased investable cash
and improved rates of return.
The effective tax rate for 1995 was 33.8%.
The 1994 tax rate reflected a benefit of 53.7% and 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 1995 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 Company does not believe that inflation has had a significant effect on its
business during 1996 or 1995.
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.
After idling certain producing units at several
18
<PAGE>
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 3 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 United States. The closing of the Brilon-Wald plant did not
materially affect consolidated sales revenues in 1995 and the profitability of
its German operations improved. In 1996, consolidated sales revenues were
adversely impacted by $12.0 million due to the loss of products previously
manufactured only at Brilon-Wald. The Company also increased utilization of its
other manufacturing facilities.
During 1997, the Company expects to complete the restructuring plan begun in the
fourth quarter of 1994. The restructuring reserve at December 31, 1996 of $7.8
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. Cash outlays for the remaining restructuring costs will be paid from
internally generated funds or available external financial sources.
Working Capital and Liquidity
Net cash provided by operating activities was $46.4 million in 1996, which was
generated primarily from net earnings before non-cash charges for depreciation
and amortization and decreased working capital.
During 1996, the Company increased its United States revolving credit facilities
from $20.0 million to $50.0 million. These facilities expire in April 1997 and
in May 1997. At December 31, 1996, the Company had $50.0 million outstanding
under these credit agreements. Subsequent to December 31, 1996, the Company
entered into a five-year $50.0 million bank credit facility and amounts
outstanding under the United States revolving credit facilities were refinanced
under this five-year credit facility. This new credit agreement requires the
Company to comply with certain financial covenants for consolidated debt-to-
capital and interest expense coverage. Interest rate options are comparable to
the Company's existing revolving credit facilities. An annual commitment fee is
required on the total amount of the facility. The Company also maintains a $16.1
million (25 million deutsche mark) credit facility with a German bank with a
duration of "until further notice." At December 31, 1996, the Company had $3.9
million outstanding under this facility.
During 1996, the Company spent approximately $92.6 million for acquisitions. The
acquisitions were financed with a combination of internal and external financing
resources. The Company borrowed $50.0 million under short-term revolving credit
facilities, $10.2 million ($14 million Canadian dollars) under a five-year term
loan and $3.9 million (6 million deutsche mark) under the German credit facility
to partially fund these acquisitions. (See Note 2 to the Consolidated Financial
Statements).
During 1996, the Company continued its common stock repurchase plan and acquired
755,200 shares at a cost of $7.7 million. These purchases were made pursuant to
a plan, covering up to 2 million shares or up to 5% of the Company's common
stock, authorized by the Board of Directors in July 1993. As of December 31,
1996, the Company has acquired 1,761,300 shares for a total cost of $20.1
million. Further purchases will be made at such times as deemed appropriate by
the Company's management.
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. Future dividends will depend on the Company's
operating results, financial condition, cash requirements of its business,
future prospects and other factors considered relevant by the Board of
Directors. At the February 1997 Board of Directors meeting, the regular dividend
of $.08 per common share was declared and will be paid on April 1, 1997.
Based upon its present financial condition, including its cash and cash
equivalents, and history of operations, the Company anticipates that net cash
provided from 1997 operating activities combined with other available external
financial resources will provide sufficient liquidity to fund operating and
capital expenditures requirements and to meet its restructuring obligations,
debt service, stock repurchase and dividend requirements.
Capital Expenditures and Investments
Capital expenditures were $14.4 million in 1996, $12.7 million in 1995 and $7.1
million in 1994. The
19
<PAGE>
major 1996 spending was associated with capacity expansions
at the Big Sandy, Kentucky plant ($6.0 million) and at the Feluy, Belgium
facility ($1.2 million) and for domestic service customer capital ($2.9
million). 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 1997 are
projected to be approximately $40.0 million and are to include carbon production
capacity increases at the Big Sandy, Kentucky; Pearl River, Mississippi; and
Feluy, Belgium plants and an improved coal handling system at the Big Sandy,
Kentucky plant.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, 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.
/s/ Price Waterhouse LLP
Pittsburgh, Pennsylvania
February 3, 1997, except as to
Note 7, which is as of
March 3, 1997.
