<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, 1999 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
Pittsburgh, Pennsylvania 15205
(Address of principal executive (Zip Code)
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, 2000, there were outstanding 38,802,132 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, 2000 was $251,592,106.
The following documents have been incorporated by reference:
<TABLE>
<CAPTION>
Form 10-K
Document Part Number
-------- -----------
<S> <C>
Portions of Annual Report to Stockholders for the Year Ended
December 31, 1999................................................ II and IV
Proxy Statement filed pursuant to Regulation 14A in connection
with registrant's Annual Meeting of Stockholders to be held on
April 18, 2000................................................... III
</TABLE>
<PAGE>
INDEX
<TABLE>
<C> <S> <C>
PART I
Item 1. Business..................................................... 1
Item 2. Properties................................................... 9
Item 3. Legal Proceedings............................................ 11
Item 4. Submission of Matters to a Vote of Security Holders.......... 11
PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5. Matters...................................................... 12
Item 6. Selected Financial Data...................................... 12
Item 7. Management's Discussion and Analysis......................... 12
Item 8. Financial Statements and Supplementary Data.................. 12
Item 9. Disagreements with Accountants............................... 12
PART III
Item 10. Directors and Executive Officers of the Registrant........... 12
Item 11. Executive Compensation....................................... 12
Security Ownership of Certain Beneficial Owners and
Item 12. Management................................................... 12
Item 13. Certain Relationships and Related Transactions............... 12
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
Item 14. 8-K.......................................................... 13
SIGNATURES................................................................ 15
</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 1999 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's") 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 and solvent recovery equipment business. This business uses principally
activated carbon as its adsorption media. 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. to form the
Company's Advanced Oxidation Technologies unit. Both of these transactions
were accounted for as purchases and provided the Company with an entry into
the advanced oxidative water treatment market using ultraviolet light (UV)
technology. 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 primarily for odor control in medical
and industrial applications where granular activated carbon is not feasible.
These products also exhibit electrical properties which make them useful in
applications other than those in which other forms of activated carbon are
utilized. 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 utilizing ion exchange and chromatographic
separation technologies. During the fourth quarter of 1997, the Company
initiated a plan to consolidate the manufacturing operations and research
activities of its Advanced Oxidation Technologies unit in Tucson, Arizona into
its Markham, Ontario, Canada site. During the fourth quarter of 1998, the
Company essentially completed the disposition of the Brilon Wald, Germany,
plant by transferring ownership of the facility to the local community. During
the fourth quarter of 1999, the Company began the process of closing and
centralizing activities from a number of facilities. This effort, to be
completed in 2000, includes the transfer of production and administrative
activities from Markham, Ontario, Canada and Lakeland, Florida to Pittsburgh,
Pennsylvania and the shutdown of activated carbon production lines in Feluy,
Belgium, Neville Island, Pennsylvania and at the Big Sandy, Kentucky location.
The Company will transfer office activity from its current location in
Brussels, Belgium to the Feluy, Belgium plant.
Through 1999, the Company's operations were principally conducted in two
business segments. Both segments include the production, design and marketing
of products and services specifically developed for the
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purification, separation and concentration of liquids and gases. One segment,
Activated Carbon, relies on activated carbon as a base material, while the
other, Engineered Systems, relies on a variety of other methods and materials
which do not involve activated carbon. The Activated Carbon segment is
represented by business activities using activated carbon while the Engineered
Systems segment generates revenues utilizing UV, ion exchange, and
chromatographic separation technologies.
Products and Services:
The Company's two segments both design and market products and services
specifically developed for the purification, separation and concentration of
liquids and gases. The Activated Carbon segment utilizes activated carbon
while the Engineered Systems segment relies on other technologies.
The Activated Carbon segment's activities consist of four areas: (1)
carbon--the production and sale of a broad range of untreated, impregnated or
acid washed carbons, in 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) carbon
equipment--the design, assembly and sale of systems that employ activated
carbon for purification, separation or concentration; and (4) charcoal--the
production and sale of charcoal to consumer markets in Germany.
Carbon. The 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 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.
Service. The principal service sold is the Calgon Carbon Service(TM) which
supplies customers with a complete process and wastewater treatment service,
particularly suited for treating water 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
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maintenance of Company-owned equipment. The Company also provides a number of
service packages which include two or more elements of the complete service.
Services are provided under contract at a fixed minimum monthly fee subject to
additional charges for increased carbon usage. The Company provides services
in packages ranging from a fifty-five-gallon drum to truckload quantities.
The Company also offers services to clean water from contaminated aquifers
and surface impoundments and to clean accidental spills on a fee basis. The
Company maintains an inventory of mobile adsorption equipment which can be
dispatched on twenty-four 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,
but also through Calgon Far East Co. Ltd., a joint venture in which the
Company is a 60% participant. 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.
Carbon Equipment. 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 1990, the Company acquired Vara International, a solvent
recovery and vapor phase equipment company.
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 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 drums to twelve-
foot-diameter vessels. Through its Vara International unit, 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 continuous solvent recovery and abatement of
volatile organic compounds with a new product (Revolver(R) CADRE).
Charcoal and Liquids. Charcoal is manufactured in Germany and used for
barbecue grilling by consumers and restaurants. In addition, the Company
recovers organic acids distilled from wood as a by-product of charcoal
production for retail and industrial markets in Europe.
The following table details total net sales for the Activated Carbon segment
in the past three years:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- ---------------------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Carbon.................. $142,333 53% $149,120 54% $162,760 54%
Service................. 88,787 33 89,939 32 91,697 31
Carbon equipment........ 22,420 8 20,009 7 24,875 8
Charcoal and liquids.... 16,896 6 19,387 7 20,315 7
-------- --- -------- --- -------- ---
Total net sales....... $270,436 100% $278,455 100% $299,647 100%
======== === ======== === ======== ===
</TABLE>
The Company's Engineered Systems segment designs and markets systems that
employ ultraviolet light (UV) technology alone or in conjunction with hydrogen
peroxide and/or other oxidizing agents, to destroy waterborne organic
contaminants. The Company also sells UV disinfection equipment to the
municipal drinking water and wastewater markets. Through its wholly owned
subsidiary, Advanced Separation Technologies Incorporated (AST), the Company
designs and markets proprietary ISEP(R) (Ionic Separator) continuous ion
3
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exchange units for separation of organic and inorganic compounds, principally
for process applications in the food, pharmaceutical and biotechnology
industries and for nitrate and perchlorate removal from drinking water. AST
also designs and markets CSEP(R) (Chromatographic Separator), a continuous
chromatography separation system for applications in food, pharmaceutical and
fine chemicals market segments.
The following table details total net sales for the Engineered Systems
segment in the past three years:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- ---------------------- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Advanced Oxidation
Technologies........... $ 8,746 34% $ 8,051 36% $ 7,631 27%
Advanced Separation
Technologies........... 16,970 66 14,534 64 20,222 73
------- --- ------- --- ------- ---
Total net sales....... $25,716 100% $22,585 100% $27,853 100%
======= === ======= === ======= ===
</TABLE>
Markets:
The Company offers its carbon, service, carbon equipment, UV, ion exchange,
and chromatographic separation systems to the Industrial Process and
Environmental markets. Industrial process applications for the Company's
products and services 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, municipal 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>
1999 1998 1997
------------------- ------------------- -------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- ---------------------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Industrial Process
Market:
Food.................. $ 46,672 16% $ 49,393 16% $ 54,148 17%
Chemical and
pharmaceutical....... 23,604 8 22,662 8 24,786 8
Original equipment
manufacturers........ 46,233 15 54,032 18 50,430 15
Other................. 20,158 7 25,734 8 27,666 8
-------- --- -------- --- -------- ---
Subtotal............ 136,667 46 151,821 50 157,030 48
-------- --- -------- --- -------- ---
Environmental Market:
Municipal............. 62,867 21 57,773 19 72,250 22
Industrial............ 79,722 27 72,059 24 77,905 24
-------- --- -------- --- -------- ---
Subtotal............ 142,589 48 129,832 43 150,155 46
-------- --- -------- --- -------- ---
Consumer Market:........ 16,896 6 19,387 7 20,315 6
-------- --- -------- --- -------- ---
Total net sales..... $296,152 100% $301,040 100% $327,500 100%
======== === ======== === ======== ===
</TABLE>
Industrial Process Market:
The Industrial Process Market consists of customers that use the Company's
products either for purification, separation or concentration of their
products in the manufacturing process or for direct incorporation into their
product. The Industrial Process Market includes four significant sub-markets:
the food market, the chemical and pharmaceutical market, the original
equipment manufacturers 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 purification of cane sugar. Ion exchange systems are also used in this
market.
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Other food processing applications include decolorization of monosodium
glutamate and 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.
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. Systems that employ ion exchange
technology contribute to sales within this market.
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.
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 municipal market and the industrial market.
Municipal Market. The Company sells activated carbons, carbon equipment,
services and ion exchange technologies to municipal customers in connection
with the treatment of potable water to remove pesticides and other dissolved
organic and inorganic material to meet current regulations and to remove
tastes and odors to make the water aesthetically acceptable to the public. The
Company sells primarily 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. In addition, the Company sells UV systems for the destruction or
inactivation of waterborne contaminants.
Municipal sewage treatment plants purchase the Company's odor control
systems and activated carbon products to remove objectionable odors emanating
from the plants 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.
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.
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The cleanup of contaminated groundwater, surface impoundments and accidental
spills comprise a significant market for the Company. The Company provides
emergency and temporary cleanup services for public and private entities.
Activated carbon is also used in the chemical, pharmaceutical and refining
industry for purification of air discharges to remove contaminants such as
benzene, toluene and other volatile organics. The Company offers carbon,
services and carbon equipment for these applications.
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 sold
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 carbon, service, carbon equipment, and engineered systems
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 82% of its products and services are sold
through its direct sales force, while 18% is through agents and distributors.
The Company has a direct sales force in the United States for its Activated
Carbon segment with offices located in Pittsburgh, Pennsylvania; Richmond,
California; Vero Beach, Florida; Houston, Texas; and Flemington, New Jersey.
The Company conducts activated carbon related sales in Canada through a
distributor under direction of its wholly owned subsidiary. The Company also
has a sales office in Markham, Ontario, Canada, which sells UV-based systems
and a sales office in Lakeland, Florida through which it markets ion exchange
and chromatographic separation systems. During 2000, the Markham and Lakeland
sales offices will be closed and these activities will be transferred to
Pittsburgh, Pennsylvania. The Company maintains an office in Singapore to
manage its business in South East Asia, including Malaysia, Thailand,
Indonesia, India, Singapore and Oceana.
