-----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, VLGiMmh36CBGwT91uD6qxwIyGszv+RWAFlKsNb/UCNvEZM4xSk5slgVCBTvR+DJF 80J2/BgopkqkP/S57HcspQ== 0000950168-02-003430.txt : 20021118 0000950168-02-003430.hdr.sgml : 20021118 20021114180041 ACCESSION NUMBER: 0000950168-02-003430 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 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: 1934 Act SEC FILE NUMBER: 001-10776 FILM NUMBER: 02826946 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 d10q.txt FORM 10Q 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 September 30, 2002 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 1-15903 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 October 31, 2002 - ---------------------------------- ------------------------------------ Common Stock, $.01 par value 38,962,758 shares CALGON CARBON CORPORATION SEC FORM 10-Q QUARTER ENDED September 30, 2002 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. I N D E X
PART 1 - FINANCIAL INFORMATION - ------ --------------------- Item 1. Financial Statements Page ------ ---- Introduction to the Financial Statements ...................... 2 Consolidated Statements of Income (Loss) and Retained Earnings ............................................. 3 Consolidated Balance Sheets ................................... 5 Consolidated Statements of Cash Flows ......................... 6 Selected Notes to Financial Statements ........................ 7 Item 2. Management's Discussion and Analysis of Results ------ ----------------------------------------------- of Operations and Financial Condition ............................ 13 ------------------------------------- Item 4. Controls and Procedures ............................................. 18 ------ ----------------------- PART II - OTHER INFORMATION - ------- ----------------- Item 1. Legal Proceedings ................................................... 19 ------ ----------------- Item 6. Exhibits and Reports on Form 8-K .................................... 19 ------ -------------------------------- SIGNATURES .......................................................................... 20 - ----------
1 PART I - FINANCIAL INFORMATION 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, 2001 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 nine months of 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 2 CALGON CARBON CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (Dollars in Thousands Except Share and Per Share Data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- -------------------------- 2002 2001 2002 2001 ---------- --------- --------- --------- Net sales ...................................................... $ 64,832 $ 64,743 $195,452 $206,560 ---------- --------- --------- --------- Cost of products sold (excluding depreciation) ..................................... 45,368 44,429 135,293 137,610 Depreciation and amortization .................................. 4,784 5,023 14,027 14,997 Selling, general and administrative expenses ...................................... 12,037 10,648 34,396 33,938 Research and development expenses ..................................................... 875 1,369 3,023 4,242 --------- --------- --------- --------- 63,064 61,469 186,739 190,787 --------- --------- --------- --------- Income from operations ......................................... 1,768 3,274 8,713 15,773 Interest income ................................................ 176 119 434 169 Interest expense ............................................... (675) (746) (1,973) (2,837) Other income (expense)--net .................................... (445) (231) (1,147) (922) --------- --------- --------- --------- Income before income taxes, minority interest and cumulative effect of change in accounting principle .................................................... 824 2,416 6,027 12,183 Provision for income taxes ..................................... 297 870 2,170 4,386 --------- --------- --------- --------- Income before minority interest ..................................................... 527 1,546 3,857 7,797 Minority interest .............................................. 29 -- 29 (53) --------- --------- --------- --------- Income before cumulative effect of change in accounting principle ............................... 556 1,546 3,886 7,744 Cumulative effect of change in accounting principle (net of tax) ....................................... -- -- (30,926) -- --------- --------- --------- --------- Net income (loss) .............................................. 556 1,546 (27,040) 7,744 Common stock dividends ......................................... (1,169) (1,940) (3,504) (5,820) Retained earnings, beginning of period .................................................... 113,241 145,277 143,172 142,959 --------- --------- --------- --------- Retained earnings, end of period ....................................................... $ 112,628 $ 144,883 $ 112,628 $ 144,883 ========= ========= ========= ========= Net income per common share before cumulative effect of change in accounting principle Basic and diluted .......................................... $ .01 $ .04 $ .10 $ .20 ========= ========= ========= =========
3 Cumulative effect of change in accounting principle per common share Basic and Diluted .......................... -- -- ($.79) -- Net income (loss) per common share Basic and Diluted .......................... $ .01 $ .04 ($.69) $ .20 Weighted average shares outstanding Basic ....................................... 38,962,758 38,810,934 38,930,797 38,804,885 =========== =========== ========== =========== Diluted ..................................... 39,017,027 39,174,758 39,187,205 39,090,855 =========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements. 4 CALGON CARBON CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in Thousands except share data) (Unaudited)