20
<PAGE>
Consolidated Statement of Income
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in thousands except per share data) 1996 1995 1994
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Net Sales $290,196 $291,898 $274,244
- -------------------------------------------------------------------------------------------------------------------------
Cost of products sold (excluding depreciation) 180,600 184,219 177,370
Depreciation 19,049 18,450 19,027
Selling, general and administrative expenses 50,277 50,195 46,522
Research and development expenses 6,518 5,593 6,291
Restructuring charges - - 41,761
- -------------------------------------------------------------------------------------------------------------------------
256,444 258,457 290,971
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 33,752 33,441 (16,727)
Interest income 1,551 1,474 1,079
Interest expense (752) (620) (752)
Other (expense)-net (742) (2,041) (2,186)
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 33,809 32,254 (18,586)
Provision (benefit) for income taxes 12,171 10,909 (9,977)
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 21,638 $ 21,345 $ (8,609)
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $.54 $.53 $(.21)
- -------------------------------------------------------------------------------------------------------------------------
Weighted average shares, in thousands 40,267 40,419 40,637
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
Consolidated Balance Sheet
Calgon Carbon Corporation
<TABLE>
<CAPTION>
December 31
(Dollars in thousands) 1996 1995
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 15,439 $ 40,089
Receivables 63,762 55,779
Inventories 46,471 43,643
Other current assets 9,247 8,518
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 134,919 148,029
Property, plant and equipment, net 173,564 175,952
Intangibles 72,658 111
Other assets 16,110 13,909
- -------------------------------------------------------------------------------------------------------------------------
Total assets $397,251 $338,001
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Long-term debt due within one year $ 4,451 $ 8,514
Accounts payable and accrued liabilities 35,846 28,252
Restructuring reserve 7,847 11,616
Payroll and benefits payable 12,903 13,546
Accrued income taxes 5,202 1,517
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 66,249 63,445
Long-term debt 65,837 5,608
Deferred income taxes 40,522 41,959
Other liabilities 7,748 8,802
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 180,356 119,814
- -------------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000 shares
authorized, 41,435,960 and 41,424,960 shares issued 414 414
Additional paid-in capital 62,102 61,986
Retained earnings 162,098 153,335
Cumulative translation adjustments 12,347 14,780
- -------------------------------------------------------------------------------------------------------------------------
236,961 230,515
Treasury stock, at cost, 1,761,300 and 1,006,100 shares (20,066) (12,328)
- -------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 216,895 218,187
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $397,251 $338,001
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
Consolidated Statement of Cash Flows
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in thousands) 1996 1995 1994
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) $ 21,638 $ 21,345 $ (8,609)
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 19,334 18,527 19,555
Employee benefit plan provisions 523 448 695
Changes in assets and liabilities-net of effects from
purchase of businesses, restructuring and exchange:
(Increase) decrease in receivables 3,957 (3,957) (1,957)
(Increase) decrease in inventories (966) (205) 1,855
(Increase) decrease in other current assets (240) 2,761 1,239
Increase (decrease) in restructuring reserve (3,006) (12,850) 21,967
Increase in accounts payable and accruals 4,933 3,362 4,850
Increase (decrease) in long-term deferred income
taxes (net) 1,919 7,226 (14,838)
Other items-net (1,723) (1,051) (405)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 46,369 35,606 43,562
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of businesses (92,633) - -
Property, plant and equipment expenditures (14,358) (12,676) (7,113)
Proceeds from disposals of equipment 1,006 698 1,357
- -------------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (105,985) (11,978) (5,756)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from borrowings 56,071 3,999 598
Treasury stock purchases (7,738) - (10,713)
Common stock dividends (12,733) (32,335) (6,493)
Other 116 - 225
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 35,716 (28,336) (16,383)
- -------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (750) (579) 2,161
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (24,650) (5,287) 23,584
Cash and cash equivalents, beginning of period 40,089 45,376 21,792
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 15,439 $ 40,089 $ 45,376
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
Consolidated Statement of Shareholders' Equity
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Common Additional Cumulative Treasury Stock
Shares Common Paid-in Retained Translation Sub- --------------------
(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, 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 ($.80 per share) - - - (32,335) - (32,335) - - (32,335)
Translation adjustment - - - - 2,030 2,030 - - 2,030
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 41,424,960 414 61,986 153,335 14,780 230,515 1,006,100 (12,328) 218,187
- ------------------------------------------------------------------------------------------------------------------------------------
1996
- ----
Net income - - - 21,638 - 21,638 - - 21,638
Employee stock plans 11,000 - 116 - - 116 - - 116
Common stock dividends
Cash ($.32 per share) - - - (12,875) - (12,875) - - (12,875)
Translation adjustment - - - - (2,433) (2,433) - - (2,433)
Treasury stock purchased - - - - - - 755,200 (7,738) (7,738)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 41,435,960 $414 $62,102 $162,098 $ 12,347 $236,961 1,761,300 $(20,066) $216,895
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
Notes to the Consolidated Financial Statements
Calgon Carbon Corporation
- --------------------------------------------------------------------------------
1. Statement of Accounting Policies
Operations
The Company's operations are principally conducted in one business segment, the
production, design and marketing of products and services specifically developed
for the purification, separation and concentration of liquids and gases. The
Company's 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.,
Solarchem Environmental Systems Inc., Charcoal Cloth (International) Limited,
Charcoal Cloth Limited, Advanced Separation Technologies Incorporated and the
Company's foreign sales corporation. A portion of the Company's international
operations in Europe is owned directly by the Company and is 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
primarily determined using the last in, first out (LIFO) 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 furniture and vehicles.