In 1997, the Company established a subsidiary in Singapore to oversee all
activities in Asia. A representative office was established in Tokyo, Japan to
manage its business in Korea, Taiwan and the People's Republic of China. Sales
of the Company's activated carbon products in Japan are conducted exclusively
by Calgon Far East Co. Ltd., a joint venture in which the Company is a 60%
participant. The joint venture purchases the Company's products for resale in
Japan. The joint venture also owns and operates a reactivation facility in
Fukui, Fukui Prefecture, Japan and sells related services. Sales to the joint
venture have not been a significant portion of the Company's total net sales.
In Europe the Company has sales offices in Brussels, Belgium; Paris, France;
Manchester, England; and Frankfurt, Germany. During 2000, the Brussels sales
office will be closed and its activities will be moved to the Company's
production facility in Feluy, Belgium. 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.
All offices can play a role in sales of products or services from either of
the Company's segments.
The following table details total net sales to customers by geographic areas
in the past three years:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- ------------------------ -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States........... $163,098 55% $162,481 54% $173,858 53%
Europe.................. 85,189 29 87,394 29 102,925 31
Other................... 47,865 16 51,165 17 50,717 16
-------- --- -------- --- -------- ---
Total net sales....... $296,152 100% $301,040 100% $327,500 100%
======== === ======== === ======== ===
</TABLE>
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Refer to Note 16 to the Consolidated Financial Statements for a discussion of
other financial information classified by major countries in which the Company
operates.
The Company's products and services were purchased by approximately 4,000
active customers in 1999. 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 two principal competitors with respect to the production and
sale of carbon related products: Norit, N.V., a Dutch company, and Westvaco
Corporation, a United States company. On February 29, 2000, Gilde Investment
Management B.V. announced its intention to make an offer to purchase all
outstanding shares of Norit. Chinese producers of coal-based activated carbon
and certain East Asian producers of coconut-based activated carbon participate
in the market on a worldwide basis and sell principally through resellers.
Competition in activated carbons, carbon equipment 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 also competes with several small
regional companies for the sale of its reactivation services and carbon
equipment.
In North America, the Company has competition for its UV technology product
line from products not involving UV technology and from a number of smaller
firms offering some form of advanced oxidation. A significant competitor is
Trojan Technologies, Inc.
In the ion exchange related systems, competition is from U.S. Filter, a
subsidiary of Vivendi, and Applexion, with both providing a full range of
filtration/separation equipment, technologies and service.
There are a number of competitors in the consumer charcoal market whose
production facilities 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 1999, the Company invested $8.6 million for capital expenditures. Of that
amount, $8.1 million were related to the Activated Carbon segment. The
Company's 2000 capital expenditure budget approximates $19.0 million and is to
include carbon production process improvements, expenditures to meet plant
facilities environmental requirements and domestic service customer capital.
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 capital expenditures in 2000.
Raw Materials:
The principal raw material purchased by the Company for its Activated Carbon
segment 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 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.
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The Company purchases significant amounts of natural gas from various
suppliers for use in its Activated Carbon segment's 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
for its UV Technologies business.
The only other raw material that is purchased by the Company in significant
quantities is pitch, which is used as a binder in the carbon manufacturing
process. The Company purchases pitch from various suppliers in the United
States and Europe under annual supply contracts.
The purchase of key equipment components for both segments 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 primarily at
a research center near Pittsburgh, Pennsylvania, under the direction of a
Senior Vice President with a staff of 47 employees. A pilot plant located near
Pittsburgh is used for the production of experimental activated carbon,
activated charcoal cloth products, and equipment for testing and applications
development. Experimental systems are also designed and evaluated at this
location.
The principal goals of the Company's research program are maintaining the
Company as a technological leader in the production and sales of its products,
services and equipment; developing new products and services; and providing
technical support to the manufacturing and marketing operations of the Company
with specific focus on advanced oxidation and separation applications and
charcoal cloth utilization.
The Company's research programs include new and improved methods for
manufacturing and utilizing improved activated carbons for applications such
as physical adsorbents and adsorptive catalysts. Emerging
purification/separation/concentration technologies are rigorously evaluated.
The Centaur(R) product line represents a family of activated carbons developed
for adsorptive/catalytic applications. The Company has also developed carbons
specifically designed to remove lead and methyl tertiary butyl ether (MTBE)
from drinking water. The charcoal cloth line is the first commercial entry
into the shaped carbon business.
Research and development expenses were $7.7 million, $8.4 million and $8.3
million in 1999, 1998 and 1997, respectively.
Patent and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 153 United States patents and 221 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.
8
<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 (are) 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, 1999, the Company employed 1,185 persons on a full-time
basis, 698 of whom were salaried production, office, supervisory and sales
personnel. The 259 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, 2002 with respect to the
Pittsburgh facility and on June 6, 2001 with respect to the Catlettsburg
facility. The 106 hourly personnel at the Bodenfelde plant in Germany are
represented by the German Chemical Industry Union. Agreements are between the
National Chemical Union and the German Chemical Federation. The current
agreement expires on May 31, 2000. The 72 hourly personnel at the Company's
Belgian facility are represented by two national labor organizations with
contracts expiring on July 31, 2001. The Company has 50 hourly employees at
three non-union United Kingdom facilities (one of which is a customer
location).
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; Bodenfelde, Germany; Fukui, Fukui Prefecture,
Japan. The Company leases three production facilities as follows: Lakeland,
Florida; Markham, Ontario, Canada; Houghton Le Spring, England. During 1998,
the Company essentially concluded its 1994 restructuring plan by transferring
ownership of the Brilon Wald, Germany, plant to the local community. This
plant was shut down in 1995. During the fourth quarter of 1999, the Company
began the process of closing and centralizing activities from a number of
facilities. This effort, to be completed in 2000, includes the transfer of
production and administrative activities from Markham, Ontario, Canada and
Lakeland, Florida to Pittsburgh, Pennsylvania and the shutdown of activated
9
<PAGE>
carbon production lines in Feluy, Belgium, Neville Island, Pennsylvania and at
the Catlettsburg, Kentucky location. The cessation of activated carbon
production at the Feluy, Belgium location will result in underutilized office
facilities and enable the Company to transfer office activity from its current
location in Brussels, Belgium to the plant.
The Lakeland, Florida, and Markham, Ontario, Canada, locations are
associated with the Engineered Systems segment and the remaining facilities
produce product for the Activated Carbon segment.
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 and acid washed
granular activated carbons and reactivates spent granular activated carbons.
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 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 carbon equipment for purification, concentration and separation
systems.
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. This facility will be closed
during 2000 and its activities will be moved to Pittsburgh, Pennsylvania as
part of the Company's consolidation effort.
The Lakeland, Florida ion exchange separation equipment plant occupies a
26,400 square foot building on approximately one and a half acres of property.
The primary operations are warehousing and equipment testing. This facility
will be closed during 2000 and its activities will be moved to Pittsburgh,
Pennsylvania as part of the Company's consolidation effort.
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 granular activated
carbon production line will be shut down and dismantled during 2000.
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 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.
10
<PAGE>
The Fukui, Fukui Prefecture, Japan plant is owned by Calgon Far East Co.,
Ltd., a joint venture of which the Company is a 60% participant. It occupies a
site of approximately 6 acres and has one production line which reactivates
spent granular activated carbon mainly for water plants. In addition, the
operations at the plant includes acid rinsing for reactivated and virgin
carbons.
The Company believes that the plants are adequate and suitable for its
operating needs.
Item 3. Legal Proceedings:
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.
On January 12, 1998, the Company filed a claim for unspecified damages in
the United States District Court in the Western District of Pennsylvania
alleging among other things that Progress Capital Holdings and Potomac Capital
Investment Corporation materially breached various AST financial and
operational representations and warranties included in the Stock Purchase
Agreement. Based upon information obtained since the acquisition and
corroborated in the course of pre-trial discovery, the Company believes that
it has a reasonable basis for this claim and intends to vigorously pursue
reimbursement for damages sustained. Neither the Company nor its counsel can
predict with certainty the amount, if any, of recovery that will be obtained
from the defendants in this matter. Accordingly, the Company has not recorded
a receivable for this gain contingency pending further developments in the
litigation. It is expected that the matter will come to trial in 2000.
---------------------
Trojan Technologies, Inc. (Trojan), a Canadian corporation and a competitor
of the Company, has commenced two patent infringement actions against the
Company and its subsidiary, Calgon Carbon Canada, Inc. These actions are
currently pending in the United States District Court for the Southern
District of Georgia (Savannah) and in Federal Court of Canada, Ottawa, Canada:
Trojan Technologies v. Calgon Carbon Corporation et al.; Civil Action No.
CV498-281; U.S. District Court for the Southern District of Georgia.
Trojan Technologies v. Calgon Carbon Corporation and Calgon Carbon Canada,
Inc.; Case No. T-488-99; Federal Court of Canada, Trial Division.
Both are civil suits brought by Trojan for the alleged infringement of U.S.
Patent No. 5,590,390 (the '390 patent) in the Southern District of Georgia
action and Canadian Patent No. 2,117,040 (the '040 patent) in the Ottawa
action. Both suits seek monetary and injunctive relief for the alleged
infringement of these patents from the manufacture, use and sale of the
Company's ultraviolet (UV) municipal wastewater treatment system known as the
Aurora UV(TM) system. The Company has denied infringement and has also
asserted the defense of patent invalidity in both suits. In addition, the
Company has brought counterclaims for unfair competition and antitrust
violations against Trojan in the U.S. case, based upon misuse of the '390
patent to suppress competition in the medium pressure UV municipal wastewater
disinfection market. The Company has brought a counterclaim for a declaration
of the invalidity of the '040 patent in the Canadian case.
The Company is vigorously defending both of these actions and believes that
it will ultimately prevail on the merits of both the United States and
Canadian cases as it does not infringe either of Trojan's patents.
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 1999.
11
<PAGE>
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 42 of the Annual Report to Stockholders
for the Year Ended December 31, 1999 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 41 of the Annual
Report to Stockholders for the Year Ended December 31, 1999 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 13 through 17 of the Annual Report to Stockholders for the
Year Ended December 31, 1999 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, 1999, 1998 and 1997 required by this Item 8 appear on pages
19 through 42 of the Annual Report to Stockholders for the Year Ended December
31, 1999 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 2000 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 2000 Annual Meeting of its Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
Information required by this item is incorporated by reference to the
material appearing under the heading "Security Ownership of Management and
Certain Beneficial Owners" in the Company's Proxy Statement for the 2000
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 2000 Annual Meeting of its Stockholders.
12
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:
A. Financial Statements
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page(s) in
Annual Report
to Stockholders
for the Year Ended
Financial Statements and Related Report December 31, 1999
--------------------------------------- ------------------
<C> <S> <C>
Report of Independent Accountants, dated February 8, 2000. 18
Consolidated Statement of Income for the Years Ended
December 31, 1999, 1998 and 1997......................... 19
Consolidated Balance Sheet as of December 31, 1999 and
1998..................................................... 20
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997......................... 21
Consolidated Statement of Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997............. 22
Notes to the Consolidated Financial Statements............ 23-40
Quarterly Financial Data--Unaudited....................... 42
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)
Calgon Carbon Corporation Stock Option Plan, as
10.1* Amended............................................ (e)
Officers Incentive Plan of Calgon Carbon
10.3* Corporation, as Amended............................ (h)
1993 Non-Employee, Directors' Stock Option Plan, as
10.4* Amended............................................ (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 60% of
Calgon Far East Co. Ltd., a Japanese corporation
23.0 Consent of Independent Accountants
</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.