September 30, December 31, 2002 2001 ------------- ------------ ASSETS Current assets: Cash and cash equivalents ........................................ $ 3,569 $ 3,567 Receivables (net of allowance of $3,089 and $2,624) .............. 44,856 44,233 Revenue recognized in excess of billings on uncompleted contracts ..................................................... 6,044 10,623 Inventories (net of allowance of $445 and $453) .................. 48,659 42,104 Other current assets ............................................. 5,294 4,008 ------------- ------------ Total current assets .......................................... 108,422 104,535 Property, plant and equipment, net ................................. 141,894 143,661 Intangibles ........................................................ 3,304 3,491 Goodwill ........................................................... 19,163 70,124 Other assets ....................................................... 10,116 9,903 ------------- ------------ Total assets .................................................. $ 282,899 $ 331,714 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt .................................................. $ -- $ 8,762 Long-term debt due within one year ............................... 2,785 1,275 Accounts payable and accrued liabilities ......................... 25,207 24,976 Billings in excess of revenue recognized on uncompleted contracts ..................................................... 1,185 2,370 Restructuring reserve ............................................ 866 1,480 Payroll and benefits payable ..................................... 7,002 6,989 Accrued income taxes ............................................. 3,199 1,890 ------------- ------------ Total current liabilities ..................................... 40,244 47,742 Long-term debt ..................................................... 56,842 54,360 Deferred income taxes .............................................. 12,086 32,021 Other liabilities .................................................. 16,267 13,782 ------------- ------------ Total liabilities ............................................. 125,439 147,905 ------------- ------------ Minority interest .................................................. 141 -- ------------- ------------ Commitments and contingencies ...................................... -- -- ------------- ------------ Shareholders' equity: Common shares, $.01 par value, 100,000,000 shares authorized, 41,750,116 and 41,643,492 shares issued ........... 418 416 Additional paid-in capital ....................................... 64,449 63,813 Retained earnings ................................................ 112,628 143,172 Accumulated other comprehensive income ........................... 6,953 3,538 ------------- ------------ 184,448 210,939 Treasury stock, at cost, 2,787,358 and 2,787,458 shares .......... (27,129) (27,130) ------------- ------------ Total shareholders' equity .................................... 157,319 183,809 ------------- ------------ Total liabilities and shareholders' equity .................... $ 282,899 $ 331,714 ============= ============
The accompanying notes are an integral part of these financial statements. 5 CALGON CARBON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Nine Months Ended September 30, -------------------- 2002 2001 -------- -------- Cash flows from operating activities Net income (loss) ................................................... ($27,040) $ 7,744 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of change in accounting principle ............... 30,926 -- Depreciation and amortization ..................................... 14,027 14,997 Employee benefit plan provisions .................................. 2,311 1,447 Changes in assets and liabilities - net of effects from purchase of the minority interest in Calgon Far East Co. Ltd. and exchange rate: Decrease in receivables ..................................... 885 2,617 Increase in inventories ...................................... (5,003) (4,445) (Increase) decrease in other current assets .................. 3,503 (2,695) Decrease in restructuring reserve ............................ (702) (1,552) Decrease in accounts payable and accruals ................................................ (739) (2,194) Increase (decrease) in long-term deferred income taxes (net) ................................................. (255) 202 Other items - net ................................................. 485 467 -------- -------- Net cash provided by operating activities ....................... 18,398 16,588 -------- -------- Cash flows from investing activities Purchase of the minority interest in Calgon Far East Co. Ltd. ..... -- (3,400) Property, plant and equipment expenditures ........................ (9,815) (8,407) Proceeds from disposals of equipment .............................. 725 551 -------- -------- Net cash used in investing activities ........................... (9,090) (11,256) -------- -------- Cash flows from financing activities Net proceeds from (repayments of) borrowings ...................... (4,720) 96 Common stock dividends ............................................ (3,504) (5,820) -------- -------- Net cash used in financing activities ......................... (8,224) (5,724) -------- -------- Effect of exchange rate changes on cash ............................. (1,082) (387) -------- -------- Increase (decrease) in cash and cash equivalents .................... 2 (779) Cash and cash equivalents, beginning of period ......................................................... 3,567 4,334 -------- -------- Cash and cash equivalents, end of period ............................ $ 3,569 $ 3,555 ======== ========
The accompanying notes are an integral part of these financial statements. 6 CALGON CARBON CORPORATION SELECTED NOTES TO FINANCIAL STATEMENTS (Dollars in Thousands) (Unaudited) 1. Inventories: September 30, 2002 December 31, 2001 ------------------ ----------------- Raw materials $ 9,254 $ 7,575 Finished goods 39,405 34,529 ------- -------- $48,659 $ 42,104 ======= ======== 2. Supplemental Cash Flow Information:
Nine Months Ended September 30, ------------------------------- 2002 2001 ---------- ----------- Cash (paid) received during the period for: Interest $ (1,888) $ (2,889) ========== =========== Income taxes (paid) refunded - net $ (49) $ 1,113 ========== =========== Bank debt: Borrowings $ 52,272 $ 20,921 Repayments (56,992) (20,825) ---------- ----------- Net (repayments of) proceeds from bank debt $ (4,720) $ 96 ========== ===========
3. Common stock dividends of $.03 per common share were declared and paid during the quarter ended September 30, 2002. Common stock dividends declared during the quarter ended September 30, 2001 were $.05 per common share. Common stock dividends in the amount of $.03 per common share were declared on October 23, 2002. 4. Comprehensive income:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- --------------------------- 2002 2001 2002 2001 ---------- ---------- ----------- ----------- Net income (loss) $ 556 $ 1,546 ($27,040) $ 7,744 Other comprehensive income (loss) net of tax provision (benefit) of ($30), $82, $141 and $132, respectively (100) 1,890 3,415 (1,138) ---------- ---------- ----------- ----------- Comprehensive income (loss) $ 456 $ 3,436 ($ 23,625) $ 6,606 ========== ========== =========== ===========
The only matter contributing to the other comprehensive income (loss) was the foreign currency translation adjustment. 5. Segment Information: 7 The Company has four reportable segments: Activated Carbon, Service, Engineered Solutions and Consumer. These reportable segments are strategic business units which offer different products and services. The Company evaluates segment performance based primarily on economic profit (as defined by the Company) and operating income. The Activated Carbon segment manufactures granular activated carbon for use in applications to remove organic compounds from liquids, gases, water and air. The Service segment consists of reactivation of spent carbon and the leasing, monitoring and maintenance of mobile carbon adsorption equipment. The Engineered Solutions segment provides solutions to customers' air and water process problems through the design, fabrication and operation of systems that utilize the Company's enabling technologies: carbon adsorption, ultraviolet light and advanced ion exchange separation. The Consumer segment brings the Company's industrial purification technologies directly to the consumer in the form of products and services including carbon cloth and charcoal products. An improvement in the Company's information reporting system in the second quarter of 2002 has allowed the Company to directly attribute, rather than allocate, certain inventory cost variances, distribution costs and assets, such as accounts receivable, to segments. As a result, the second quarter and June year-to-date results for 2001 have been restated to conform with the 2002 presentation.
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Net Sales Activated Carbon ....................... $ 24,218 $ 25,074 $ 74,723 $ 81,915 Service ................................ 24,275 23,476 71,073 71,000 Engineered Solutions ................... 10,875 11,305 30,710 37,034 Consumer ............................... 5,464 4,888 18,946 16,611 --------- --------- --------- --------- $ 64,832 $ 64,743 $ 195,452 $ 206,560 ========= ========= ========= ========= Income (loss) from operations before depreciation and amortization Activated Carbon ....................... $ 3,768 $ 4,234 $ 12,192 $ 14,316 Service ................................ 5,225 4,466 14,496 14,783 Engineered Solutions ................... (1,840) 57 (3,546) 1,817 Consumer ............................... (601) (460) (402) (146) --------- --------- --------- --------- 6,552 8,297 $ 22,740 $ 30,770 Depreciation and amortization Activated Carbon ....................... 2,303 2,319 7,069 7,177 Service ................................ 1,930 1,712 5,361 4,856 Engineered Solutions ................... 207 726 609 2,151 Consumer ............................... 344 266 988 813 --------- --------- --------- --------- 4,784 5,023 14,027 14,997 --------- --------- --------- --------- Income from operations after depreciation and amortization .......... $ 1,768 $ 3,274 $ 8,713 $ 15,773 ========= ========= ========= =========
8
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ----------------------- 2002 2001 2002 2001 -------- -------- ------- -------- Reconciling items Interest income 176 119 434 169 Interest expense (675) (746) (1,973) (2,837) Other income (expense) - net (445) (231) (1,147) (922) ---------- --------- -------- --------- Consolidated income before income taxes, minority interest and cumulative effect of change in accounting principle $ 824 $ 2,416 $ 6,027 $ 12,183 ========= ========= ======= ========= September 30, 2002 December 31, 2001 ------------------ ----------------- Total Assets Activated Carbon $121,859 $124,125 Service 96,058 89,202 Engineered Solutions 42,300 99,610 Consumer 22,682 18,777 -------- -------- $282,899 $331,714 ======== ========
6. Derivative Instruments The Company accounts for its derivative instruments under Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended. This standard requires recognition of all derivatives as either assets or liabilities at fair value and 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 from changes in the fair value of derivative instruments. As of September 30, 2002, the Company held five derivative instruments, four foreign exchange contracts and an interest rate swap agreement. None of the five derivatives received hedge accounting treatment under SFAS No. 133 and were marked to market through the Company's earnings for the nine months ended September 30, 2002. 