-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wd0oKJFe+QFvB6mmmOV9fKu7sgZyruoZ8TbjmmT83zeUwR0P0JRJIrGbjjSS/9Fq LsXyP6SmH+RCfHAKVoagaw== 0000950132-99-000743.txt : 19990813 0000950132-99-000743.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950132-99-000743 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALGON CARBON CORPORATION CENTRAL INDEX KEY: 0000812701 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 250530110 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10776 FILM NUMBER: 99684929 BUSINESS ADDRESS: STREET 1: P O BOX 717 STREET 2: 400 CALGON CARBON DR CITY: PITTSBURGH STATE: PA ZIP: 15230-0717 BUSINESS PHONE: 4127876700 MAIL ADDRESS: STREET 1: P.O. BOX 717 CITY: PITTSBURGH STATE: PA ZIP: 15230-0717 10-Q 1 FORM 10-Q 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 June 30, 1999 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______ Commission file number 0-15903 CALGON CARBON CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 25-0530110 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 717, Pittsburgh, PA 15230-0717 ----------------------------------------- (Address of principal executive offices) (Zip Code) (412) 787-6700 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ----- Applicable only to issuers involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes_____ No ______ Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 30, 1999 - ----------------------------- ---------------------------- Common Stock, $.01 par value 38,802,132 shares CALGON CARBON CORPORATION SEC FORM 10-Q QUARTER ENDED June 30, 1999 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. Specific examples of such uncertainties include references to future cost savings associated with restructuring charges as well as estimated costs from Year 2000 compliance. 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. I N D E X --------- PART 1 - FINANCIAL INFORMATION - ------ --------------------- Item 1. Financial Statements ------- Page ---- Introduction to the Financial Statements....... 2 Consolidated Statement of Income and Retained Earnings.............................. 3 Consolidated Balance Sheet..................... 4 Consolidated Statement of Cash Flows........... 5 Selected Notes to Financial Statements......... 6 Item 2. Management's Discussion and Analysis of Results ------- ----------------------------------------------- of Operations and Financial Condition ......... 8 ------------------------------------- PART II - OTHER INFORMATION - ------- ----------------- Item 4. Submission of Matters to a Vote of Security ------ ------------------------------------------- Holders........................................ 15 ------- Item 6. Exhibits and Reports on Form 8-K .............. 15 ------ -------------------------------- SIGNATURES .................................................... 16 - ---------- -1- PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements - ------- -------------------- INTRODUCTION TO THE FINANCIAL STATEMENTS ---------------------------------------- The consolidated financial statements included herein have been prepared by Calgon Carbon Corporation (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the Company's consolidated financial statements and the notes included therein for the year ended December 31, 1998. The financial information presented reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results for interim periods are not necessarily indicative of results to be expected for the year. -2- CALGON CARBON CORPORATION CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS ------------------------------------------------------ (Dollars in Thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net sales............................................. $ 80,215 $ 85,713 $152,007 $155,221 -------- -------- -------- -------- Cost of products sold (excluding depreciation)............................ 51,869 53,687 97,551 94,662 Depreciation and amortization......................... 5,873 5,411 11,854 10,861 Selling, general and administrative expenses............................. 14,768 14,546 27,519 28,337 Research and development expenses............................................ 2,020 2,169 3,887 4,136 -------- -------- -------- -------- 74,530 75,813 140,811 137,996 -------- -------- -------- -------- Income from operations................................ 5,685 9,900 11,196 17,225 Interest income....................................... 22 53 34 87 Interest expense...................................... (1,245) (1,271) (2,379) (2,446) Other income (expense)--net........................... (319) (389) (668) (820) -------- -------- -------- -------- Income before income taxes and minority interest............................... 4,143 8,293 8,183 14,046 Provision for income taxes............................................... 