Intangibles Resulting from Business Acquisitions
Intangible assets resulting from business acquisitions principally consist of
the excess of the acquisition cost over the fair value of the net assets of
businesses acquired (goodwill). Goodwill is amortized on a straight-line basis
over 40 years. Other intangible assets are amortized on a straight-line basis
over their estimated useful lives.
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.
Use of Estimates
The preparation of financial statements in conformity 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.
25
<PAGE>
- -------------------------------------------------------------------------------
2. Acquisitions
In February 1996, the Company acquired the business and operating assets of the
perox-pure/TM/ operations of Vulcan Peroxidation Systems, Inc. The purchase
provided the Company with entry into the oxidative water treatment market. The
technology is complementary to the Company's existing carbon adsorption service.
The business has equipment assembly and office facilities in Tucson, Arizona.
The acquisition has been accounted for by the purchase method and is included in
the consolidated financial statements from February 20, 1996, the effective date
of the acquisition. The cost was approximately $7,528,000 in cash.
In June 1996, Calgon Carbon Canada, Inc. acquired the common stock of Solarchem
Enterprises Inc. This purchase, along with the "perox-pure/TM/" purchase,
broadened the Company's coverage in the oxidative water treatment market. This
business has assembly, research and office space in Markham, Ontario, Canada.
The acquisition has been accounted for by the purchase method and is included in
the consolidated financial statements from June 3, 1996, the effective date of
the acquisition. The cost was $10,998,000 in cash.
In December 1996, Chemviron Carbon Ltd. acquired the common stock of Charcoal
Cloth (International) Limited and Charcoal Cloth Limited from CCL Holdings
Limited. The acquired companies, with manufacturing and office facilities, are
near Newcastle, England and produce activated carbon in cloth form for odor
control in medical and industrial applications. The textile properties are
suitable for applications where granular activated carbon is not feasible.
The acquisition has been accounted for by the purchase method and is included in
the consolidated financial statements effective December 30, 1996. The cost was
approximately $4,114,000 in cash.
On December 31, 1996, the Company purchased the common stock of Advanced
Separation Technologies Incorporated (AST) from Progress Capital Holdings, Inc.
and Potomac Capital Investment Corporation. AST is headquartered
in Lakeland, Florida, where there are equipment assembly, research and office
facilities. AST designs and assembles proprietary separation equipment that
employs continuous ion exchange and continuous chromatography technologies. AST
serves both the industrial process and environmental markets worldwide and is a
leader in supplying separation systems to the lysine and corn syrup industries.
The acquisition has been accounted for by the purchase method and is included in
the consolidated financial statements effective December 31, 1996. The cost was
approximately $70,762,000 in cash.
The application of purchase accounting to the acquisitions resulted in
recognization of goodwill of $68,813,000 and other intangible assets of
$3,907,000.
Except for the acquisition of AST, the results of operations on a pro forma
basis for the Company's other acquisitions are not presented as the effects are
not material to the consolidated financial statements individually or in the
aggregate.
Unaudited pro forma results of operations for the years ended December 31, 1996
and 1995, assuming the AST acquisition had occurred on January 1, 1995 are as
follows:
<TABLE>
<CAPTION>
Unaudited
Year Ended December 31
(Dollars in thousands except per share data) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Net sales $317,514 $313,374
Net income $ 21,411 $ 19,796
Net income per common share $ .53 $ .49
- --------------------------------------------------------------------------------
</TABLE>
The pro forma information does not purport to be indicative of the results that
actually would have been obtained if the operations had been combined during the
entire period presented and is not intended to be a projection of future
results.