13
<PAGE>
(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 material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 2000 Annual Meeting of its Stockholders.
(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 2000 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, 1999.
14
<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 20, 2000 /s/ James A. Cederna
- ------------------------------------- By: _________________________________
(Date) James A. Cederna
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James A. Cederna President, Chief Executive March 20, 2000
______________________________________ Officer, Director
James A. Cederna
/s/ William E. Cann Chief Financial Officer March 20, 2000
______________________________________
William E. Cann
/s/ Robert W. Cruickshank Director March 20, 2000
______________________________________
Robert W. Cruickshank
/s/ Arthur L. Goeschel Director March 20, 2000
______________________________________
Arthur L. Goeschel
/s/ Thomas A. McConomy Director March 20, 2000
______________________________________
Thomas A. McConomy
/s/ Nick H. Prater Director March 20, 2000
______________________________________
Nick H. Prater
/s/ Seth E. Schofield Director March 20, 2000
______________________________________
Seth E. Schofield
/s/ Harry H. Weil Director March 20, 2000
______________________________________
Harry H. Weil
/s/ Robert L. Yohe Director March 20, 2000
______________________________________
</TABLE> Robert L. Yohe
15
<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)
1993 Non-Employee, Directors' Stock Option Plan, as
10.4* Amended.............................................. (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
60% 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 material
appearing under the heading of "Executive Compensation" in the Company's
Proxy Statement for the 2000 Annual Meeting of its Stockholders.
(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 2000 Annual Meeting of its Stockholders.
* Executive compensation plans.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Calgon Carbon Corporation
Overview
Calgon Carbon has begun the transition from an activated carbon products and
related technology company to a provider of value added services and solutions
to its customers. These changes are designed to increase the Company's value by
leveraging the Company's strengths in the global marketplace.
During 1999, a number of expenses were incurred as the Company changed.
These costs included hiring a new chief executive officer, chief financial
officer, and other organizational moves. Reduction of inventory by over twenty
percent and attention to accounts receivable also resulted in increased costs.
During the fourth quarter of 1999, the Company adopted a new strategy
aimed at lowering costs to serve the activated carbon markets, investing to
grow its service and solutions businesses and repositioning its proven
technologies to bring more value to consumers. In order to achieve these
goals, the Company has been reorganized as a globally integrated business with
emphasis on becoming a service and solutions provider. The implementation of
these new strategies required a restructuring in the fourth quarter of 1999.
Additional information associated with this restructuring can be found in Note
2 to the Consolidated Financial Statements.
The implementation of the Company's new strategy and global organization
has been coupled with a new internal measurement system known as "Economic
Profit." "Economic Profit" is defined as "Net Operating Profit After Taxes"
(NOPAT) compared to the "Cost of Capital Employed." The Company will focus on
four drivers of "Economic Profit," which are price increases, cost reductions,
sales volume growth, and capital reduction. All business decisions as well as
the Company's new incentive compensation plan are based on "Economic Profit."
All four platforms have business plans based on "Economic Profit."
Efforts continued in 1999 to optimize the use of the Company's new
business information system, and these activities will continue in 2000, as the
Company moves toward centralized process excellence.
The end result is that the Company changed significantly in 1999.
Fundamental changes that were made had a short-term impact on earnings and will
have a positive long-term impact on value creation.
Results of Operations
1999 Versus 1998
Consolidated net sales decreased in 1999 versus 1998 by $4.9 million or 1.6%.
This was the net result of sales decreases in the Activated Carbon segment of
$8.0 million or 2.9% partially offset by increases in the Engineered Systems
segment of $3.1 million or 13.9%. The Activated Carbon segment net sales
decrease was due to both price and volume decreases and a negative effect of
foreign exchange. The consolidated unfavorable effect of foreign exchange of
$1.6 million was primarily due to the strengthening of the U.S. dollar versus
the Belgian franc and German deutsche mark, partially offset by its weakening
compared to the Japanese yen versus 1998. The sales decrease within the
Activated Carbon segment was primarily due to lower carbon products sales within
the Japanese municipal market and also within the U.S. food and non-U.S.
original equipment manufacturer markets. Sales decreased also in the service
products category because emergency-related projects and large fills in 1998
within the industrial environmental area did not repeat in 1999. Carbon
equipment sales increased within the U.S. environmental municipal and industrial
markets. Charcoal sales in Germany were down due to business lost to imports.
Within the Engineered Systems segment, revenues for both the Advanced Oxidation
Technologies and the Advanced Separation Technologies units were up. The backlog
of orders for this segment has decreased by $4.6 million since December 31,
1998. New product sales (sales of products introduced within the past five
years) increased as a percentage of total sales to 16% during 1999 versus 12% in
1998.
Gross profit before depreciation, as a percentage of net sales, was 33.8%
in 1999 versus 37.5% in 1998. The decline in the Activated Carbon segment was
related to charges associated with the Company's inventory reduction program,
competitive pressure on pricing, and shifts in sales to higher-cost products
than were sold in 1998. These negative effects were partially offset by savings
associated with the 1998 restructuring. The improvement in the Engineered
Systems segment versus 1998 was attributed to sales of more profitable projects,
continued cost control, and better project management practices. This segment
also benefited from cost reductions associated with the 1998 restructuring.
13
<PAGE>
Depreciation and amortization increased by $1.3 million due to capital
spending associated with the Company's new business information system and
normal ongoing capital expenditures.
Selling, general and administrative expenses were reduced by $.9 million.
This net reduction was primarily the result of savings related to the 1998
restructuring partially offset by organizational and CEO recruitment costs of
$1.4 million and write-offs of problem accounts receivables during 1999.
Research and development expenses were down by $.7 million due to savings
associated with the 1998 restructuring of operations. As a percentage of sales,
these expenses were 2.6% in 1999 versus 2.8% in 1998.
During the fourth quarter of 1999, the Company recorded a restructuring
charge as a prelude to implementing its new strategy. Some activated carbon
production lines will be shut down and dismantled, and operations at several
locations will be consolidated to gain global productivity and centralized
processes to promote corporate-wide sharing of technical, operational, and
financial information. Costs associated with the restructuring were $30.7
million and included employee severance and termination costs and asset
write-offs. This action is expected to reduce costs by approximately $13.0
million, on an annualized basis, when fully implemented. These costs were
partially offset by the reversals of accruals from previous years'
restructurings. Additional information on restructuring charges can be found in
Note 2 to the Consolidated Financial Statements.
The increase in other (expense) in 1999 versus 1998 was primarily due to
the write off of miscellaneous equipment determined to be unusable in 1999.
The effective tax rate for 1999 was a benefit of 40.7% compared to a tax
expense of 36.1% in 1998. The 1999 benefit was primarily the result of the
pre-tax loss related to the restructuring charge.
1998 Versus 1997
Consolidated net sales in 1998 decreased by $26.5 million or 8.1% versus 1997.
This decrease was the combination of reduced sales in the Activated Carbon
segment of $21.2 million or 7.1% and underruns in the Engineered Systems segment
of $5.3 million or 18.9%. The overall sales decrease was primarily attributed to
lower volume associated with both segments and the negative effect of foreign
exchange within the Activated Carbon segment. The unfavorable effect of foreign
exchange of $1.1 million was related to the strengthening of the U.S. dollar
versus the Belgian franc, German deutsche mark, and Japanese yen and its
weakening versus the British pound sterling compared to 1997. The volume
decrease within the Activated Carbon segment was primarily associated with
initial fills both in the United States (corn sweetener and municipal
categories) and in Japan (municipal) that occurred in 1997 but did not repeat in
1998. Carbon equipment sales declines, primarily in the cane sugar industry,
were also a contributing factor. The decline in the Engineered Systems segment
was primarily related to decreases in the Advanced Separation Technologies area
as the Company expended resources to perform required warranty work on units in
fabrication or shipped prior to the Company's acquisition of this business.
Overall, new product sales were 12% in 1998, virtually the same percentage as in
1997.
Gross profit before depreciation as a percentage of net sales was 37.5% in
1998 as compared to 38.1% in 1997. The decline in the Activated Carbon segment
was primarily the result of a less profitable mix of sales of carbon products.
In addition, relatively stable fixed manufacturing costs versus lower sales
were somewhat offset by lower variable manufacturing costs. An increase in the
Engineered Systems segment was primarily associated with improvements in the
Advanced Separation Technologies category due to improved project management
and cost control.
Depreciation and amortization increased by $1.2 million due to spending
associated with the Company's new business information system and normal ongoing
capital expenditures.
Selling, general and administrative expenses remained stable in 1998
versus 1997. This was the net effect of unusual expenses in 1998 related to
professional fees associated with recent litigations and the chief executive
officer search, employment contract settlement fees related to the resignation
of the previous chief executive officer, and expenses related to training
associated with the new business information system. These expenses were
partially offset by the beginnings of savings associated with the 1998
restructuring and continued cost control procedures.
14
<PAGE>
Research and development expenses also remained constant in 1998 versus
1997. These expenses were 2.8% in 1998 versus 2.5% in 1997 based on the sales
revenues in the respective years. This increase was primarily due to reduced
sales in 1998.
In the third quarter of 1998, the Company initiated a worldwide plan to
reduce costs and realign the organizational structure. Costs associated with
this restructuring were $8.1 million and included employee severance and
termination benefit costs and asset write-offs. This plan reduced costs by
approximately $10.0 million on an annualized basis after full implementation.
These costs were partially offset by the partial reversal of the unused
restructuring reserve of $.7 million from the 1994 closing of the Brilon Wald,
Germany plant. Additional information on restructuring charges can be found in
Note 2 to the Consolidated Financial Statements.
Interest expense increased in 1998 by $.7 million due primarily to
increased debt.
The increase in other (expense) during 1998 versus 1997 was primarily due
to an increase in taxes, other than income taxes.
The effective tax rate in 1998 was 36.1% versus 35.3% in 1997. The
increase was due to decreased benefits associated with foreign income,
primarily related to exchange rates, mitigated by overall foreign tax losses.
Year 2000
The Company encountered no unusual problems during the rollover to the Year
2000. To date, no Year 2000-related problems have been encountered with third
parties. Until all processes and systems are run in production for the first
time after the rollover and through the year, there is the potential for date-
related problems. The Company plans to continue monitoring its processes and
systems to ensure dates and date-related information continue to be processed
correctly.