1,498 3,070 2,953 5,222 -------- -------- -------- -------- Income before minority interest............................................ 2,645 5,223 5,230 8,824 Minority interest..................................... 47 (6) 56 (38) -------- -------- -------- -------- Net income............................................ 2,692 5,217 5,286 8,786 Common stock dividends................................ (3,104) (3,180) (6,202) (6,359) Retained earnings, beginning of period........................................... 163,407 168,665 163,911 168,275 -------- -------- -------- -------- Retained earnings, end of period.............................................. $162,995 $170,702 $162,995 $170,702 ======== ======== ======== ======== Net income per common share (basic and diluted)................................. $ .07 $.13 $.14 $.22 ========== ========= ========== ========== Weighted average shares outstanding......................................... 38,784,415 39,742,660 38,755,432 39,742,660 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. -3- CALGON CARBON CORPORATION CONSOLIDATED BALANCE SHEET -------------------------- (Dollars in Thousands)
June 30, December 31, 1999 1998 ----------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents....................... $ 5,455 $ 1,325 Receivables..................................... 60,026 56,463 Inventories..................................... 56,445 57,816 Other current assets............................ 15,832 14,236 -------- -------- Total current assets......................... 137,758 129,840 Property, plant and equipment, net................ 179,041 189,250 Intangibles....................................... 77,578 78,342 Other assets...................................... 8,479 9,562 -------- -------- Total assets................................. $402,856 $406,994 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Long-term debt due within one year.............. $ 29,262 $ 22,131 Accounts payable and accrued liabilities........ 30,447 33,704 Restructuring reserve........................... 2,663 4,909 Payroll and benefits payable.................... 9,887 10,141 Accrued income taxes............................ 3,016 933 -------- -------- Total current liabilities.................... 75,275 71,818 Long-term debt.................................... 70,834 71,101 Deferred income taxes............................. 39,624 42,641 Other liabilities................................. 10,099 9,826 -------- -------- Total liabilities............................ 195,832 195,386 -------- -------- Minority interest................................. 1,414 1,622 -------- -------- Commitments and contingencies..................... - - -------- -------- 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............................... 162,995 163,911 Accumulated other comprehensive income.......... 5,943 9,778 -------- -------- 232,725 236,972 Treasury stock, at cost, 2,780,500 and 2,761,500 shares.............................. (27,115) (26,986) -------- -------- Total shareholders' equity................... 205,610 209,986 -------- -------- Total liabilities and shareholders' equity....................... $402,856 $406,994 ======== ========
The accompanying notes are an integral part of these financial statements. -4- CALGON CARBON CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------ (Dollars in Thousands) (Unaudited)
Six Months Ended June 30, ------------------- 1999 1998 -------- -------- Cash flows from operating activities - ------------------------------------ Net income..................................... $ 5,286 $ 8,786 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................ 11,854 10,861 Employee benefit plan provisions............. 246 206 Changes in assets and liabilities - net of effects from purchase of businesses and exchange: (Increase) decrease in receivables....... (5,723) 5,504 (Increase) in inventories................ (639) (6,781) (Increase) decrease in other current assets................................. (1,728) 3,045 (Decrease) in restructuring reserve...... (2,238) (96) Increase (decrease) in accounts payable and accruals........................... 1,006 (10,940) Increase in long-term deferred income taxes (net)..................... 648 3,152 Other items--net............................. 477 (422) ------- -------- Net cash provided by operating activities................... 9,189 13,315 ------- -------- Cash flows from investing activities - ------------------------------------ Purchase of businesses....................... (725) (2,308) Property, plant and equipment expenditures... (5,138) (10,535) Proceeds from disposals of equipment......... 431 273 ------- -------- Net cash (used in) investing activities.... (5,432) (12,570) ------- -------- Cash flows from financing activities - ------------------------------------ Net proceeds from borrowings................. 7,351 7,687 Treasury stock purchases..................... (129) - Common stock dividends....................... (6,202) (6,359) ------- -------- Net cash provided by financing activities............................. 1,020 1,328 ------- -------- Effect of exchange rate changes on cash........ (647) 52 ------- -------- Increase in cash and cash equivalents.......... 4,130 2,125 Cash and cash equivalents, beginning of period.................................... 1,325 7,982 ------- -------- Cash and cash equivalents, end of period....... $ 5,455 $ 10,107 ======= ========