- --------------------------------------------------------------------------------
3. Restructuring Charges
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
26
<PAGE>
involved with this plant. In accordance with the Company's plan, the Brilon-Wald
plant was closed and employees separated in 1995. With the exception of the
writedowns of assets, these restructuring charges resulted in cash outlays.
The following table sets forth the Company's restructuring charges for the year
ended December 31, 1994 (there were no such charges in 1995 or 1996):
<TABLE>
<CAPTION>
(Thousands) Year Ended December 31, 1994
<S> <C>
- ---------------------------------------------------------------------------------
Employee separations $10,480
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
=================================================================================
</TABLE>
The reserve balance for demolition, disposition and environmental costs totaled
$7,847,000 at December 31, 1996 and $9,306,000 at December 31, 1995. The reserve
balance for employee separations at December 31, 1995 was $1,900,000.
There were 156 and 21 employees terminated in 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
4. Inventories
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Raw materials $16,122 $13,960
Finished goods 30,349 29,683
- -------------------------------------------------------------------------------
Total $46,471 $43,643
================================================================================
</TABLE>
Approximately 74% and 71% of total inventories at December 31, 1996 and 1995,
respectively, are valued using the LIFO method. The LIFO carrying value of
inventories exceeded the related current cost by $3,473,000 and $4,232,000 at
December 31, 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
5. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
Land and improvements $ 12,744 $ 13,054
Buildings 21,823 21,499
Machinery and equipment 266,748 253,608
Furniture and vehicles 8,592 8,236
- --------------------------------------------------------------------------------
$ 309,907 $ 296,397
Less accumulated depreciation (136,343) (120,445)
- --------------------------------------------------------------------------------
Net $ 173,564 $ 175,952
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6. Intangibles
The following summarizes intangible assets, net of accumulated amortization of
$363,000 and $65,000 at December 31, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------
Goodwill $68,663 $ -
Other 3,995 111
- ----------------------------------------------------------------------------------
Total $72,658 $111
==================================================================================
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
7. Long-Term Debt
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------
United States credit facilities $50,000 $ -
Term loan 10,220 -
Pollution control debt
Ashland, Kentucky bonds 5,100 5,100
German pollution control loans 469 737
German credit facility 3,862 8,285
Other 637 -
- --------------------------------------------------------------------------------
Total $70,288 $14,122
Less current maturities of long-term debt (4,451) (8,514)
- --------------------------------------------------------------------------------
Net $65,837 $ 5,608
================================================================================
</TABLE>
United States Credit Facilities
The Company's two credit facilities totalling $50 million expire in April and
May of 1997. An annual facility fee is paid on the unused portion of each credit
line. The facilities provide for interest rates based upon the banks' Prime Rate
with other interest options available. In March 1997, borrowings outstanding
under these loans were refinanced with a $50 million five-year unsecured bank
credit facility expiring March 2002. This five-year credit facility requires the
Company to comply with certain financial covenants for consolidated debt-to-
capital and interest expense coverage. Interest rate options are comparable to
the Company's existing United States credit facilities. An annual commitment fee
is required on the total amount of the facility. As a result of the addition of
the new credit facility, short-term obligations due under the United States
credit facilities were reclassified as long-term as of December 31, 1996. The
weighted average interest rate on the loans outstanding was 5.9%.
Term Loan
In June 1996, the Company entered into a five-year unsecured $10,220,000 ($14
million Canadian dollars) term loan with a Canadian bank. Interest rates are
based upon the bank's Prime Rate or a Bankers Acceptance Rate. As of December
31, 1996, the interest rate was 3.4%.
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, 1996, the Company paid interest on these bonds at an average
rate of 3.7%. 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.
German Credit Facility
The Company maintains a bank credit facility in Germany which provides for
borrowings up to $16,100,000 (25 million deutsche mark). The facility has no
set maturity date and is made available on an "until further notice basis."
No commitment fee is required on the unused portion of the credit line. Loans
bear interest at the German Bank Rate with other interest options available.
As of December 31, 1996, the interest rate was 4.1% on the loan 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,
1996, the Company was in compliance with all financial covenants relating to the
credit facilities in the United States.
The German credit facility and the term loan have no financial covenants.
Maturities of Debt
The Company is obligated to make principal payments on debt outstanding at
December 31, 1996 of $4,451,000 in 1997, $141,000 in 1998, $135,000 in 1999,
$47,000 in 2000 and $10,220,000 in 2001.