Working Capital and Liquidity
Cash flows from operating activities were $39.0 million for the year ended
December 31, 1999. This was primarily the net result of the net loss for the
year and a decrease in long-term deferred income taxes offset by depreciation
and amortization, non-cash restructuring write-downs, decreases in inventory,
and an increase in the restructuring reserve. The decrease in inventory (net of
exchange and non-cash restructuring write-downs effects) of $11.1 million was
the result of the implementation of an inventory reduction plan during the
second, third, and fourth quarters of 1999. The restructuring reserve increase
was primarily the result of costs associated with the restructuring plan
implemented during the fourth quarter of 1999 which has an expected completion
date during the third quarter of 2000. The reserve consists primarily of
employee severance and termination benefits. Payments associated with this
reserve are essentially expected to be paid before year-end 2000. When the plan
is fully implemented, annualized savings are expected to be approximately $13.0
million. Additional information on restructuring charges can be found in Note 2
to the Consolidated Financial Statements. Included in cash flow from operating
activities were the negative effects of increases in accounts receivable. The
Company expects to improve these results in 2000 by increased attention to
monies owed by customers. The net effect of foreign currency translation
decreased working capital by $.7 million.
Total debt decreased during the year by $12.5 million. This was primarily
the result of improved cash flows from operating activities, which included the
aforementioned inventory reduction program and ongoing critical review of
capital projects, which resulted in reduced capital spending versus previous
periods. During the year, the Company restructured its United States credit
facility to support current requirements. The new available amount associated
with this facility is $125.0 million, which includes a subfacility for letters
of credit of $30.0 million. Additional information related to this facility can
be found in Note 6 to the Consolidated Financial Statements.
During 1998, the Board of Directors authorized an open market repurchase
program for up to 2,000,000 shares of the Company's common stock. The Company
acquired 19,000 shares at a cost of $.1 million under this program in 1999. At
December 31, 1999, including purchases authorized prior to 1998, there were
2,780,500 treasury shares at a total cost of $27.1 million.
The Company has paid quarterly cash dividends on its common stock since
the third quarter of 1987, the quarter succeeding the one in which the Company
went public. During 1999, the Company paid dividends at a rate of $.32 per
share for a total amount of $12.4 million.
15
<PAGE>
Dividend declaration and payout are at the discretion of the Board of
Directors. Future dividends will depend on the Company's operating results,
financial condition, cash requirements of its businesses, future prospects, and
other factors considered relevant by the Board of Directors. During 1999, the
Board of Directors specifically determined that dividends declared would be
related to the past and projected operating results of the Company. In line
with that decision, on December 15, 1999, the Board of Directors declared a
dividend of $.05 per common share which was paid on January 11, 2000. This was
a reduction of $.03 per common share versus recent dividend payments.
The Company expects that cash from operating activities plus cash balances
and available external financing will be sufficient to meet its requirements.
Capital Expenditures and Investments
Capital expenditures were $8.6 million in 1999, $19.4 million in 1998, and $34.5
million in 1997. Expenditures for 1999 primarily included the continuing
investment associated with the new business information system of $1.8 million,
domestic service customer capital of $.7 million, and capacity productivity and
cost reduction-related spending at the Company's manufacturing facilities of
$2.6 million in the United States and $1.3 million in Europe. The 1998
expenditure amount consisted primarily of spending associated with the new
business information system in the amount of $8.7 million, capacity expansion
and cost reduction-related spending at the Big Sandy, Kentucky, and Feluy,
Belgium plants of $3.7 million and $1.8 million, respectively, and domestic
service customer capital of $1.2 million. Included in the 1997 spending amount
were also capacity expansion and cost reduction projects at the Big Sandy,
Kentucky, Pearl River, Mississippi, and Feluy, Belgium plants in the amounts of
$13.2 million, $2.8 million, and $3.6 million, respectively, and an improved
coal handling system at the Big Sandy, Kentucky plant in the amount of $7.0
million. Capital expenditures for 2000 are projected to be approximately $19.0
million and are to include carbon production process improvements, expenditures
to meet plant facilities' environmental requirements, and domestic service
customer capital.
The 1999 and 1998 purchase of businesses amounts represent the
continuation of cash expenditures for 1996 acquisition Advanced Separations
Technologies Incorporated (AST) project failures for projects completed before
the acquisition. These expenditures were previously accrued, and payments are
virtually completed.
The 1997 purchase of businesses amount of $4.5 million included an
increase to the purchase price for AST of $.5 million, cash expended for the
aforementioned AST project failures of $2.7 million, payments of accruals
related to the 1996 acquisitions of $.8 million, and a net expenditure of $.6
million, which increased the Company's ownership percentage in Calgon Far East
Co., Ltd., its Japanese joint venture. The increased purchase price for AST was
due to a higher level of "Adjusted Closing Net Current Assets" than stated in
the purchase agreement. The increased investment in Calgon Far East Co., Ltd.
was effective July 1, 1997 and increased the Company's ownership of that entity
from 50% to 60%, giving it a controlling interest. Cash expended for this
increase in ownership was $1.1 million and was partially offset by cash on this
entity's July 1, 1997 balance sheet of $.5 million, resulting in a net purchase
of business amount of $.6 million.
Prior to the Calgon Far East Co., Ltd. ownership change, the balance sheet
and income statement of this entity were included in the Company's financial
statements under the equity method of accounting. Effective July 1, 1997, the
financial statements have been consolidated into the Company's financial
statements recognizing minority interest on both the balance sheet and income
statement.
Market Risk
Commodity Price Risk
In the normal course of its business, the Company is exposed to market risk or
price fluctuations related to the purchase and production of carbon products and
its inventories of carbon products as well as the cost of natural gas used in
the production of its products. The Company obtains competitive prices for its
products and allows operating results to reflect market price movements dictated
by supply and demand where regulated prices do not exist. The Company uses fixed
price contracts to manage a portion of its coal and natural gas commodity price
risk.
Interest Rate Risk
Substantially all current and long-term debt is based on rates that float with
Euro dollar-based rates or prime rates, and the carrying value approximates fair
value.
Foreign Currency Exchange Risk
The Company is subject to risk of price fluctuations related to anticipated
revenues and operating costs, firm commitments for capital expenditures, and
existing assets or liabilities denominated in currencies other than U.S.
dollars. The Company has made limited use of forward currency contracts to
manage these exposures. At December 31, 1999, no forward contracts were
outstanding. Non-derivative financial instruments subject to foreign exchange
exposure are limited to a foreign currency denominated loan of 14.0 million
Canadian dollars as described in Note 6 to the Consolidated Financial
Statements.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard requires recognition of
all derivatives as either assets or liabilities at fair value. This new
16
<PAGE>
standard may result in additional volatility in both current period earnings
and other comprehensive income as a result of recording recognized and
unrecognized gains and losses resulting from changes in the fair value of
derivative instruments. At adoption, this new standard requires a comprehensive
review of all outstanding derivative instruments to determine whether or not
their use meets the hedge accounting criteria. It is possible that there will
be derivative instruments employed in the Company's businesses that do not meet
all of the designated hedge criteria, and they will be reflected in income on a
mark-to-market basis. Based upon the strategies currently used by the Company
and the level of activity related to forward exchange contracts and
commodity-based derivative instruments in recent periods, the Company does not
anticipate the effect of adoption to have a material impact on either financial
position or results of operations. The effective date of SFAS No. 133 was
amended by SFAS No. 137. The Company plans to adopt the standard effective
January 1, 2001, as required.
REPORT OF MANAGEMENT
Calgon Carbon Corporation
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's 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 PricewaterhouseCoopers LLP, independent accountants. Their
responsibility is to examine the Company's financial statements in accordance
with generally accepted auditing standards in the United States 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.
17
<PAGE>
REPORT OF PRICEWATERHOUSECOOPERS 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, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. 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 in the United States, 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/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 8, 2000
18
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
(Dollars in thousands except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 296,152 $301,040 $327,500
- --------------------------------------------------------------------------------------------------
Cost of products sold (excluding depreciation) 196,194 188,126 202,778
Depreciation and amortization 22,882 21,612 20,436
Selling, general and administrative expenses 55,145 56,076 56,211
Research and development expenses 7,742 8,437 8,331
Restructuring charges 29,838 7,349 1,532
- --------------------------------------------------------------------------------------------------
311,801 281,600 289,288
- --------------------------------------------------------------------------------------------------
Income (loss) from operations (15,649) 19,440 38,212
Interest income 98 181 325
Interest expense (4,893) (4,771) (4,057)
Other (expense)--net (2,523) (1,834) (1,440)
- --------------------------------------------------------------------------------------------------
Income (loss) before income taxes and minority interest (22,967) 13,016 33,040
Provision (benefit) for income taxes (9,339) 4,699 11,661
- --------------------------------------------------------------------------------------------------
Income (loss) before minority interest (13,628) 8,317 21,379
Minority interest (101) (48) 105
- --------------------------------------------------------------------------------------------------
Net income (loss) (13,729) 8,269 21,484
Other comprehensive income (loss), net of tax (benefit)
of ($2,299), $1,017 and ($2,400), respectively (4,270) 1,889 (4,458)
- --------------------------------------------------------------------------------------------------
Comprehensive Income (Loss) $ (17,999) $ 10,158 $ 17,026
==================================================================================================
Net income (loss) per common share (basic and diluted) $(.35) $.21 $.54
==================================================================================================
Weighted average shares, in thousands 38,779 39,504 39,696
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
CONSOLIDATED BALANCE SHEET
Calgon Carbon Corporation
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,194 $ 1,325
Receivables, net of allowance of $3,843 and $3,283 58,886 56,463
Inventories 44,368 57,816
Other current assets 9,032 14,236
- ----------------------------------------------------------------------------------------------
Total current assets 116,480 129,840
Property, plant and equipment, net 161,752 189,250
Intangibles 76,620 78,342
Other assets 7,288 9,562
- ----------------------------------------------------------------------------------------------
Total assets $362,140 $406,994
==============================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Long-term debt due within one year $ 4,604 $ 22,131
Accounts payable and accrued liabilities 30,495 33,704
Restructuring reserve 19,244 4,909