The accompanying notes are an integral part of these financial statements. -5- CALGON CARBON CORPORATION SELECTED NOTES TO FINANCIAL STATEMENTS -------------------------------------- (Dollars in Thousands) (Unaudited) 1. Inventories:
June 30, 1999 December 31, 1998 ------------- ----------------- Raw materials $12,134 $12,943 Finished goods 44,311 44,873 ------- ------- $56,445 $57,816 ======= =======
2. Supplemental Cash Flow Information:
Six Months Ended June 30, --------------------------- 1999 1998 ------- ------- Cash paid during the period for: Interest $ 2,616 $ 2,443 Income taxes, net of refunds $ 671 $ 5,091 ======= ======= Bank debt: Borrowings $11,624 $16,824 Repayments (4,273) (9,137) ------- ------- Net proceeds from borrowings $ 7,351 $ 7,687 ======= =======
3. Common stock dividends declared during both quarters ended June 30, 1999 and 1998 were $.08 per common share. 4. Comprehensive Income:
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ------- ------ ------ ------ Net income $ 2,692 $5,217 $ 5,286 $8,786 Other comprehensive income (loss), net of tax (benefit) of ($694), $242, ($2,605) and ($167), respectively (1,289) 449 (3,835) (311) ------- ------ ------- ------ Comprehensive income $ 1,403 $5,666 $ 1,451 $8,475 ======= ====== ======= ======
The only matter contributing to the other comprehensive income (loss) was the currency translation adjustment. -6- 5. Segment Information:
Three Months Ended Six Months Ended June 30, June 30, -------- -------- 1999 1998 1999 1998 ---- ------ ------ ------ Net Sales Activated Carbon $72,933 $78,567 $138,123 $144,514 Engineered Systems 7,282 7,146 13,884 10,707 ------- ------- -------- -------- $80,215 $85,713 $152,007 $155,221 ======= ======= ======== ======== Income from operations before amortization Activated Carbon $ 5,822 $ 9,869 $ 11,022 $ 18,775 Engineered Systems 434 631 1,333 (349) ------- ------- -------- -------- 6,256 10,500 12,355 18,426 Reconciling items Amortization of intangibles and organization costs (571) (600) (1,159) (1,201) Interest income 22 53 34 87 Interest expense (1,245) (1,271) (2,379) (2,446) Other expense - net (319) (389) (668) (820) ------- ------- -------- -------- Consolidated income before income taxes and minority interest $ 4,143 $ 8,293 $ 8,183 $ 14,046 ======= ======= ======== ========
-7- Item 2. Management's Discussion and Analysis of Results of - ------ -------------------------------------------------- Operations and Financial Condition ---------------------------------- This discussion should be read in connection with the information contained in the Consolidated Financial Statements and Selected Notes to Financial Statements. Results of Operations - --------------------- Consolidated net sales for the three-month period ended June 30, 1999 decreased $5.5 million, or 6.4%, versus the three months ended June 30, 1998. For the six-month period ended June 30, 1999, consolidated net sales decreased by $3.2 million or 2.1% compared to the same period of 1998. Refer to the table below for sales detail by segments/products, markets and geography for both periods. These amounts are in thousands of dollars:
Three Months Ended June 30, Six Months Ended June 30, ------------------------------ --------------------------- 1999 1998 % Change 1999 1998 % Change ------- -------- -------- -------- ------- -------- Segments/Products - ----------------- Activated Carbon Segment Carbon $36,016 $42,048 - 14.3% $ 69,838 $ 77,121 - 9.4% Service 23,816 23,017 + 3.5 46,918 45,582 + 2.9 Carbon Equipment 6,617 5,000 + 32.3 11,489 9,552 + 20.3 Charcoal and Liquid 6,484 8,502 - 23.7 9,878 12,259 - 19.4 ------- ------- ------- -------- -------- ------ 72,933 78,567 - 7.2 138,123 144,514 - 4.4 ------- ------- ------- ------- -------- ------ Engineered Systems Segment Advanced Oxidation Tech. 2,885 2,174 + 32.7 4,502 3,895 + 15.6 Advanced Separation Tech. 4,397 4,972 - 11.6 9,382 6,812 + 37.7 ------- ------- ------- -------- -------- ------ 7,282 7,146 + 1.9 13,884 10,707 + 29.7 ------- ------- ------- ------- -------- ------ TOTAL $80,215 $85,713 - 6.4% $152,007 $155,221 - 2.1% ======= ======= ======= ======== ======== ====== Markets - ------- Industrial Food $11,895 $13,580 - 12.4% $ 23,740 $ 24,593 - 3.5% Chemical/Pharmaceutical 