UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005 or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-10776
CALGON CARBON CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 25-0530110 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
P.O. Box 717, Pittsburgh, PA 15230-0717
(Address of principal executive offices)
(Zip Code)
(412) 787-6700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 91 days. Yes ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨
Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at March 31, 2005 | |
| Common Stock, $.01 par value | 39,475,425 shares |
FORM 10-Q
QUARTER ENDED March 31, 2005
The Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause the Company’s actual results in the future to differ from performance suggested herein. A specific example of such uncertainties includes references to reductions in working capital. In the context of forward-looking information provided in this Form 10-Q and in other reports, please refer to the discussion of risk factors detailed in, as well as the other information contained in the Company’s filings with the Securities and Exchange Commission.
INDEX
| Page | ||||
| PART 1—FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements |
2 | ||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Results of Operations and Financial Condition |
17 | ||
| Item 4. |
20 | |||
| PART II—OTHER INFORMATION |
||||
| Item 1. |
21 | |||
| Item 4. |
21 | |||
| Item 6. |
21 | |||
| 23 | ||||
| CERTIFICATIONS |
||||
1
| Item 1. | Financial Statements |
INTRODUCTION TO THE FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements included herein have been prepared by Calgon Carbon Corporation (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Management of the Company believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the Company’s audited consolidated financial statements and the notes included therein for the year ended December 31, 2004 filed with the Securities and Exchange Commission by the Company in Form 10-K.
In management’s opinion, the unaudited interim consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, which are necessary for a fair presentation, in all material respects, of financial results for the interim periods presented. Operating results for the first three months of 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.
2
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in Thousands Except Share and Per Share Data)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Net sales |
$ | 83,406 | $ | 71,243 | ||||
| Cost of products sold (excluding depreciation) |
60,613 | 50,012 | ||||||
| Depreciation and amortization |
5,815 | 5,308 | ||||||
| Selling, general and administrative expenses |
16,020 | 14,937 | ||||||
| Research and development expenses |
1,070 | 965 | ||||||
| Gulf Coast Facility impairment charge (Note 2) |
2,158 | — | ||||||
| Restructuring charge |
252 | — | ||||||
| 85,928 | 71,222 | |||||||
| (Loss) income from operations |
(2,522 | ) | 21 | |||||
| Interest income |
181 | 209 | ||||||
| Interest expense |
(1,092 | ) | (680 | ) | ||||
| Other expense—net |
(387 | ) | (788 | ) | ||||
| Loss before income taxes, equity income, and minority interest |
(3,820 | ) | (1,238 | ) | ||||
| Income tax benefit |
(726 | ) | (158 | ) | ||||
| Loss before equity income and minority interest |
(3,094 | ) | (1,080 | ) | ||||
| Equity income in Calgon Mitsubishi Chemical Corporation |
273 | 520 | ||||||
| Minority interest |
— | 11 | ||||||
| Net loss |
(2,821 | ) | (549 | ) | ||||
| Common stock dividends |
(1,177 | ) | (1,170 | ) | ||||
| Retained earnings, beginning of period |
112,804 | 111,601 | ||||||
| Retained earnings, end of period |
$ | 108,806 | $ | 109,882 | ||||
| Net loss per common share |
||||||||
| Basic and diluted |
$ | (.07 | ) | $ | (.01 | ) | ||
| Weighted average shares outstanding |
||||||||
| Basic |
39,200,362 | 39,024,316 | ||||||
| Diluted |
39,847,856 | 39,405,304 | ||||||
The accompanying notes are an integral part of these financial statements.