Payroll and benefits payable 8,617 10,141
Accrued income taxes 2,396 933
- ----------------------------------------------------------------------------------------------
Total current liabilities 65,356 71,818
Long-term debt 76,120 71,101
Deferred income taxes 26,650 42,641
Other liabilities 11,020 9,826
- ----------------------------------------------------------------------------------------------
Total liabilities 179,146 195,386
- ----------------------------------------------------------------------------------------------
Minority interest 1,878 1,622
- ----------------------------------------------------------------------------------------------
Commitments and contingencies (Note 14) - -
- ----------------------------------------------------------------------------------------------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000 shares authorized,
41,582,632 and 41,503,960 shares issued 416 415
Additional paid-in capital 63,371 62,868
Retained earnings 138,936 163,911
Accumulated other comprehensive income 5,508 9,778
- ----------------------------------------------------------------------------------------------
208,231 236,972
Treasury stock, at cost, 2,780,500 and 2,761,500 shares (27,115) (26,986)
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 181,116 209,986
- ----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $362,140 $406,994
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
(Dollars in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $(13,729) $ 8,269 $ 21,484
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 22,882 21,612 20,436
Non-cash restructuring asset and liability write-downs 11,127 434 -
Employee benefit plan provisions 2,161 2,293 488
Changes in assets and liabilities--net of effects from
purchase of businesses, exchange and non-cash
restructuring asset and liability write-downs:
(Increase) decrease in receivables (3,310) 12,595 (3,264)
(Increase) decrease in inventories 11,124 (7,248) (7,316)
(Increase) decrease in other current assets 3,508 (179) (2,215)
Increase (decrease) in restructuring reserve 15,215 (1,053) (544)
Increase (decrease) in accounts payable and accruals 851 (14,315) 6,366
Increase (decrease) in long-term deferred income taxes (net) (11,790) 5,220 3,526
Other items--net 923 (711) (1,421)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 38,962 26,917 37,540
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of businesses (813) (6,055) (4,546)
Property, plant and equipment expenditures (8,582) (19,375) (34,481)
Proceeds from disposals of equipment 1,818 830 1,607
- --------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (7,577) (24,600) (37,420)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net proceeds from (repayments of) borrowings (13,243) 11,183 5,202
Treasury stock purchases (129) (6,920) -
Common stock dividends (12,411) (12,708) (12,697)
Other - - 767
- --------------------------------------------------------------------------------------------------------------------
Net cash (used in) financing activities (25,783) (8,445) (6,728)
- --------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (2,733) (529) (849)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 2,869 (6,657) (7,457)
Cash and cash equivalents, beginning of period 1,325 7,982 15,439
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 4,194 $ 1,325 $ 7,982
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Calgon Carbon Corporation
<TABLE>
<CAPTION>
Accumulated
Other
Common Additional Compreh- Treasury Stock
Shares Common Paid-In Retained ensive -----------------
(Dollars in thousands) Issued Shares Capital Earnings Income Sub-Total Shares Amount Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 41,435,960 $414 $62,102 $159,493 $12,347 $234,356 1,761,300 $(20,066) $214,290
1997
Net income - - - 21,484 - 21,484 - - 21,484
Employee stock plans 68,000 1 766 - - 767 - - 767
Common stock dividends
Cash ($.32 per share) - - - (12,702) - (12,702) - - (12,702)
Translation adjustments - - - - (4,458) (4,458) - - (4,458)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 41,503,960 415 62,868 168,275 7,889 239,447 1,761,300 (20,066) 219,381
- ------------------------------------------------------------------------------------------------------------------------------------
1998
Net income - - - 8,269 - 8,269 - - 8,269
Common stock dividends
Cash ($.32 per share) - - - (12,633) - (12,633) - - (12,633)
Translation adjustments - - - - 1,889 1,889 - - 1,889
Treasury stock purchased - - - - - - 1,000,200 (6,920) (6,920)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 41,503,960 415 62,868 163,911 9,778 236,972 2,761,500 (26,986) 209,986
- ------------------------------------------------------------------------------------------------------------------------------------
1999
Net (loss) - - - (13,729) - (13,729) - - (13,729)
Employee and director
stock plans 78,672 1 503 - - 504 - - 504
Common stock dividends
Cash ($.29 per share) - - - (11,246) - (11,246) - - (11,246)
Translation adjustments - - - - (4,270) (4,270) - - (4,270)
Treasury stock purchased - - - - - - 19,000 (129) (129)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 41,582,632 $416 $63,371 $138,936 $ 5,508 $208,231 2,780,500 $(27,115) $181,116
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Calgon Carbon Corporation
1. Statement of Accounting Policies
- --------------------------------------------------------------------------------
Operations
The Company's operations are principally conducted in two business segments.
Both segments include the production, design and marketing of products and
services specifically developed for the purification, separation and
concentration of liquids and gases. One segment, Activated Carbon, relies on
activated carbon as a base material, while the other, Engineered Systems, relies
on a variety of other methods and materials which do not involve activated
carbon. The Company's largest markets are in the United States, Europe and
Japan. The Company also markets in the Far East, Latin America and Asia.
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 are owned directly by the Company and are operated as
branches. The consolidated financial statements also include the accounts of the
Company's 60% ownership interest in Calgon Far East Co., Ltd. Consolidation of
less than 100% owned entities results in recording and presentation of minority
interest. 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 represent other comprehensive income and 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 except for major equipment projects where revenues are
recognized under the percentage of completion method.
Inventories
Inventories are carried at the lower of cost or market. Inventory costs are
primarily determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment expenditures are recorded at cost. Repair and
maintenance costs are expensed as incurred. Depreciation for financial statement
purposes is computed on the straight-line method over the estimated service
lives of the assets, which are from twenty to thirty years for buildings and
land improvements, fifteen years for machinery and equipment, ten years for
customer capital, seven to ten years for furniture and vehicles and seven years
for the capitalized portion of the recently implemented business information
system.
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.
Long-Lived Assets
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
requires that long-lived assets, including goodwill, be reviewed for impairment
and written down to fair value whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. For assets
to be held and used, including related goodwill, the Company uses expected cash
flows (undiscounted and without interest charges) from the use of the assets to
assess the recoverability of the assets. If the sum of the expected future cash
flows is less than the carrying amount of the asset, a fair value assessment of
the asset would be completed using the best estimates of fair value available in
the circumstances. The Company adopted this statement upon its issuance and has
determined that no impairment losses need to be recognized for assets to be held
and used. Assets to be disposed of are reported at the lower of carrying amount
or fair value less cost to sell.
23
<PAGE>
Reclassification
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
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 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.
Net Income Per Common Share
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding plus all dilutive potential common
shares outstanding during the period. Dilutive common shares are determined
using the treasury stock method. Under the treasury stock method, exercise of
options is assumed at the beginning of the period when the average stock price
during the period exceeds the exercise price of outstanding options and common
shares are assumed issued. The proceeds from exercise are assumed to be used to
purchase common stock at the average market price during the period. The
incremental shares to be issued are considered to be the dilutive potential
common shares outstanding.
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.
2. Restructuring Charges
- --------------------------------------------------------------------------------
During the fourth quarter of 1999, the Company adopted a strategy aimed at
lowering costs to serve the activated carbon markets, investing to grow its
service and solutions businesses and repositioning its proven technologies to
bring more value to consumers. In order to achieve these goals, the Company has
been reorganized as a globally integrated business with emphasis on becoming a
service business.
As part of this strategy, three activated carbon production lines will be
shut down and dismantled. One of these lines is at the Feluy, Belgium location,
another is at Neville Island, Pennsylvania and the third is at the Company's Big
Sandy, Kentucky facility. The cessation of activated carbon production activity
at the Feluy plant will result in underutilized office facilities and enable the
Company to transfer office activity from its current location in Brussels,
Belgium to the plant. Operations at several other locations will be consolidated
to gain global productivity and centralized processes to promote corporate-wide
sharing of technical, operational and financial information. Included in this
consolidation will be the transfer of production and administration activities
from Markham, Ontario, Canada and Lakeland, Florida to Pittsburgh, Pennsylvania.
With the exception of asset write-offs, these restructuring charges will require
cash outlays. The implementation was begun in December 1999 and is expected to
be completed before the end of the third quarter of 2000 with minor contractual
cash outlays being deferred through the second quarter of 2001. The number of
employee separations from this restructuring is expected to be 147. These
separations will occur primarily at the locations impacted by the strategy and
will be spread evenly between plant personnel and administrative positions.
Additional hires will result in a net staff reduction of approximately 120
positions. Separations through December 31, 1999 were 18.
In the third quarter of 1998, the Company initiated a worldwide plan to
reduce costs and realign the organizational structure. The implementation was
begun in September 1998 and is essentially completed, although contractual cash
outlays will be made in the second quarter of 2000. With the exception of the
asset write-offs, these restructuring charges required cash outlays. The number
of planned employee separations from this restructuring was 131. All separations
have been completed and were in line with the plan. An excess accrual in the
amount of $809,000 resulted in a favorable adjustment to restructuring charges
in 1999.
During the fourth quarter of 1998, the Company essentially concluded its
1994 restructuring plan by transferring ownership of the Brilon Wald, Germany
plant to the local community. The plant was shut down in 1995. The transaction
provided that the Company contribute 9,000,000 deutsche marks (approximately
$5,300,000) to the community to be
24
<PAGE>
used for demolition and development costs. These costs had been accrued by the
Company through the initial restructuring plan. An excess accrual in the amount
of $744,000 resulted in a favorable adjustment to restructuring charges in 1998.
At the end of 1998, an accrual for final legal fees remained. During the fourth
quarter of 1999, the balance remaining in the accrual was determined to be
unnecessary and therefore a favorable adjustment of $61,000 was included in the
restructuring charge for 1999.
During the fourth quarter of 1997, the Company initiated a plan to
consolidate the manufacturing operations and research activities of its Advanced
Oxidation Technologies unit in Tucson, Arizona to its Markham, Ontario, Canada
site. This consolidation was completed during the first quarter of 1998. As
stated previously, activities from this site will be relocated to Pittsburgh,
Pennsylvania in 2000.