6,009 5,514 + 9.0 12,386 10,803 + 14.7 Original Equipment Manufacturer 11,353 15,365 - 26.1 24,031 28,889 - 16.8 Other 4,974 6,616 - 24.8 10,344 12,835 - 19.4 ------- ------- ------- -------- -------- ------ 34,231 41,075 - 16.7 70,501 77,120 - 8.6 ------- ------- ------- ------- -------- ------ Environmental Municipal 20,426 16,668 + 22.5 33,470 28,896 + 15.8 Industrial 19,074 19,468 - 2.0 38,158 36,946 + 3.3 ------- ------- ------- -------- -------- ------ 39,500 36,136 + 9.3 71,628 65,842 + 8.8 ------- ------- ------- ------- -------- ------ Consumer 6,484 8,502 - 23.7 9,878 12,259 - 19.4 ------- ------- ------- -------- -------- ------ TOTAL $80,215 $85,713 - 6.4% $152,007 $155,221 - 2.1% ======= ======= ======= ======== ======== ====== Geography - --------- United States $43,970 $43,678 + 0.7% $ 84,431 $ 81,127 + 4.1% Europe 25,889 25,450 + 1.7 47,815 43,814 + 9.1 Other 10,356 16,585 - 37.6 19,761 30,280 - 34.7 ------- ------- ------- -------- -------- ------ TOTAL $80,215 $85,713 - 6.4% $152,007 $155,221 - 2.1% ======= ======= ======= ======== ======== ======
Note: Sales, by product, for 1998, have been reclassified to conform with the 1999 presentation. -8- For the quarter, within the activated carbon segment, sales of service and carbon equipment increased while revenues from carbon and charcoal declined. These results included a net negative impact associated with foreign exchange of $0.5 million due primarily to the strengthening of the U.S. dollar versus the Belgian franc, British pound sterling and the German deutsche mark partially offset by its weakening compared to the Japanese yen. The net increase within the engineered systems segment was associated with gains by the Advanced Oxidation Technologies unit due to improvements associated with multiple technology projects partially offset by delays in the awarding of customer contracts to the Advanced Separation Technologies unit. The decrease in sales of carbon products included some price decreases but was primarily the result of the non-repeating of activated carbon initial fills in the Japanese municipal category and to decreases within the U.S. food and original equipment manufacturer categories. These decreases were partially offset by increases in U.S. and European municipal markets. Service sales increased primarily in the U.S. and European municipal markets. Carbon equipment sales increased in the U.S. environmental municipal and industrial categories. Charcoal sales decreased due to business lost to competitors. New product sales (sales of products introduced within the past 5 years), as a percentage of total sales, was 18% during the quarter ended June 30, 1999 compared to 14% for the similar period ended June 30, 1998. For the year-to-date period, the activated carbon segment experienced sales increases within the service and carbon equipment categories and declines in the carbon and charcoal areas. These results included net gains due to foreign exchange rate changes of $0.3 million, the net effect of the weakening of the U.S. dollar versus the Japanese yen partially offset by its strengthening as compared to the Belgium franc, British pound sterling and the German deutsche mark. The other reasons associated with the changes are virtually the same as for the quarter. Within the engineered systems segment, revenues for the Advanced Oxidation Technologies unit were up due to increases associated with multiple technology products and revenue increases for the Advanced Separation Technologies area are associated with orders received in the first quarter of 1999. The backlog for this segment has decreased by $3.7 million from December 31, 1998. New product sales, as a percentage of total sales, were 18% during the six months ended June 30, 1999 versus 13% for the six months ended June 30, 1998. Gross profit, before depreciation, as a percentage of net sales, for the three and six months ended June 30, 1999 were 35.3% and 35.8%, respectively. These compare to 37.4% and 39.0%, respectively, for the three and six-month periods ended June 30, 1998. The decline in the activated carbon segment for both periods was related to competitive pressure on pricing, reduced activated carbon sales versus relatively fixed manufacturing costs and shifts in sales to higher cost products that were sold in 1998. This shift also occurred within the engineered systems segment during the three months ended June 30, 1999. For the six-month period ended June 30, 1999, this percentage rate for Advanced Separation Technologies improved due to continued cost control and better project management practices. Both segments benefitted from increases associated with cost reductions due to the 1998 restructuring of operations. Depreciation and amortization expenses increased by $0.5 million and $1.0 million, respectively, in the three and six-month periods ended