28
<PAGE>
- --------------------------------------------------------------------------------
8. 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 noncancellable lease terms in excess of one year are $5,886,000 in
1997, $5,287,000 in 1998, $4,509,000 in 1999, $4,014,000 in 2000, $3,771,000 in
2001 and $14,781,000 thereafter.
Total rental expenses on all operating leases were $7,136,000, $6,829,000 and
$6,489,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
9. 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
that 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 have
been made from time to time and the repurchased shares are held as treasury
stock. No shares were purchased during 1995. During 1996, 755,200 shares were
purchased at a cost of $7,738,000. As of December 31, 1996, the Company had
purchased 1,761,300 shares of its common stock at an aggregate cost of
$20,066,000.
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 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
rights for shares with a market value equal to the then-current exercise price
or three shares, whichever has the greater value.
- --------------------------------------------------------------------------------
10. Stock Compensation Plans
At December 31, 1996, the Company has two stock-based compensation plans that
are described below.
Fixed Stock Option Plan
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.
"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 eight years from the date of
grant.
A summary of the Plan activity for the years ended December 31, 1996, 1995 and
1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- --------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 767,000 $11.36 62,000 $ 20.24 396,600 $ 4.38
Granted 68,000 12.06 755,000 10.57 49,120 13.00
Exercised (11,000) 10.50 - - (322,600) .70
Cancelled (60,000) 11.05 (50,000) 10.50 (61,120) 14.63
Outstanding at end of year 764,000 11.45 767,000 11.36 62,000 20.24
Options exercisable at year end 185,500 43,600 28,700
Weighted-average fair value of
options granted during the year $3.41 $ 3.42
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12-31-96 Contractual Life Exercise Price at 12-31-96 Exercise Price
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$10.50 to $23.13 764,000 6.0 Years $ 11.45 185,500 $13.37
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance Based Stock Option Plan
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. These stock options are no longer exercisable
after expiration of ten years from the date of grant.
A summary of the Plan activity for the years ended December 31, 1996, 1995 and
1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------- ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 8,000 $15.50 6,500 $15.50 6,000 $15.50
Granted 8,100 15.50 8,000 15.50 6,500 15.50
Cancelled - - (6,500) 15.50 (6,000) 15.50
Outstanding at end of year 16,100 15.50 8,000 15.50 6,500 15.50
Options exercisable at year end 8,000 - -
Weighted-average fair value of
options granted during the year $2.82 $ 2.86
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Price at 12-31-96 Contractual Life Exercise Price at 12-31-96 Exercise Price
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$ 15.50 16,100 6.8 Years $ 15.50 8,000 $ 15.50
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company applies Accounting Principles Board Opinion 25 and related
Interpretations in accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for these plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans, the Company's net income and net income per common share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31
(Dollars in thousands except per share data) 1996 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net income As reported $21,638 $21,345
Pro forma $21,317 $21,084
Net income per common share As reported $ .54 $ .53
Pro forma $ .53 $ .52
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions, dividend yield of 2.67%, risk-free interest rates ranging from
5.10% to 6.80%, expected volatility between 29% and 32% for options granted in
1996 and 35% for options granted in 1995 and expected lives of five years for
options granted in 1996 and either three or five years for options granted in
1995.
- --------------------------------------------------------------------------------
11. 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 pools for distribution for the years ended December 31, 1996 and December
31, 1995 were $143,000 and $1,009,000, respectively. There was no pool for
distribution for the year ended December 31, 1994.