7. Contingencies 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. The Company is also currently a party in two cases involving alleged infringement of its U.S. patent No. 6,129,893 ("893 patent") and one case involving alleged infringment of its Canadian patent No. 2,331,525 ("525 patent"). Both patents are for the method of preventing cryptosporidium infection in drinking water. In the first case, Wedeco Ideal Horizons, Inc. (Wedeco) has filed suit against the Company seeking a declaratory judgment that it does not infringe the Company's "893 patent". This matter is currently pending in the United States District Court for the District of New Jersey. In the second case, the Company has pending litigation against the Town of Ontario, NY and Robert Wykle, et al. in the United 9 States District Court for the Western District of New York alleging that the defendant is practicing the method claimed within the "893 patent" without a license. The third case the Company has pending is against The Corporation of the City of North Bay and Trojan Technologies Inc. in Federal Court of Canada - Trial Division. The claim alleges that the defendants are practicing a method claimed in the "525 patent". Neither the Company nor its counsel can predict with any certainty the outcome of the three matters. The Company is involved in various legal proceedings, lawsuits, and claims, including employment, product warranty, and environmental matters of a nature considered normal to its business. It is the Company's policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount is reasonably estimable. Management believes, after consulting with counsel, that the ultimate liabilities, if any, resulting from such lawsuits and claims will not materially affect the consolidated results, liquidity or financial position of the Company. 8. Goodwill & Intangible Assets In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, "Goodwill and Other Intangible Assets." This standard requires that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually. This new standard also prescribes guidelines for new disclosure requirements. The Company has adopted SFAS No. 142 as of January 1, 2002, as required. In accordance with SFAS No. 142, the Company assessed the useful lives of its intangible assets during the first quarter of 2002 and concluded that it holds no indefinite lived intangibles. As a result, no impairment test was required and no transition adjustment was recorded for indefinite lived intangibles. As required by SFAS No. 142, management has allocated goodwill to its reporting units. During the three months ended June 30, 2002, management completed the initial goodwill impairment test required as of January 1, 2002 for each of its reporting units. The initial goodwill impairment test included determining the fair value of each reporting unit that is allocated goodwill and comparing that fair value to the reporting unit's carrying value. The Company, in its initial goodwill impairment test, identified one reporting unit whose carrying value exceeded its estimated fair value. The Company engaged an independent valuation specialist to estimate the fair value of this reporting unit. The report of the independent valuation specialist used a combination of methods to determine the fair value of the reporting unit including prices of comparable businesses, a present value technique and a technique using recent transactions involving businesses similar to the reporting unit. The reporting unit consists primarily of the Company's AST subsidiary that is included in the Company's Engineered Solutions Segment. As a result of the reporting unit's excess carrying value, the Company was required, for this reporting unit, to assign the estimated fair value to the reporting unit's identifiable assets (including those intangible assets not recorded on the reporting unit's balance sheet) and liabilities to determine the implied fair value of the reporting unit's goodwill and the amount of impairment loss as of the date of implementation, January 1, 2002. The Company recorded a cumulative effect of change in accounting principle of $30.9 million (net of the tax effect of $20.1 million) at January 1, 2002 for its implementation of SFAS No. 142. The effect of adopting this change in accounting principle effective for the first quarter of 2002 reduced previously reported net income for the quarter ended March 31, 2002 by $30.9 million to a net loss of $29.6 million, basic net income per share by $0.80 to a basic net loss per share of $0.76, and diluted net income per share by $0.79 to a diluted net loss per share of $0.75. 10 The following is the categorization of the Company's intangible assets as of September 30, 2002 and December 31, 2001, respectively:
September 30, 2002 December 31, 2001 -------------------------------- -------------------------------- Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization -------------- ------------ -------------- ------------ Amortized Intangible Assets: Patents $ 1,319 $ (405) $ 1,319 $ (344) Unpatented Technology 2,875 (485) 2,875 (359) -------------- ------------ --------------- ------------ Total $ 4,194 $ (890) $ 4,194 $ (703) ============== ============ =============== ============
For the three and nine month periods ended September 30, 2002 the Company recognized $62 and $187 thousand, respectively, of amortization expense. The Company estimates amortization expense to be recognized during the next five years as follows: For the year ended 12/31/02 $ 248 For the year ended 12/31/03 $ 246 For the year ended 12/31/04 $ 246 For the year ended 12/31/05 $ 246 For the year ended 12/31/06 $ 246 The changes in the carrying amounts of goodwill by segment for the nine months ended September 30, 2002 are as follows:
Activated Engineered Carbon Service Solutions Consumer Segment Segment Segment Segment Total ------- ------- ------- ------- ----- Balance as of January 1, 2002 $ 2,015 $ - $ 68,049 $60 $ 70,124 Cumulative effect of change in accounting principle - - (51,000) - (51,000) Foreign exchange - - 39 - 39 -------- ---------- --------- ----- --------- Balance as of September 30, 2002 $ 2,015 $ - $ 17,088 $60 $ 19,163 ======== ========== ========= ===== =========
11 The following is the Company's net income adjusted to exclude goodwill amortization expense (net of tax) for the three months and nine months ended September 30, 2002 and 2001, respectively.