The following table sets forth the Company's restructuring charges for the
years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
(Thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee severance and termination benefit costs $13,754 $ 6,303 $ 96
Asset write-offs 11,997 1,178 1,201
Other costs 4,957 612 235
- ------------------------------------------------------------------------------------------------------
$30,708 $ 8,093 $1,532
Excess 1998 plan accrual (809) - -
Excess Brilon Wald, Germany accrual (61) (744) -
- ------------------------------------------------------------------------------------------------------
Total $29,838 $ 7,349 $1,532
======================================================================================================
<CAPTION>
The restructuring reserve balances at
December 31, 1999 and 1998 included:
December 31
-----------------------
(Thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 Plan
Employee severance and termination benefit costs $13,062 $ -
Other costs 4,882 -
- ------------------------------------------------------------------------------------------------------
$17,944 $ -
- ------------------------------------------------------------------------------------------------------
1998 Plan
Employee severance and termination benefit costs $ 1,091 $4,393
Other costs 209 407
- ------------------------------------------------------------------------------------------------------
$ 1,300 $4,800
- ------------------------------------------------------------------------------------------------------
1994 Plan
Demolition, disposition and environmental costs associated
with the closing of the Brilon Wald, Germany plant - 109
- ------------------------------------------------------------------------------------------------------
Total $19,244 $4,909
======================================================================================================
</TABLE>
25
<PAGE>
3. Inventories
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
--------------------------
(Thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 9,453 $ 12,943
Finished goods 34,915 44,873
- --------------------------------------------------------------------------------
Total $ 44,368 $ 57,816
================================================================================
</TABLE>
4. Property, Plant and Equipment
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
--------------------------
(Thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 13,915 $ 13,524
Buildings 23,394 22,767
Machinery and equipment 267,175 305,278
Furniture and vehicles 21,069 19,450
- --------------------------------------------------------------------------------
$ 325,553 $ 361,019
Less accumulated depreciation (163,801) (171,769)
- --------------------------------------------------------------------------------
Net $ 161,752 $ 189,250
================================================================================
</TABLE>
5. Intangibles
- --------------------------------------------------------------------------------
The following summarizes intangible assets, net of
accumulated amortization of $6,483,000 and $4,341,000
at December 31, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
December 31
--------------------------
(Thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 73,054 $ 74,638
Other 3,566 3,704
- --------------------------------------------------------------------------------
Total $ 76,620 $ 78,342
================================================================================
</TABLE>
6. Long-Term Debt
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
-------------------------
(Thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
United States credit facilities $ 55,000 $ 68,400
Term loan 9,628 9,044
Pollution control debt and Industrial revenue bonds 8,139 8,234
German credit facility 379 1,130
Other 7,578 6,424
- --------------------------------------------------------------------------------
Total $ 80,724 $ 93,232
Less current maturities of long-term debt (4,604) (22,131)
- --------------------------------------------------------------------------------
Net $ 76,120 $ 71,101
================================================================================
</TABLE>
26
<PAGE>
United States Credit Facilities
During the second quarter of 1999, the Company entered into a new revolving
United States credit facility. This new facility replaced the previous ones
which, in total, had a borrowing availability of $100.0 million. The new, multi-
bank credit agreement originally consisted of a $114.6 million five-year
revolving credit facility expiring in May 2004 and a $50.4 million 364-day
revolving credit facility expiring in May 2000. This was subsequently lowered to
$86.8 million for the five-year revolving portion and $38.2 million for the 364-
day revolving portion because it was determined that the lower amount would be
adequate to meet the Company's needs. Included in this facility is a letter of
credit subfacility which may not exceed $30.0 million. Annual facility fees are
paid on the committed amount. Availability under this credit facility at
December 31, 1999 was $64.6 million. The interest rate is based upon Euro
dollar-based rates with other interest rate options available. The weighted
average interest rate on the outstanding balance was 6.8% at December 31, 1999.
Term Loan
In June 1996, the Company entered into a five-year unsecured $9.6 million (14.0
million Canadian dollars) term loan with a Canadian bank. The interest rate is
based upon either the bank's Prime Rate or a Bankers Acceptance Rate. As of
December 31, 1999, the interest rate was 5.2%.
Pollution Control Debt and Industrial Revenue Bonds
The City of Ashland, Kentucky Floating Rate Pollution Control Revenue bonds
totaling $5.1 million bear interest at a floating rate and are due October 1,
2006. As of December 31, 1999, the interest rate was 5.3%. These pollution
control bonds are secured by certain pollution control assets located at the
Company's Big Sandy, Kentucky plant. The German pollution control loan matures
in 2000 and has a fixed interest rate of 6.0%.
The Mississippi Industrial Revenue Bonds totaling $3.0 million bear
interest at a floating rate and mature in May 2009. The interest rate as of
December 31, 1999 was 5.7%. These Bonds were issued to finance certain equipment
acquisitions at the Company's Pearl River, Mississippi plant.
German Credit Facility
The Company maintains a bank credit facility in Germany which provides for
borrowings up to $2.6 million (5 million deutsche marks). During the year, this
facility was reduced from 25 million deutsche marks because it was determined
that this amount was excessive. 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. Availability under this credit
facility at December 31, 1999 was $2.2 million (4.3 million deutsche marks). The
weighted average interest rate on the loans outstanding at December 31, 1999 was
5.3%.
Other
Other consists of borrowings primarily from Japanese banks at various interest
rates ranging from 1.0% to 4.1% and maturities through 2007. The weighted
average interest rate on the loans outstanding was 2.1% at December 31, 1999.
Restrictive Covenants
The United States credit facilities' covenants impose financial restrictions on
the Company, including maintaining certain ratios of debt to capital, operating
income to interest expense and cash flow to debt. At December 31, 1999, the
Company was in compliance with all covenants relating to the credit facilities
in the United States. The German credit facility and the Canadian term loan have
no financial covenants.
Fair Value of Long-Term Debt
Substantially all long-term debt is based on rates that float with Euro dollar-
based rates or prime rates and accordingly the carrying value of these
obligations approximate their fair value.
Maturities of Debt
The Company is obligated to make principal payments on debt outstanding at
December 31, 1999 of $4,604,000 in 2000, $10,582,000 in 2001, $853,000 in 2002,
$685,000 in 2003, $55,287,000 in 2004 and $8,713,000, thereafter.
27
<PAGE>
7. Lease Commitments
- -------------------------------------------------------------------------------
The Company has entered into leases covering principally office, research and
warehouse space, office equipment and vehicles.
Future minimum rental payments required under all operating leases that
have remaining noncancelable lease terms in excess of one year are $6,448,000 in
2000, $4,517,000 in 2001, $3,951,000 in 2002, $3,782,000 in 2003, $3,724,000 in
2004 and $7,555,000 thereafter.
Total rental expenses on all operating leases were $7,598,000, $7,097,000
and $7,195,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
8. Shareholders' Equity
- -------------------------------------------------------------------------------
On July 13, 1993, the Board of Directors authorized the Company to purchase up
to 2,000,000 shares, or approximately 5% of its common stock. This authorization
resulted in the purchase of 1,761,300 shares. On August 24, 1998, the Board of
Directors authorized the purchase of an additional 2,000,000 shares. In
conformance with those authorizations, purchases have been made from time to
time and the repurchased shares are held as treasury stock. During 1999, 19,000
shares were purchased at a cost of $129,000. During 1998, 1,000,200 shares were
purchased at a cost of $6,920,000. No shares were purchased during 1997. As of
December 31, 1999, the Company had purchased 2,780,500 shares at a cost of
$27,115,000. At December 31, 1998, the Company had purchased 2,761,500 shares of
its common stock at an aggregate cost of $26,986,000.
The Board of Directors adopted a Stockholder Rights Plan in January 1995,
designed to guard against (1) 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. The Rights can be redeemed by
the Board of Directors under certain circumstances, in which case the Rights
will not be exchangeable for shares.
28
<PAGE>
9. Stock Compensation Plans
- -------------------------------------------------------------------------------
At December 31, 1999, the Company had two stock-based compensation plans that
are described below.
Employee 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 and are no longer exercisable after the
expiration of four to ten years from the date of grant. Of the options granted
in 1999, 197,250 are performance-based options that vest immediately in various
increments based upon the Company's achievement of four key 1999 measures and
expire five years from the date of grant. Thirty percent of these options vested
in January 2000. No compensation cost has been recorded in relation to the
performance shares since the fair market value of the Company's stock was less
than the option price of the related shares as of December 31, 1999.
A summary of the Plan activity for the years ended December 31, 1999, 1998
and 1997 is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 691,500 $11.11 706,500 $11.19 764,000 $11.45
Granted 657,250 6.43 60,000 11.75 60,000 13.69
Exercised - - - - (68,000) 11.27
Canceled (129,500) 10.42 (75,000) 12.39 (49,500) 18.13
Outstanding at end of year 1,219,250 8.66 691,500 11.11 706,500 11.19
Options exercisable at year end 575,500 365,100 251,600
Weighted-average fair value of
options granted during the year $1.74 $3.32 $2.49
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about
stock options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------- -----------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.06 to $17.88 1,219,250 5.5 Years $8.66 575,500 $10.08
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Non-Employee Directors' Stock Option Plan
The 1993 Non-Employee Directors' Stock Option Plan, as amended in 1997, provides
for an annual grant on the day following the Annual Meeting of Stockholders of
option shares equal to a number of shares which will result in a Black-Scholes
calculated value of $25,000 per Director on the date of grant. The options vest
and become exercisable six months after the date of grant and, in general,
expire ten years after the date of grant. The amended Plan was not implemented
until 1999. There are previously issued options that are still outstanding.
A summary of the Plan activity for the years ended December 31, 1999, 1998
and 1997 is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 13,700 $15.50 23,200 $ 15.50 16,100 $15.50
Granted 80,500 6.53 - - 8,400 15.50
Canceled - - (9,500) 15.50 (1,300) 15.50
Outstanding at end of year 94,200 7.83 13,700 15.50 23,200 15.50
Options exercisable at year end 94,200 13,700 14,800
Weighted-average fair value of
options granted during the year $2.17 - $2.25
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about
stock options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------- -----------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.53 to $15.50 94,200 8.5 Years $7.83 94,200 $7.83
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
The Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for its stock-based compensation plans. 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
(loss) and net income (loss) per common share would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
(Dollars in thousands except per share data) 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) As reported $(13,729) $8,269 $21,484
Pro forma $(14,196) $8,042 $21,217
Net income (loss) per common share
Basic As reported $ (.35) $ .21 $ .54
Pro forma $ (.37) $ .20 $ .53
Diluted As reported $ (.35) $ .21 $ .54
Pro forma $ (.37) $ .20 $ .53
- --------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 4.94% 4.27% 2.98%
Risk-free interest rates 5.37%-6.00% 5.80% 6.13%-6.81%
Expected volatility 39%-54% 32% 23%-27%
Expected lives of options 2-10 years 10 years 3-5 years
- -----------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
10. Pensions
- --------------------------------------------------------------------------------
The Company sponsors defined benefit plans covering substantially all employees.