- --------------------------------------------------------------------------------
12. 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 bond 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) 1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 1,939 $ 1,332 $ 1,505
Interest cost on projected benefit obligation 2,442 1,822 1,739
Net amortization 242 222 223
- ------------------------------------------------------------------------------------------------------------
4,623 3,376 3,467
- ------------------------------------------------------------------------------------------------------------
Return on plan assets:
Actual loss (return) (4,291) (5,126) 186
Amount deferred 2,049 3,688 (1,504)
- ------------------------------------------------------------------------------------------------------------
Recognized return on plan assets (2,242) (1,438) (1,318)
- ------------------------------------------------------------------------------------------------------------
Net pension cost for the period $ 2,381 $ 1,938 $ 2,149
============================================================================================================
Discount rate 7.25% 8.25% 7.50%
Long-term rate of return on assets 9.00% 8.50% 8.50%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligation
Vested benefits $ 14,422 $ 13,420
Nonvested benefits 3,832 3,748
- ------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations $ 18,254 $ 17,168
============================================================================================================
Projected benefit obligation $ 32,584 $ 30,175
Plan assets at fair value (29,271) (23,244)
- ------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets $ 3,313 $ 6,931
Unrecognized net gain (loss) from past experience different from assumed 1,462 (1,315)
Prior service cost not yet recognized in net periodic pension cost (2,958) (2,902)
- ------------------------------------------------------------------------------------------------------------
Pension liability included in the balance sheet $ 1,817 $ 2,714
============================================================================================================
Discount rate 7.75% 7.25%
Rate of increase in compensation levels 4.00% 4.00%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
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) 1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 639 $ 678 $ 608
Interest cost on projected benefit obligation 905 937 799
Net amortization - 36 68
- ------------------------------------------------------------------------------------------------------------------------
1,544 1,651 1,475
- ------------------------------------------------------------------------------------------------------------------------
Return on plan assets:
Actual (return) (321) (282) (249)
Amount deferred 3 (33) 18
- ------------------------------------------------------------------------------------------------------------------------
Recognized return on plan assets (318) (315) (231)
- ------------------------------------------------------------------------------------------------------------------------
Net pension cost for the period $ 1,226 $ 1,336 $ 1,244
========================================================================================================================
Discount rate 7.0--7.8% 7.5--9.0% 7.0--8.0%
Long-term rate of return on assets 7.0--7.8% 7.0--7.8% 8.0--9.0%
- -------------------------------------------------------------------------------------------------------------------------
</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.
<TABLE>
<CAPTION>
December 31
(Thousands) 1996 1995
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligation
Vested benefits $ 9,902 $ 8,781
Nonvested benefits 397 446
- -------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations $ 10,299 $ 9,227
=========================================================================================================================
Projected benefit obligation $ 13,698 $ 13,364
Plan assets at fair value (4,842) (4,402)
- -------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets $ 8,856 $ 8,962
Unrecognized net gain from past
experience different from assumed 214 320
Unrecognized net transition obligation,
net of amortization (694) (847)
- -------------------------------------------------------------------------------------------------------------------------
Pension liability included in the balance sheet $ 8,376 $ 8,435
=========================================================================================================================
Discount rate 6.5--7.8% 7.0--7.8%
Rate of increase in compensation levels 4.0--5.0% 4.0--5.5%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
- -------------------------------------------------------------------------------
13. Provision for Income Taxes
The components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Current
Federal $ 8,376 $ 3,004 $ 1,937
State and local 442 (58) 172
Foreign 2,252 54 1,994
- -------------------------------------------------------------------------------------------------------------------------
11,070 3,000 4,103
- -------------------------------------------------------------------------------------------------------------------------
Deferred
Federal 445 6,880 (795)
State and local (972) (948) (194)
Foreign 1,628 1,977 (13,091)
- -------------------------------------------------------------------------------------------------------------------------
1,101 7,909 (14,080)
- -------------------------------------------------------------------------------------------------------------------------
Provision (benefit) for income taxes $12,171 $10,909 $ (9,977)
=========================================================================================================================
</TABLE>
Income (loss) before income taxes for 1996, 1995 and 1994 includes $9,559,000,
$7,846,000 and ($28,879,000), respectively, generated by operations outside the
United States.
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
1996 1995 1994
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
U.S. federal statutory rate 35.0% 35.0% (35.0)%
State income taxes, net of federal
income tax benefit (1.0) (2.0) (.1)
Foreign tax credit carryback - - (9.3)
Higher tax (benefit) rate on foreign income (loss) 2.4 3.9 (8.9)
Other-net (.4) (3.1) (.4)
- -------------------------------------------------------------------------------------------------------------------------------
Effective income tax rate 36.0% 33.8% (53.7)%
===============================================================================================================================
</TABLE>
The Company has the following operating loss and tax credit carryforwards as of
December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Type Amount Expiration Date
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Operating loss carryforwards-foreign $29,465 None
Operating loss carryforwards-foreign $ 2,808 1997--2001
Tax credit carryforwards $ 200 1998--2004
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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, 1996.