June 30, 1999 versus the comparable periods in 1998 primarily due to depreciation associated with the Company's new business information system. Combined, selling, general and administrative expenses and research and development expenses, were flat in the quarter ended June 30, 1999 versus the similar period in 1998 due to the net effect of organizational and CEO -9- recruitment costs of $1.4 million offset by other net decreases of $1.3 million due primarily to the savings associated with the 1998 restructuring. For the six months ended June 30, 1999, these expenses were down by $1.1 million resulting primarily from six months savings from the restructuring of operations in 1998 partially offset by the aforementioned organizational and CEO recruitment costs. Research and development expenses, as a percentage of net sales, were 2.5% and 2.6%, respectively, for the three and six-month periods ended June 30, 1999 versus 2.5% and 2.7%, respectively, for the comparable 1998 periods. The effective tax rate for the three-month period ended June 30, 1999 was 36.2% versus 37.0% for the three months ended June 30, 1998. For the six months ended June 30, 1999, the effective tax rate was 36.1% as compared to 37.2% for the 1998 period. Both reductions were related to higher utilization of foreign tax credits. Financial Condition - ------------------- Working Capital and Liquidity ----------------------------- Cash flows from operating activities were $9.2 million for the six months ending June 30, 1999 versus $13.3 million for the comparable 1998 period. The reduction was due primarily to reduced net income, partially offset by an increase in depreciation associated with the new business information system, and a reduced increase in long-term deferred income taxes. The increase in investment in working capital was stable versus 1998. The working capital investment increase was primarily due to increased receivables and other current assets and decreased payables and accruals. The Company expects to reduce its inventory levels during the balance of 1999 by specific actions that will have a negative effect on short-term earnings but benefit future economic profits. The new information system will also allow better balance of product output with expected sales activity. The Company's restructuring reserve decreased $2.2 million due to cash outlays for employee severance costs and benefits in connection with the 1998 restructuring plan. Currently maturing debt and short-term borrowings increased $7.1 million to $29.3 million at June 30, 1999. The net impact of foreign currency translation decreased working capital by $2.6 million reflecting spot foreign exchange rates at June 30, 1999 and December 31, 1998. Total debt at June 30, 1999 was $100.1 million, an increase of $6.9 million, primarily to support working capital investment. During the quarter, the Company entered into a new revolving United States credit facility. This new facility replaces the previous ones which, in total, had a borrowing availability of $100.0 million. The new, multi bank, credit agreement consists of a $114.6 million five-year revolving credit facility and a $50.4 million 364-day revolving credit facility. Included in this facility is a letter of credit subfacility which may not exceed $30.0 million. The Company expects that cash from operating activities plus cash balances and available external financing will be sufficient to meet its requirements. -10- Status of Restructuring of Operations - ------------------------------------- In the third quarter of 1998, the Company initiated a worldwide plan to reduce costs and realign the organizational structure. The implementation began in September 1998 and was expected to be completed by mid 1999. With the exception of the asset write offs, these restructuring charges required cash outlays. This plan is expected to reduce costs by approximately $10 million on an annualized basis when fully implemented. The number of planned employee separations from this restructuring was 131. Separations through June 30, 1999 were 128. The staff reductions associated with this plan are now complete although associated payments are not. The majority of these payments will be made prior to the end of 1999, but some are expected to be made in the year 2000. During the fourth quarter of 1998, the Company 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 restructuring reserve activity for the six months ended June 30, 1999 was:
Balance Balance ($000) 1-1-99 Payments Exchange 6-30-99 ------- -------- -------- -------- 1998 Plan - --------- Employee severance and termination benefit costs $ 4,393 $(2,123) $ - $ 2,270 Other costs 407 (77) - 330 ------- ------- -------- -------- 4,800 (2,200) - 2,600 1994 Plan - --------- Disposition costs associated with the closing of the Brilon Wald, Germany Plant 109 (38) (8) 63 ------- ------- -------- -------- $ 4,909 $(2,238) $(8) $ 2,663 ======= ======= ======== ========