Three Months Ended Nine Months Ended September 30, September 30, --------------------- ------------------- 2002 2001 2002 2001 -------- -------- ------ ------ NET INCOME: Reported net income (loss) $ 556 $1,546 $(27,040) $7,744 Add back goodwill amortization, net of tax - 336 - 975 ------- -------- --------- ------ Adjusted net income (loss) $ 556 $1,882 $(27,040) $8,719 ======= ======== ========= ====== BASIC AND DILUTED EARNINGS PER SHARE: Reported net income (loss) $ 0.01 $ 0.04 $ (.69) $ .20 Goodwill amortization, net of tax - 0.01 - .02 ------- -------- --------- ------ Adjusted net income (loss) $ 0.01 $ 0.05 $ (.69) $ .22 ======= ======== ========= ======
9. New Accounting Pronouncements The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Management has not yet evaluated the impact of the adoption of SFAS No. 143 on the Company's financial statements. The Company plans to adopt SFAS No. 143 on January 1, 2003 as required. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company has adopted SFAS No. 144 as of January 1, 2002 as required with no resulting impact on the Company's financial statements. In July 2002, the FASB has issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. Previous accounting guidance, amended by SFAS No. 146, was provided by EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. 12 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 were consistent for the quarter ended September 30, 2002 versus the quarter ended September 30, 2001. Consolidated net sales for the year-to-date period ended September 30, 2002 decreased by $11.1 million or 5.4% versus the year-to-date period ended September 30, 2001 (an analysis of sales by segment can be found in Note 5 of Selected Notes to Financial Statements). Net sales for the activated carbon segment decreased by $0.9 million or 3.4% versus the quarter ended September 30, 2001 and $7.2 million or 8.8% versus the year-to-date period ended September 30, 2001. The decline for both periods was primarily the result of lower sales volume in North America due to the economic downturn that began in the latter part of 2001 and that has continued through the end of the third quarter of 2002. Net sales for the service segment increased by $0.8 million or 3.4% for the quarter ended September 30, 2002 as compared to the quarter ended September 30, 2001. Service segment sales for the year-to-date period ended September 30, 2002 were consistent with the similar 2001 period. For both periods of comparison, slower sales in North America were more than offset by increased sales in Europe and the positive impact of foreign currency translation which was $0.7 million for both the quarter and year-to-date periods. Revenues associated with the engineered solutions segment decreased by $0.4 million or 3.8% for the quarter ended September 30, 2002 versus the quarter ended September 30, 2001 and $6.3 million or 17.1% for the year-to-date period ended September 30, 2002 versus the comparable 2001 period primarily due to lower revenues in 2002 associated with a major project secured and substantially recorded in 2001. Sales to the consumer segment for the quarter ended September 30, 2002 increased by $0.6 million or 11.8% compared to the quarter ended September 30, 2001 and $2.3 million or 14.1% for the year-to-date period ended September 30, 2002 versus the similar 2001 period. The sales increase for the quarter is primarily due to increased sales of new consumer products. The reason for the increase during the year-to-date period of comparison was due to higher sales of charcoal, carbon cloth and new consumer products. The total positive impact of foreign currency translation on consolidated net sales for the quarter and year-to-date periods ended September 30, 2002 was $1.8 million and $1.5 million respectively. Gross profit, before depreciation, as a percentage of net sales was 30.2% for the quarter ended September 30, 2002 compared to 31.4% for the similar 2001 period, a 1.2 percentage point decline. For the year-to-date period, gross profit, before depreciation, as a percentage of net sales was 30.8% in 2002 versus 33.4% in the 2001 period representing a 2.6 percentage point decline. The decline for the quarter and year-to-date was primarily due to a combination of costs associated with a major Engineered Solutions project and increased charcoal production costs. Those cost increases were partially offset by lower energy costs and lower cost of U.S. sourced carbon products shipped to the Company's Belgian branch as a result of the strengthening of the Euro in 2002 versus the comparable 2001 periods in addition to higher production costs realized in the third quarter of 2001 due to the labor strike at the Company's Catlettsburg, Kentucky facility that was resolved in the first quarter of 2002. The depreciation and amortization decreases of $0.2 million and $1.0 million during the quarter and year-to-date periods ended September 30, 2002 versus the quarter and year-to-date periods ended September 30, 2001 were related primarily to the Company ceasing to amortize goodwill due to the implementation of Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" as of January 1, 2002 partially offset by higher depreciation. Combined, selling, general and administrative expenses and research and development expenses for the quarter ended September 30, 2002 were higher than the comparable 2001 quarter by $0.9 million or 7.4%. The increase is the result of a positive revision of the Company's pension expense estimate in the third quarter of 2001 coupled with additional expense incurred due to the new carbon facility in The People's Republic of China being operational for the entire third quarter of 2002. Combined, selling, general and administrative expenses and research and development expenses for the year-to-date period ended September 30, 2002 were $0.8 million or 2.0% lower than the comparable 2001 period. The decrease represents the Company's commitment to aggressively control spending during periods of lower sales demand. 