For U.S. plans, the following tables provide a reconciliation of changes in the
plans' benefit obligations and fair value of assets over the two-year period
ending December 31, 1999 and a statement of the funded status as of December 31
of both years:
<TABLE>
<CAPTION>
December 31
-------------------
(Thousands) 1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------
Reconciliation of benefit obligation
Benefit obligations at January 1 $ 49,235 $43,258
Service cost 2,521 2,529
Interest cost 3,183 3,148
Plan amendments 218 -
Actuarial (gains) losses (13,458) 1,747
Benefits paid (1,664) (1,447)
- -----------------------------------------------------------------------------
Benefit obligations at December 31 $ 40,035 $49,235
- -----------------------------------------------------------------------------
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 45,795 $37,112
Actual return on plan assets 4,467 8,113
Employer contributions 507 2,017
Benefits paid (1,664) (1,447)
- -----------------------------------------------------------------------------
Fair value of plan assets at December 31 $ 49,105 $45,795
- -----------------------------------------------------------------------------
Funded status of plans at December 31 $ 9,070 $(3,440)
Unrecognized net actuarial (gains) losses (16,372) (2,695)
Unrecognized prior service cost 2,448 2,480
- -----------------------------------------------------------------------------
Accrued pension cost at December 31 $ (4,854) $(3,655)
- -----------------------------------------------------------------------------
</TABLE>
For U.S. plans, the following table provides the components of net periodic
pension costs of the plans for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,521 $ 2,529 $ 2,192
Interest cost 3,183 3,148 2,821
Expected return on assets (4,103) (3,409) (2,653)
Prior service cost 250 239 239
Net amortization (145) - -
- ----------------------------------------------------------------------------
Net periodic pension cost $ 1,706 $ 2,507 $ 2,599
- ----------------------------------------------------------------------------
</TABLE>
32
<PAGE>
For U.S. plans, the assumptions used in the measurement of the benefit
obligations are shown in the following table:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Weighted average actuarial assumptions at December 31:
Discount rate 8.00% 6.75%
Expected annual return on plan assets 9.00% 9.00%
Rate of increase in compensation levels 4.00% 4.00%
- ---------------------------------------------------------------------------
</TABLE>
For European plans, the following tables provide a reconciliation of
changes in the plans' benefit obligations and fair value of assets over the two-
year period ending December 31, 1999 and a statement of the funded status as of
December 31 of both years:
<TABLE>
<CAPTION>
December 31
------------------
(Thousands) 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Reconciliation of benefit obligation
Benefit obligations at January 1 $18,946 $ 13,789
Service cost 907 774
Interest cost 921 873
Employee contributions 221 -
Actuarial (gains) losses (2,502) 2,950
Benefits paid (423) (295)
Foreign currency exchange rate changes (1,443) 855
- ---------------------------------------------------------------------------
Benefit obligations at December 31 $16,627 $ 18,946
- ---------------------------------------------------------------------------
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $ 7,334 $ 5,548
Actual return on plan assets 784 525
Employer contributions 837 1,169
Employee contributions 221 -
Benefits paid (423) (135)
Foreign currency exchange rate changes (591) 227
- ---------------------------------------------------------------------------
Fair value of plan assets at December 31 $ 8,162 $ 7,334
- ---------------------------------------------------------------------------
Funded status of plans at December 31 $(8,465) $(11,612)
Unrecognized net actuarial losses 625 3,109
Unrecognized net transition obligation 449 552
- ---------------------------------------------------------------------------
Accrued pension cost at December 31 $(7,391) $ (7,951)
- ---------------------------------------------------------------------------
</TABLE>
33
<PAGE>
For European plans, the following table provides the components of net
periodic pension costs of the plans for the years ended December 31, 1999, 1998
and 1997:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
(Thousands) 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 907 $ 691 $ 621
Interest cost 921 873 895
Expected return on assets (430) (429) (338)
Net amortization 105 14 10
- ---------------------------------------------------------------------------
Net periodic pension cost $1,503 $1,149 $1,188
- ---------------------------------------------------------------------------
</TABLE>
For European plans, the assumptions used in the measurement of the benefit
obligations are shown in the following table:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Weighted average actuarial assumptions at December 31:
Discount rate 5.57% 5.30%
Expected annual return on plan assets 6.85% 6.20%
Rate of increase in compensation levels 3.60% 3.50%
- ---------------------------------------------------------------------------
</TABLE>
The accumulated benefit obligation and fair value of plan assets for
pension plans with accumulated benefit obligations in excess of plan assets were
$9,648,000 and $3,810,000, respectively as of December 31, 1999 and $10,776,000
and $3,854,000, respectively, as of December 31, 1998.
11. Provision for Income Taxes
- --------------------------------------------------------------------------------
The components of the provision (benefit) for
income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
(Thousands) 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $(1,203) $(2,802) $ 5,721
State and local (369) (327) 969
Foreign 820 2,526 1,824
- ---------------------------------------------------------------------------
(752) (603) 8,514
- ---------------------------------------------------------------------------
Deferred
Federal (3,840) 4,480 818
State and local (941) 523 175
Foreign (3,806) 299 2,154
- ---------------------------------------------------------------------------
(8,587) 5,302 3,147
- ---------------------------------------------------------------------------
Provision (benefit) for income taxes $(9,339) $ 4,699 $11,661
- ---------------------------------------------------------------------------
</TABLE>
34
<PAGE>
Income (loss) before income taxes for 1999, 1998 and 1997 includes
($7,503,000), $2,925,000 and $8,396,000, 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
-----------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory rate (35.0)% 35.0% 35.0%
State income taxes, net of federal income tax benefit (3.7) 1.6 2.2
Higher tax (benefit) rate on foreign income (loss) (1.6) 2.4 (.9)
Other-net (0.4) (2.9) (1.0)
- --------------------------------------------------------------------------------------
Effective income tax rate (40.7)% 36.1% 35.3%
- --------------------------------------------------------------------------------------
</TABLE>
The Company has the following operating loss and tax credit carryforwards
as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Expiration
Type Amount Date
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Operating loss carryforwards-domestic $ 9,583 2018
Operating loss carryforwards-foreign $24,242 None
- ----------------------------------------------------------------------------------------
</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, 1999.
The components of deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
December 31
-------------------
(Thousands) 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets
Foreign tax loss and credit carryforwards $ 9,805 $10,028
U.S. net operating loss carryforwards 3,354 -
U.S. tax benefits on deferred foreign income - 759
Accruals 13,292 2,972
Intangibles 407 -
Inventories 988 1,057
Pensions 2,771 2,281
Organization costs 664 664
Other - 123
- --------------------------------------------------------------------------------------
Total deferred tax assets $31,281 $17,884
- --------------------------------------------------------------------------------------
Deferred tax liabilities
Property, plant and equipment $35,902 $36,502
U.S. liability on Belgian deferred tax assets 2,581 -
U.S. liability on German deferred tax assets 5,405 7,275
U.S. liability on deferred foreign income 1,031 -
Cumulative translation adjustment 3,824 6,123
Inventories - 408
Intangibles 2,925 1,623
Other 40 947
- --------------------------------------------------------------------------------------
Total deferred tax liabilities $51,708 $52,878
- --------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
12. Other Information
- --------------------------------------------------------------------------------
Repair and maintenance expenses were $19,068,000, $21,855,000 and $19,778,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
Other (expense)--net includes net foreign currency transaction gains of
$66,000 for the year ended December 31, 1999 and losses of ($147,000) and
($238,000) for the years ended December 31, 1998 and 1997 and taxes other than
on income of ($1,068,000), ($1,078,000) and ($691,000) for the years ended
December 31, 1999, 1998 and 1997, respectively. Also included are losses due to
the write-off of unusable equipment of ($539,000) for the year ended December
31, 1999, with nominal amounts for the years ended December 31, 1998 and 1997.
Deferred taxes included in the translation adjustments for 1999, 1998 and
1997 were ($2,299,000), $976,000 and ($2,449,000), respectively.
13. Supplemental Cash Flow Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid (received) during the year for
Interest (net of $142 capitalized in 1998) $ 5,142 $ 4,737 $ 3,768
Income taxes (net of refunds) $ (748) $ 7,576 $ 9,267
- --------------------------------------------------------------------------------
Bank debt
Borrowings $ 9,443 $ 29,259 $ 19,584
Repayments (22,686) (18,076) (14,382)
- --------------------------------------------------------------------------------
Net proceeds from (repayments of) borrowings $(13,243) $ 11,183 $ 5,202
================================================================================
</TABLE>
14. Litigation
- --------------------------------------------------------------------------------
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.
On January 12, 1998, the Company filed a claim for unspecified damages in
the United States District Court in the Western District of Pennsylvania
alleging among other things that Progress Capital Holdings and Potomac Capital
Investment Corporation materially breached various AST financial and operational
representations and warranties included in the Stock Purchase Agreement. Based
upon information obtained since the acquisition and corroborated in the course
of pre-trial discovery, the Company believes that it has a reasonable basis for
this claim and intends to vigorously pursue reimbursement for damages sustained.
Neither the Company nor its counsel can predict with certainty the amount, if
any, of recovery that will be obtained from the defendants in this matter.
Accordingly, the Company has not recorded a receivable for this gain contingency
pending further developments in the litigation. It is expected that the matter
will come to trial in 2000.
Trojan Technologies, Inc. (Trojan), a Canadian corporation and a
competitor of the Company, has commenced two patent infringement actions against
the Company and its subsidiary, Calgon Carbon Canada, Inc. These actions are
currently pending in the United States District Court for the Southern District
of Georgia (Savannah) and in Federal Court of Canada, Ottawa, Canada:
Trojan Technologies v. Calgon Carbon Corporation et al.; Civil Action No.
-------------------------------------------------------
CV498-281; U.S. District Court for the Southern District of Georgia.
Trojan Technologies v. Calgon Carbon Corporation and Calgon Carbon
------------------------------------------------------------------
Canada, Inc.; Case No. T-488-99; Federal Court of Canada, Trial Division.
- ------------
36
<PAGE>
Both are civil suits brought by Trojan for the alleged infringement of U.S.
Patent No. 5,590,390 (the '390 patent) in the Southern District of Georgia
action and Canadian Patent No. 2,117,040 (the '040 patent) in the Ottawa action.
Both suits seek monetary and injunctive relief for the alleged infringement of
these patents from the manufacture, use and sale of the Company's ultraviolet
(UV) municipal wastewater treatment system known as the Aurora UV(tm) system.
The Company has denied infringement and has also asserted the defense of patent
invalidity in both suits. In addition, the Company has brought counterclaims for
unfair competition and antitrust violations against Trojan in the U.S. case,
based upon misuse of the '390 patent to suppress competition in the medium
pressure UV municipal wastewater disinfection market. The Company has brought a
counterclaim for a declaration of the invalidity of the '040 patent in the
Canadian case.
The Company is vigorously defending both of these actions and believes
that it will ultimately prevail on the merits of both the United States and
Canadian cases as it does not infringe either of Trojan's patents.
15. Basic and Diluted Net Income Per Common Share
- --------------------------------------------------------------------------------
Computation of basic and diluted net income (loss)
per common share is performed as follows:
<TABLE>
<CAPTION>
For the Year For the Year For the Year
Ended 1999 Ended 1998 Ended 1997
-------------------------- -------------------------- ---------------------------
(Loss) Shares Income Shares Income Shares
(Dollars in thousands, except per share amounts) (Numerator) (Denominator) (Numerator) (Denominator) (Numerator) (Denominator)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Net Income (Loss) Per Common Share
Income (loss) available to
common stockholders $(13,729) 38,778,974 $ 8,269 39,504,292 $21,484 39,696,008
Effect of Dilutive Securities
Options - 17,117 88,911
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted Net Income (Loss) Per Common Share
Income (loss) available to common
stockholders plus assumed conversion $(13,729) 38,778,974 $ 8,269 39,521,409 $21,484 39,784,919
- -----------------------------------------------------------------------------------------------------------------------------------
Basic Net Income (Loss) Per Common Share $ (.35) $ .21 $ .54
Diluted Net Income (Loss) Per Common Share $ (.35) $ .21 $ .54
===================================================================================================================================
</TABLE>
As of December 31, 1999, there were 1,313,450 options outstanding with an
exercise price range of between $6.06 and $17.88 per share. The 1999 diluted
earnings per share calculation excluded the effect of 10,862 dilutive securities
with an exercise price range of between $6.06 and $6.53 per share depending on
the average stock prices during the period, because the effect was antidilutive.