The reserve balances are deemed adequate. Capital Expenditures and Investments - ------------------------------------ Capital expenditures for property, plant and equipment totaled $5.1 million for the six-month period ended June 30, 1999 compared to expenditures of $10.5 million for the same period in 1998. The decrease was primarily due to a lower level of expenditures associated with the new business information system. Investment in the new business information system accounted for $1.7 million of the 1999 expenditures while domestic customer capital expenditures were $0.4 million and capacity and cost reduction related spending was $1.3 million in the United States and $0.8 million in Europe. Total capital expenditures are currently expected to be approximately $10.0 million for the year 1999. -11- The purchase of business expenditures, for both periods, represents the continuation of previously accrued cash expenditures for Advanced Separation Technologies (a 1996 acquisition) project failures for projects completed before the acquisition. Year 2000 - --------- The Company has continued to address the Year 2000 issues related to both information technology and non-information technology aspects. The following discussion is a description of activities, results and expectations on each of these fronts. General Comments - ---------------- A task force was established in 1997 to identify all potential areas of material risk and to make required modifications as they relate to business computer systems, technical infrastructure, end user computing, suppliers, customers and manufacturing systems. Key suppliers of material, services and equipment have been surveyed regarding their Year 2000 compliance and their responses are being analyzed. All are expected to be compliant before the end of the third quarter. Further, all purchase orders for new software and/or hardware include a statement, that by acceptance of the purchase order, the vendor is certifying compliance. Business contingency plans are being developed for all locations to mitigate risks associated with potential loss of utilities, wide-area networks, etc. These plans will be finalized in the third quarter of 1999. Information Technology - ---------------------- To ensure Year 2000 compliance, the Company is engaged in a program to modernize and replace its computerized production control and management information systems with SAP. SAP is an enterprise wide business system that was installed to replace the previous legacy system. Although Year 2000 compliance was not the primary purpose of the program, the new system was fully implemented in the U.S. and Europe and is expected to be Year 2000 ready. Final testing of SAP's Year 2000 compliance was completed in May 1999. Included in the above activity is the replacement of the existing human resource system. This task is expected to be completed during the third quarter of 1999. No known supplier issues are involved. Year 2000 compliance audit of the Company's personal computers and related software is complete. All non-compliant personal computers have been replaced, remediated or will be replaced before December 31, 1999. Additional costs for Year 2000 compliance are not expected to be material to the operating results. -12- Non-Information Technology - -------------------------- The Company has established a task team to identify and resolve the millennium date rollover issues in its manufacturing processes worldwide. This focus is on process related technology and other devices with embedded microprocessors which are used to control the manufacturing processes or operate security, communication or building services. The initial phase of planning and awareness was completed in early 1998. The inventory phase was completed during the second quarter of 1998 for both the domestic and European manufacturing facilities. The compliance status of all devices has been determined. Approximately 95% of all devices are compliant. Detailed definition and implementation of solutions was completed during the second quarter of 1999. During the second quarter of 1999, full scale tests were successfully completed on B-line, D-line, and the reactivation facility at the Big Sandy Plant. No problems were encountered during testing at the Neville Island and Pearl River Plants. The Feluy Belgium prime carbon production line was also successfully tested. The upgrades at the Bodenfelde, Germany Plant are guaranteed by the vendor, but will not be fully tested until September 1999. The Grays and Carbon Cloth production facilities in the United Kingdom have been determined to be Year 2000 compliant. It now appears that all devices are Year 2000 compliant and current efforts are focused on contingency planning to deal