13 Other expense for the quarter and year-to-date periods ended September 30, 2002 increased by $0.2 million versus both comparable periods. The primary reason for the increase in both periods presented is a small foreign exchange loss recognized during the quarter and year-to-date periods in 2002 versus a small foreign exchange gain recognized in the similar 2001 periods. Interest expense, net of interest income, for the quarter and year-to-date periods ended September 30, 2002 was below the quarter and year-to-date periods ended September 30, 2001 by $0.1 million or 20.4% and $1.1 million or 42.3%, respectively. The decrease in interest expense for both periods was primarily the result of the combination of lower interest rates and a lower average level of borrowings during the comparable periods. Net income decreased by $1.0 million and $34.8 million for the quarter and year-to-date periods ended September 30, 2002 versus the quarter and year-to-date periods ended September 30, 2001 primarily for the reasons discussed above and, for the year-to-date period, as a result of the $30.9 million after tax effect of the cumulative effect of change in accounting principle related to the implementation of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (see note 8 to the Selected Notes to Financial Statements.) Financial Condition Working Capital and Liquidity Cash flows generated from operating activities were $18.4 million for the nine month period ended September 30, 2002 versus cash generated from operations of $16.6 million for the comparable 2001 period. The $1.8 million increase represents a decrease in operating working capital (exclusive of debt) in 2002 versus the comparable period in 2001 partially offset by lower earnings and depreciation and amortization in 2002. Common stock dividends paid during the quarter ended September 30, 2002 represented $.03 per common share versus dividends paid of $.05 per common share for the quarter ended September 30, 2001. Total debt at September 30, 2002 was $59.6 million, a decrease of $4.8 million from December 31, 2001. The decline in debt was primarily the result of cash generated by net operating cash flows greater than the Company's capital expenditure and dividend requirements and those cash flows being used to repay debt. The Company expects that current cash from operating activities plus cash balances and available external financing will be sufficient to meet its future requirements. The Company has a $113.4 million credit facility consisting of an $86.8 million five-year revolving credit facility expiring in May 2004 and a $26.6 million 364-day revolving credit facility expiring in May 2004. The commitment under the 364-day revolving credit facility expired in May 2002 and was not renewed. However, in order to preserve the full $113.4 million commitment of the credit facility, the Company exercised its contractual option of borrowing the total commitment of $26.6 million under the 364-day line before its May 2002 expiration. The $26.6 million of outstanding borrowings mature in May 2004 which coincides with the expiration of the long-term portion of the credit facility. Included in this facility is a letter of credit subfacility which may not exceed $30.0 million. At September 30, 2002 there were $26.6 million of borrowings under the 364-day revolving credit agreement. The weighted average interest rate on the outstanding balance under this credit facility was 3.12% at September 30, 2002. The Company is currently in compliance with all of the financial covenants in the $113.4 million credit facility. One of those covenants is an interest coverage ratio that requires the Company to maintain a trailing four quarters earnings before interest and tax (EBIT) level greater than three times its interest expense. Due to the Company's recent operating performance, the potential exists that the Company could violate that interest coverage covenant should future quarterly EBIT cause the trailing four quarters EBIT to fall below its current level. Management intends to negotiate a waiver and an amendment to its facility prior to any violation. Such waiver would require the consent of the banks included in the credit facility. 14 In January 2001, the Company entered into an interest rate swap that fixes $10.0 million of its outstanding variable rate U.S. credit facility at 5.48%. The arrangement expires in January 2003. Restructuring of Operations The Company currently has two separate restructuring plans requiring continued cash outlays as of the period ended September 30, 2002. The latter of the two initiatives was undertaken during the fourth quarter of 1999 while the former commenced in the third quarter of 1998. The details of both restructuring plans are outlined below. 