33
<PAGE>
The components of deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands) 1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Deferred tax assets
Foreign tax loss and credit carryforwards $13,979 $13,513
U.S. tax benefits on deferred foreign income 2,252 2,428
Accruals 7,089 8,782
Intangibles 1,156 1,381
Pensions 1,513 2,126
Organization costs 663 690
Other 106 422
- --------------------------------------------------------------------------------------------------------------------
Total deferred tax assets $26,758 $29,342
====================================================================================================================
Deferred tax liabilities
Property, plant and equipment $37,560 $39,861
U.S. liability on German deferred tax assets 9,348 10,952
Cumulative translation adjustment 6,649 7,958
Inventories 1,761 890
Other 295 688
- --------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities $55,613 $60,349
===================================================================================================================
</TABLE>
- -------------------------------------------------------------------------------
14. Other Information
Repair and maintenance expenses were $19,695,000, $19,330,000 and $19,693,000
for the years ended December 31, 1996, 1995 and 1994, respectively. Other
(expense)-net includes net foreign currency transaction gains of $1,002,000 for
the year ended December 31, 1996 and losses of ($358,000) and ($548,000) for the
years ended December 31, 1995 and 1994. Also included are taxes other than on
income of ($1,152,000), ($1,162,000) and ($1,335,000) for the years ended
December 31, 1996, 1995 and 1994, respectively.
Deferred taxes included in the translation adjustments for 1996, 1995 and 1994
were ($1,309,000), $1,093,000 and $2,824,000, respectively.
- -------------------------------------------------------------------------------
15. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Cash paid during the year for
Interest $ 768 $ 918 $ 430
Income taxes (net of refunds) $ 5,290 $ 802 $ 4,007
- --------------------------------------------------------------------------------------------------------------------
Bank debt
Borrowings $ 79,660 $ 38,300 $ 19,891
Repayments (23,589) (34,301) (19,293)
- --------------------------------------------------------------------------------------------------------------------
Net proceeds from borrowings $ 56,071 $ 3,999 $ 598
====================================================================================================================
</TABLE>
34
<PAGE>
- -------------------------------------------------------------------------------
16. Geographic Information
Net sales by the Company's operations in certain geographic areas, transfers
between geographic areas and income from operations for 1996, 1995 and 1994 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)
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers
U.S. $192,817 $182,414 $174,461
Europe 97,379 109,484 99,783
- --------------------------------------------------------------------------------------------------------------------
$290,196 $291,898 $274,244
====================================================================================================================
Transfers between areas
U.S. $ 11,231 $ 9,340 $ 11,001
Europe 10,394 6,958 5,152
- --------------------------------------------------------------------------------------------------------------------
$ 21,625 $ 16,298 $ 16,153
====================================================================================================================
Income (loss) from operations
U.S. $ 29,709 $ 27,714 $ 13,050
Europe 6,024 7,011 (28,865)
Eliminations (1,981) (1,284) (912)
- --------------------------------------------------------------------------------------------------------------------
$ 33,752 $ 33,441 $(16,727)
====================================================================================================================
Identifiable assets, end of year
U.S. $294,368 $229,740 $235,300
Europe 104,587 109,234 108,959
Eliminations (1,704) (973) (775)
- --------------------------------------------------------------------------------------------------------------------
$397,251 $338,001 $343,484
====================================================================================================================
</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.
- --------------------------------------------------------------------------------
Forward-Looking Information Safe Harbor
This Annual Report contains historical information and forward-looking
statements. Statements looking forward in time, including statements regarding
future growth and profitability, price increases, cost savings, broader product
lines, enhanced competitive posture and acquisitions, are included in this
Annual Report pursuant to the "safe harbor" provision 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 future periods to
be materially different from any future performance suggested herein. Further,
the Company operates in an industry sector where securities values may be
volatile and may be influenced by economic and other factors beyond the
Company's control. In the context of the forward-looking information provided in
this Annual Report, please refer to the discussions of risk factors detailed in,
as well as the other information contained in this Annual Report and the
Company's filings with the Securities and Exchange Commission during the past 12
months.