3
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands except share data)
(Unaudited)
| March 31, 2005 |
December 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 7,742 | $ | 8,780 | ||||
| Receivables (net of allowance of $3,104 and $3,033) |
61,035 | 61,598 | ||||||
| Revenue recognized in excess of billings on uncompleted contracts |
12,248 | 8,978 | ||||||
| Inventories |
67,558 | 64,843 | ||||||
| Deferred income taxes—current |
6,410 | 7,939 | ||||||
| Other current assets |
6,140 | 6,957 | ||||||
| Total current assets |
161,133 | 159,095 | ||||||
| Property, plant and equipment, net |
121,937 | 129,285 | ||||||
| Investment in Calgon Mitsubishi Chemical Corporation |
8,198 | 8,135 | ||||||
| Intangibles |
11,712 | 12,237 | ||||||
| Goodwill |
34,950 | 35,071 | ||||||
| Deferred income taxes—long term |
15,488 | 16,578 | ||||||
| Other assets |
3,404 | 3,497 | ||||||
| Total assets |
$ | 356,822 | $ | 363,898 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities |
33,943 | 36,871 | ||||||
| Billings in excess of revenue recognized on uncompleted contracts |
3,945 | 3,686 | ||||||
| Restructuring reserve |
912 | 872 | ||||||
| Payroll and benefits payable |
8,611 | 9,244 | ||||||
| Accrued income taxes |
12,698 | 12,736 | ||||||
| Total current liabilities |
60,109 | 63,409 | ||||||
| Long-term debt |
87,700 | 84,600 | ||||||
| Deferred income taxes—long term |
5,775 | 8,235 | ||||||
| Other liabilities |
40,640 | 39,783 | ||||||
| Total liabilities |
194,224 | 196,027 | ||||||
| Minority interest |
— | — | ||||||
| Commitments and contingencies |
— | — | ||||||
| Shareholders’ equity: |
||||||||
| Common shares, $.01 par value, 100,000,000 shares authorized, 42,262,683 and 41,958,933 shares issued |
423 | 420 | ||||||
| Additional paid-in capital |
67,199 | 65,523 | ||||||
| Retained earnings |
108,806 | 112,804 | ||||||
| Accumulated other comprehensive income |
13,299 | 16,253 | ||||||
| 189,727 | 195,000 | |||||||
| Treasury stock, at cost, 2,787,258 shares |
(27,129 | ) | (27,129 | ) | ||||
| Total shareholders’ equity |
162,598 | 167,871 | ||||||
| Total liabilities and shareholders’ equity |
$ | 356,822 | $ | 363,898 | ||||
The accompanying notes are an integral part of these financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
($2,821 | ) | ($549 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
5,815 | 5,308 | ||||||
| Non-cash impairment and restructuring charges |
2,373 | — | ||||||
| Equity in income of Calgon Mitsubishi Chemical Corporation |
(273 | ) | (520 | ) | ||||
| Distributions received from Calgon Mitsubishi Chemical Corporation |
254 | — | ||||||
| Employee benefit plan provisions |
1,348 | 1,110 | ||||||
| Changes in assets and liabilities—net of effects from purchase of business, foreign exchange and non-cash impairment and restructuring: |
||||||||
| (Increase) decrease in receivables |
(399 | ) | 2,841 | |||||
| Increase in inventories |
(3,776 | ) | (1,534 | ) | ||||
| (Increase) decrease in revenue in excess of billings on uncompleted contracts and other current assets |
(1,042 | ) | 2,762 | |||||
| Decrease in restructuring reserve |
(209 | ) | (11 | ) | ||||
| Decrease in accounts payable and accrued liabilities |
(1,466 | ) | (3,403 | ) | ||||
| Decrease in long-term deferred income taxes |
(2,163 | ) | (564 | ) | ||||
| Other items—net |
(26 | ) | (847 | ) | ||||
| Net cash (used in) provided by operating activities |
(2,385 | ) | 4,593 | |||||
| Cash flows from investing activities |
||||||||
| Purchase of business—net of cash |
(530 | ) | (32,250 | ) | ||||
| Purchase of intangible asset |
— | (500 | ) | |||||
| Property, plant and equipment expenditures |
(1,740 | ) | (3,816 | ) | ||||
| Proceeds from disposals of property, plant and equipment |
396 | 21 | ||||||
| Net cash used in investing activities |
(1,874 | ) | (39,545 | ) | ||||
| Cash flows from financing activities |
||||||||
| Proceeds from borrowings |
23,500 | 93,900 | ||||||
| Repayments of borrowings |
(20,400 | ) | (59,434 | ) | ||||
| Common stock dividends |
(1,177 | ) | (1,170 | ) | ||||
| Common stock issued through exercise of stock options |
1,679 | 145 | ||||||
| Net cash provided by financing activities |
3,602 | 33,441 | ||||||
| Effect of exchange rate changes on cash |
(381 | ) | 58 | |||||
| Decrease in cash and cash equivalents |
(1,038 | ) | (1,453 | ) | ||||
| Cash and cash equivalents, beginning of period |
8,780 | 8,954 | ||||||
| Cash and cash equivalents, end of period |
$ | 7,742 | $ | 7,501 | ||||
The accompanying notes are an integral part of these financial statements.
5
SELECTED NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)