For the year ended December 31, 1998, there were 705,200 options outstanding
with exercise prices ranging from $10.50 to $17.88 per share. The diluted
earnings per share calculation included those with an exercise price range of
between $10.50 and $11.38 per share. For the year ended December 31, 1997,
options outstanding of 729,700 had an exercise price range from $10.50 to $21.88
per share. The diluted earnings per share calculation included those with an
exercise price range of between $10.50 and $13.13 per share.
37
<PAGE>
16. Segment Information
- --------------------------------------------------------------------------------
In 1998, the Company adopted SFAS No. 131. The 1997 segment information has been
restated to present the Company's two reportable segments: 1. Activated Carbon
and 2. Engineered Systems. Both segments produce, design and market products and
services specifically developed for the purification, separation and
concentration of liquids and gases and both sell to the same markets. The
Activated Carbon segment includes production facilities in Pittsburgh,
Pennsylvania (2 locations); Big Sandy, Kentucky; Pearl River, Mississippi; Blue
Lake, California; Feluy, Belgium; Grays, England; Houghton Le Spring, England;
Bodenfelde, Germany; and Fukui Prefecture, Japan. Office facilities are located
in Pittsburgh, Pennsylvania; Vero Beach, Florida and Brussels, Belgium. The
Engineered Systems segment has manufacturing and office facilities in Lakeland,
Florida and Markham, Ontario, Canada. The following segment related information
is presented for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Activated Carbon Segment
Carbon $142,333 $149,120 $162,760
Service 88,787 89,939 91,697
Carbon equipment 22,420 20,009 24,875
Charcoal and liquid 16,896 19,387 20,315
- ----------------------------------------------------------------------------------------------------------
270,436 278,455 299,647
- ----------------------------------------------------------------------------------------------------------
Engineered Systems Segment
Advanced Oxidation Technologies 8,746 8,051 7,631
Advanced Separation Technologies 16,970 14,534 20,222
- ----------------------------------------------------------------------------------------------------------
25,716 22,585 27,853
- ----------------------------------------------------------------------------------------------------------
Consolidated net sales $296,152 $301,040 $327,500
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) from operations before
amortization and restructuring charges
Activated Carbon $ 14,727 $ 29,412 $ 43,938
Engineered Systems 1,765 (225) (1,783)
- ----------------------------------------------------------------------------------------------------------
$ 16,492 $ 29,187 $ 42,155
Reconciling items
Restructuring charges (29,838) (7,349) (1,532)
Amortization of intangibles and organization costs (2,303) (2,398) (2,411)
Interest income 98 181 325
Interest expense (4,893) (4,771) (4,057)
Other expense--net (2,523) (1,834) (1,440)
- ----------------------------------------------------------------------------------------------------------
Consolidated income (loss) before income taxes and minority interest $(22,967) $ 13,016 $ 33,040
==========================================================================================================
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation
Activated Carbon $ 19,885 $ 18,351 $ 17,114
Engineered Systems 694 863 911
- ----------------------------------------------------------------------------------------------------------
$ 20,579 $ 19,214 $ 18,025
Amortization of intangibles and organization costs 2,303 2,398 2,411
- ----------------------------------------------------------------------------------------------------------
Consolidated depreciation and amortization $ 22,882 $ 21,612 $ 20,436
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total assets
Activated Carbon $280,048 $319,736 $323,677
Engineered Systems 82,092 87,258 95,363
- ----------------------------------------------------------------------------------------------------------
Consolidated total assets $362,140 $406,994 $419,040
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property, plant and equipment expenditures
Activated Carbon $ 8,140 $ 18,779 $ 33,650
Engineered Systems 442 596 831
- ----------------------------------------------------------------------------------------------------------
Consolidated property, plant and equipment expenditures $ 8,582 $ 19,375 $ 34,481
==========================================================================================================
</TABLE>
Geographic Information
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $163,098 $162,481 $173,858
Germany 29,115 29,192 30,800
United Kingdom 18,506 20,398 31,158
Japan 13,498 17,486 11,897
Other 71,935 71,483 79,787
- ----------------------------------------------------------------------------------------------------------
Consolidated net sales $296,152 $301,040 $327,500
=========================================================================================================
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
December 31
----------------------------------
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-lived assets
United States $197,139 $214,570 $215,204
Belgium 14,487 24,442 24,253
Germany 8,360 9,899 9,867
Canada 6,818 7,386 9,292
Japan 7,208 7,299 7,131
United Kingdom 5,314 6,354 4,673
France 111 151 166
- ----------------------------------------------------------------------------------------------------------
$239,437 $270,101 $270,586
Deferred taxes 6,223 7,053 8,863
- ----------------------------------------------------------------------------------------------------------
Consolidated long-lived assets $245,660 $277,154 $279,449
==========================================================================================================
</TABLE>
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.
40
<PAGE>
Six-Year Summary Selected Financial and Statistical Data
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------
(Dollars in thousands, except per share data) 1999 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $296,152 $301,040 $327,500 $290,196 $291,898 $274,244
Income (loss) from operations $(15,649) $ 19,440 $ 38,212 $ 32,834 $ 32,087 $(16,281)
Interest expense $ 4,893 $ 4,771 $ 4,057 $ 752 $ 620 $ 752
Net income (loss) (a)(b)(c)(d) $(13,729) $ 8,269 $ 21,484 $ 21,061 $ 20,438 $ (8,319)
Percent of pre-tax income (loss) to sales (7.8)% 4.3% 10.1% 11.3% 10.6% (6.6)%
Net income (loss) per common share--
basic (a)(b)(c)(d) $ (.35) $ .21 $ .54 $ .52 $ .51 $ (.20)
Net income (loss) per common share--
diluted (a)(b)(c)(d) $ (.35) $ .21 $ .54 $ .52 $ .50 $ (.20)
Dividends declared per common share $ .29 $ .32 $ .32 $ .32 $ .80 $ .16
- ----------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at year end):
Working capital $ 51,124 $ 58,022 $ 57,252 $ 64,925 $ 81,774 $ 81,828
Total assets $362,140 $406,994 $419,040 $392,983 $334,651 $341,488
Long-term debt $ 76,120 $ 71,101 $ 72,297 $ 65,837 $ 5,608 $ 6,401
Treasury stock, at cost $ 27,115 $ 26,986 $ 20,066 $ 20,066 $ 12,328 $ 12,328
- ----------------------------------------------------------------------------------------------------------------------
Other Selected Data (at year end):
Return (loss) on average
shareholders' equity (7)% 4% 10% 10% 9% (4)%
Ratio of total debt to total capitalization 31 % 31% 27% 25% 6% 4%
Current ratio 178 % 181% 170% 198% 229% 224%
Effective tax rate (40.7)% 36.1% 35.3% 36.0% 33.9% (54.1)%
Treasury stock, in thousands 2,781 2,762 1,761 1,761 1,006 1,006
Shares outstanding, in thousands 38,802 38,742 39,743 39,675 40,419 40,419
Book value per outstanding
common share $ 4.67 $ 5.42 $ 5.52 $ 5.40 $ 5.35 $ 5.59
Market value of common stock $ 5.88 $ 7.50 $ 10.75 $ 12.25 $ 12.00 $ 10.00
Price earnings ratio of stock prices - 35.7 19.9 23.6 23.5 -
Capital expenditures $ 8,582 $ 19,375 $ 34,481 $ 14,375 $ 12,681 $ 7,193
Number of registered shareholders 1,861 803 866 984 1,102 1,306
Number of employees 1,185 1,195 1,341 1,297 1,097 1,267
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) After an after-tax charge in 1994 of $24.25 million or $.59 per share
resulting from a restructuring of operations.
(b) After an after-tax charge in 1997 of $.95 million or $.03 per share
resulting from a restructuring of operations.
(c) After an after-tax charge in 1998 of $4.70 million or $.12 per share
resulting from a restructuring of operations.
(d) After an after-tax charge in 1999 of $18.02 million or $.46 per share
resulting from a restructuring of operations.
41
<PAGE>
Quarterly Financial Data-Unaudited
<TABLE>
<CAPTION>
1999 1998
------------------------------------------- ----------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
(Thousands except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $71,792 $80,215 $73,822 $ 70,323 $69,508 $85,713 $72,636 $73,183
Gross profit $26,110 $28,346 $25,417 $ 20,085 $28,533 $32,026 $25,380 $26,975
Net income (loss) $ 2,594 $ 2,692 $ 1,800 $(20,815) $ 3,569 $ 5,217 $(2,931) $ 2,414
============================================================================================================================
Common Stock Data:
Net income (loss) per common
share (basic and diluted) $ .07 $ .07 $ .05 $ (.54) $ .09 $ .13 $ (.07) $ .06
============================================================================================================================
Average common
shares outstanding 38,726 38,784 38,802 38,802 39,743 39,743 39,640 38,899
============================================================================================================================
</TABLE>
Common Shares and Market Information
Common shares are traded on the New York Stock Exchange under the trading symbol
CCC. There were 1,861 registered shareholders at year end.
Quarterly Common Stock Price Ranges and Dividends
<TABLE>
<CAPTION>
1999 1998
-------------------------------- ---------------------------------
Fiscal Quarter High Low Dividend High Low Dividend
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First 7 3/4 5 1/16 $.080 13 7/8 9 13/16 $.080
Second 6 3/4 5 1/8 $.080 12 1/2 9 3/4 $.080
Third 7 7/16 5 3/4 $.080 11 1/4 5 7/8 $.080
Fourth 7 3/8 5 7/16 $.050 8 9/16 5 5/16 $.080
==============================================================================================================
</TABLE>
42
<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
8, 2000, relating to the financial statements, which appears on page 18 of the
Annual Report to Stockholders which is incorporated in this Annual Report on
Form 10-K.
PRICEWATERHOUSECOOPERS LLP
600 Grant Street
Pittsburgh, PA 15219-2793
March 27, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,194
<SECURITIES> 0
<RECEIVABLES> 62,729
<ALLOWANCES> 3,843
<INVENTORY> 44,368
<CURRENT-ASSETS> 116,480
<PP&E> 325,553
<DEPRECIATION> 163,801
<TOTAL-ASSETS> 362,140
<CURRENT-LIABILITIES> 65,356
<BONDS> 0
0
0
<COMMON> 36,672
<OTHER-SE> 144,444
<TOTAL-LIABILITY-AND-EQUITY> 362,140
<SALES> 296,152
<TOTAL-REVENUES> 296,152
<CGS> 196,194
<TOTAL-COSTS> 311,801
<OTHER-EXPENSES> 2,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,893
<INCOME-PRETAX> (22,967)
<INCOME-TAX> (9,339)
<INCOME-CONTINUING> (13,729)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,729)
<EPS-BASIC> (.35)
<EPS-DILUTED> (.35)
</TABLE>