35
<PAGE>
Six-Year Summary Selected Financial And Statistical Data
<TABLE>
<CAPTION>
Year Ended December 31
(Thousands except per share data) 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Income Statement Data:
Net sales $290,196 $291,898 $274,244 $269,424 $298,371 $308,373
Income (loss) from operations $ 33,752 $ 33,441 $(16,727) $ 33,015 $ 46,653 $ 61,258
Interest expense $ 752 $ 620 $ 752 $ 984 $ 1,347 $ 1,040
Net income (loss)(a) $ 21,638 $ 21,345 $ (8,609) $ 19,153 $ 17,983 $ 38,102
Percent of pretax income (loss) to sales 11.7% 11.0% (6.8)% 11.4% 14.7% 19.7%
Net income (loss) per common share(a) $ .54 $ .53 $ (.21) $ .47 $ .44 $ .94
Dividends declared per common share $ .32 $ .80 $ .16 $ .16 $ .16 $ .16
- ----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at year end):
Working capital $ 68,670 $ 84,584 $ 83,279 $ 94,664 $ 74,659 $ 77,050
Total assets $397,251 $338,001 $343,484 $337,329 $334,518 $335,964
Long-term debt $ 65,837 $ 5,608 $ 6,401 $ 6,477 $ 6,797 $ 27,652
Treasury stock, at cost $ 20,066 $ 12,328 $ 12,328 $ 1,615 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Other Selected Data (at year end):
Return (loss) on average shareholders' equity 10% 10% (4)% 8% 8% 18%
Ratio of total debt to total capitalization 24% 6% 4 % 4% 5% 11%
Current ratio 204% 233% 226 % 347% 266% 266%
Effective tax rate 36.0% 33.8% (53.7)% 37.8% 34.9% 37.2%
Treasury stock 1,761 1,006 1,006 154 - -
Shares outstanding 39,675 40,419 40,419 40,949 40,904 40,749
Book value per outstanding common share $ 5.47 $ 5.40 $ 5.62 $ 6.03 $ 5.84 $ 5.67
Market value of common stock $ 12.25 $ 12.00 $ 10.00 $ 13.00 $ 17.63 $ 21.38
Price earnings ratio of stock prices 22.7 22.6 - 27.7 40.1 22.7
Capital expenditures $ 14,358 $ 12,676 $ 7,113 $ 15,114 $ 24,046 $ 70,571
Number of registered shareholders 984 1,102 1,306 1,470 1,503 1,410
Number of employees 1,297 1,097 1,267 1,320 1,480 1,513
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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>
1996 1995
-------------------------------------------------- --------------------------------------------------
(Thousands except per
share data) 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 $68,989 $74,945 $69,451 $76,811 $68,809 $75,968 $71,283 $75,838
Gross profit $25,760 $27,751 $26,239 $29,846 $24,640 $27,892 $27,004 $28,143
Net income $ 4,782 $ 6,085 $ 4,406 $ 6,365 $ 3,919 $ 6,051 $ 5,589 $ 5,786
================================================== ==================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Data:
Net income per common share $ .12 $ .15 $ .11 $ .16 $ .10 $ .15 $ .14 $ .14
================================================== ==================================================
Average common shares
outstanding 40,419 40,419 40,417 39,816 40,419 40,419 40,419 40,419
================================================== ==================================================
</TABLE>
- --------------------------------------------------------------------------------
Common Shares and Market Information
Common shares are traded on the New York Stock Exchange under the trading symbol
CCC. There were 984 registered shareholders at year end.
Quarterly Common Stock Price Ranges and Dividends
<TABLE>
<CAPTION>
1996 1995
------------------------- -----------------------------
Fiscal Quarter High Low Dividend High Low Dividend
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First (a) 13 10 3/4 $.080 11 1/2 10 $.575
Second 14 5/8 11 1/2 $.080 13 3/4 11 3/8 $.075
Third 14 9 1/2 $.080 12 5/8 11 $.075
Fourth 12 1/2 9 3/4 $.080 12 7/8 11 1/4 $.075
</TABLE>
(a) In February of 1995, the Company paid a one-time special dividend of $.50
per share.
36
<PAGE>
EXHIBIT 23
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
3, 1997 except as to Note 7, which is as of March 3, 1997, appearing on page
20 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, 1997
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,439
<SECURITIES> 0
<RECEIVABLES> 63,762
<ALLOWANCES> 0
<INVENTORY> 46,471
<CURRENT-ASSETS> 134,919
<PP&E> 309,907
<DEPRECIATION> 136,343
<TOTAL-ASSETS> 397,251
<CURRENT-LIABILITIES> 66,249
<BONDS> 0
0
0
<COMMON> 42,450
<OTHER-SE> 174,445
<TOTAL-LIABILITY-AND-EQUITY> 397,251
<SALES> 290,196
<TOTAL-REVENUES> 290,196
<CGS> 180,600
<TOTAL-COSTS> 256,444
<OTHER-EXPENSES> 742
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 752
<INCOME-PRETAX> 33,809
<INCOME-TAX> 12,171
<INCOME-CONTINUING> 21,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,638
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