with possible failures in the utility's supply systems. An initial plan has been developed and reviewed with the manufacturing plants. Each plant is preparing its own detailed action plan for final review by September 30, 1999. The costs to address the Company's Year 2000 issues in manufacturing have been estimated in the range of $0.5 million to $0.8 million. Based on expenditures to date and full scale test results, it appears that the total cost will be within the estimated range. These expense items include third party consultant fees and costs to upgrade or replace non-compliant devices. None of the components of the estimate were contemplated for reasons other than Year 2000 readiness. The task team is making efforts to ensure that all devices will be Year 2000 ready, however, since the assessment process is still under way, it is not possible to guarantee the results at this point. It is expected that all manufacturing operations will be ready and operable. However, if a significant uncertainty arises at any time, a plan will be developed in the third quarter of 1999 to focus efforts on those devices critical to operation of the production process(es). Devices that are informational only or non-critical to operation will then be deferred until the operability of the process(es) is ensured. The Company anticipates that the most likely worst case Year 2000 scenario, if one were to occur, would be the inability of third party suppliers such as utility providers, telecommunication companies and other critical suppliers to continue providing their products and services. This possible scenario could pose the most significant threat to the operation of the Company's facilities along with associated environmental and potential financial consequences. If this would occur, new suppliers would be contacted immediately. -13- Discussion of the Company's efforts and management's expectations relating to Year 2000 compliance are forward-looking statements. The Company's ability to achieve Year 2000 compliance and the level of incremental costs associated with compliance could be adversely impacted by, among other matters, the availability and cost of programming and testing resources, vendors' ability to modify software and unanticipated problems identified in the ongoing compliance review. The Company has little or no control over the actions of the proprietary software vendors and other entities with which it interacts. Therefore, Year 2000 compliance problems experienced by these entities could adversely affect the operating results of the Company. New Accounting Pronouncements - ----------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("FAS") 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 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 our 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 FAS No. 133 was amended by FAS No. 137. The Company plans to adopt the standard effective January 1, 2001, as required. -14- PART II - OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders - ------ --------------------------------------------------- The annual meeting of stockholders was held April 20, 1999. In connection with the meeting, proxies were solicited pursuant to the Securities Exchange Act. The following are the voting results on proposals considered and voted upon at the meeting, all of which were described in the proxy statement. 1. The nominees for directors listed in the proxy statement were elected. Votes For Votes Withheld ------------- ----------------- Class of 2000 ---------------------------- Harry H. Weil 30,620,822 562,261 Robert L. Yohe 30,616,641 566,442 Class of 2002 ---------------------------- Nick H. Prater 30,618,146 564,937 Seth E. Schofield 30,607,540 562,261 The following directors continued in office after the meeting: Class of 2002 ---------------------------- Robert W. Cruickshank Arthur L. Goeschel Thomas A. McConomy 2. The proposal to approve Votes Votes Votes the readoption and amend- For Against Abstained ment of the stock option ------------ ----------- ----------- plan was passed. 19,878,173 4,058,591 508,284 Item 6. Exhibits and Reports on Form 8-K - ------ -------------------------------- (c) Exhibits None (d) Reports on Form 8-K There were no reports on Form 8-K filed for the quarter ended June 30, 1999. -15- SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CALGON CARBON CORPORATION ------------------------- (REGISTRANT) Date: August 12, 1999 By /s/Clarence J. Kenney --------------------------------- Clarence J. Kenney Interim Chief Financial Officer -16- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1999 JUN-30-1999 5,455 0 60,026 0 56,445 137,758 356,071 177,030 402,856 75,275 0 0 0 36,672 168,938 402,856 152,007 152,007 97,551 140,811 668 0 2,379 8,183 2,953 5,286 0 0 0 5,286 .14 .14
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