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 providing services and solutions to customer problems. The implementation began in December 1999 and is essentially complete except for contractual cash outlays for employee severance payments to be made in 2002 and other contractual cash outlays, primarily lease obligations, through the second quarter of 2006. In the third quarter of 1998, the Company initiated a worldwide plan to reduce costs and realign the organization structure. The implementation began in September 1998 and is essentially completed with the exception of some minor contractual cash outlays that will continue through 2002. 15 The restructuring reserve activity for the nine months ended September 30, 2002 was: Balance Balance 1-1-02 Payments 9-30-02 --------- -------- ------- ($000) 1999 Plan Employee severance and termination benefit costs $ 247 $ (228) $ 19 Other costs 1,101 (278) 823 ---------- ----------- ----------- 1,348 (506) 842 ---------- ----------- ----------- 1998 Plan Employee severance and termination benefit costs 95 (95) - Other costs 37 (13) 24 ---------- ----------- ----------- 132 (108) 24 ---------- ----------- ----------- Total reserves $ 1,480 $ 614) $ 866 ========== =========== =========== Management believes the reserve balances are adequate. Capital Expenditures and Investments Capital expenditures for property, plant and equipment totaled $9.8 million for the year-to-date period ended September 30, 2002 compared to expenditures of $8.4 million for the same period in 2001. The increase is primarily the result of the Company's investment in the construction of a carbon facility in the People's Republic of China. Capital expenditures for 2002 are projected to be approximately $13.0 million. Regulatory Matters 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 local, state and federal air pollution control entities. The Company is presently in compliance with these permits. Continued compliance will require administrative control and will be subject to any new or additional standards. In this regard, the Company has agreed with the state of Kentucky that it will either begin installation of additional control equipment on one of its three activated carbon lines at its Catlettsburg, Kentucky facility by November 2003 or cease operations of this one activated carbon line in May 2003. The Company has not started installation and does not expect to have the additional control equipment installed by May 2003. The activated carbon line has a net book value, including the coal handling servicing equipment related to this line, of approximately $3,000,000. Management has not concluded its plan of action for compliance related to this activated carbon line, however, if it is ultimately determined that a shutdown of the activated carbon line is warranted, operating results may be adversely effected by increased depreciation or impairment charges on this line. The total cost of the control equipment required for compliance, if installed, is estimated at approximately $7.0 million. The Company is evaluating its production capacity and related alternatives, including considering current market demands. The Company believes that the cessation of production of the activated carbon line, if temporary or other than temporary, will not have a material impact upon the Company's ability to service the demands of its customers. New Accounting Pronouncements The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Management has not yet evaluated the impact of the adoption of SFAS No. 143 on the Company's financial statements. The Company plans to adopt SFAS No. 143 on January 1, 2003 as required. 16 In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company has adopted SFAS No. 144 as of January 1, 2002 as required with no resulting impact on the Company's financial statements. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. Previous accounting guidance, amended by SFAS No. 146, was provided by EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. 17 Item 4. Controls and Procedures The Company's principal executive officer and principal financial officer have evaluated the effectiveness of the Company's "disclosure controls and procedures," as such term is defined in Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") within 90 days of the filing date of this Quarterly Report on Form 10-Q. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation. 18 PART II - OTHER INFORMATION Item 1. Legal Proceedings See Note 7 to the unaudited interim Consolidated Financial Statements contained herein. Item 6. Exhibits and Reports on Form 8-K (c) Exhibits Exhibit 10.8 Employment Agreement between Calgon Carbon Corporation and Gail A. Gerono. Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (d) Reports on Form 8-K A report on Form 8-K, dated August 13, 2002 which furnished information filed under Item 9. Regulation FD Disclosure detailing the Company's restatement of its previously reported segment financial data. 19 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: November 14, 2002 /s/William E. Cann ----------------------------- William E. Cann Senior Vice President, Chief Financial Officer 20 CERTIFICATION I, James A. Cederna, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Calgon Carbon Corporation. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ James A. Cederna - --------------------------------------- Name: James A. Cederna Title: Chief Executive Officer 21 CERTIFICATION I, William E. Cann, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Calgon Carbon Corporation. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ William E. Cann - -------------------------------------- Name: William E. Cann Title: Chief Financial Officer 22 EX-10.8 3 dex108.txt G.A. GERONO EMPLOYMENT AGREEMENT Exhibit 10.8 EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of January 17 , 1995, between CALGON CARBON CORPORATION (the "Company"), a Delaware corporation, and GAIL A. GERONO ("Employee"), of 3080 Swallowhill Circle, Pittsburgh, Pennsylvania 15220, WITNESSETH: WHEREAS, Employee is and has been Director of Investor Relations of the Company, in which capacity her services have contributed materially to the successful operation of the Company's business, the increase in the number of its customers and the development and maintenance of the good will of such customers. WHEREAS, the Company wishes to assure itself of the continued availability of Employee's services and of reasonable protection against Employee's competing against the Company, and Employee is willing to give such assurance in return for protection against arbitrary or unjustified discharge, demotion and similar events; NOW, THEREFORE, intending to be legally bound hereby, the Company hereby agrees to employ Employee, and Employee hereby agrees to be employed by the Company, upon the following terms and conditions: 1. Duties and Responsibilities. Employee shall use her best energies and abilities in, and shall devote all her time during business hours to, the rendering of such services and the performance of such duties as may be assigned to her from time to time by the Company, all as directed by and to the satisfaction of the President and the Board of Directors of the Company. Employee's assignment and primary responsibility shall be Director of Investor Relations of the Company. Notwithstanding the foregoing without Employee's consent, she shall not be required to render services or perform duties hereunder which are not reasonably consistent with and customary for her position as Director of Investor Relations of the Company, or which would require her to move her personal residence from Allegheny County, Pennsylvania. 2. Initial and renewal terms; death or disability. ---------------------------------------------- (a) Employment hereunder shall commence as of January 17, 1995. Except as otherwise provided in paragraph 2(b), such employment shall continue for an initial period until December 31, 1995 and unless terminated as provided in paragraph 2 (c) or article 4, shall continue thereafter for successive renewal periods o f one year each after December 31, 1995. (b) If a Change of Control occurs at a.time when Employee is employed hereunder, such employment shall continue until the last day of the second full calendar year after such Change of Control and unless terminated as provided in paragraph 2 (c) or article 4 , shall continue thereafter for successive renewal periods of one year each. The term "Change of Control" is defined in paragraph 2 (d). (c) The Company or Employee may terminate Employee's employment hereunder as of the end of the initial period referred to in paragraph 2 (a), or as of the end of the second full calendar year after a Change of Control pursuant to paragraph 2(b), or as of the end of any applicable renewal period referred to in paragraphs 2 (a) or 2 (b), by giving written notice to the other that such employment will terminate and of the date of such termination. Any such notice, to be effective, must be given not less than six months before the date when such employment is to terminate other termination rights are provided in article 4. (d) For all purposes of this Agreement, a Change of Control shall be deemed to have occurred when (i) the Company is merged or consolidated with another corporation which is not then controlled by the Company, or (ii) a majority of the Company' s assets are sold or otherwise transferred to another such corporation or to a partnership, firm or one or more individuals not so controlled, or (iii) a majority of the members of the Company's Board of Directors consists of persons who were not nominated for election as directors by or on behalf of the Board of Directors itself or with the express concurrence of the Board of Directors, or (iv) a single person other than the Voting Trust, or a group of persons acting in concert and not including the Voting Trust, obtains the power to cause the nominees or such person or group to be elected as a majority of the directors of the Company. For all purposes of this Agreement, the term "Voting Trust" shall mean ( i ) the Voting Trust dated as of March 1, 1985, as amended and as it may be amended, of which Thomas A. McConomy is presently the Voting Trustee (the "Existing Voting Trust"), (ii) the Trustee of the Existing Voting Trust acting as such, (iii) any Successor Voting Trust and (iv) the voting trustee or trustees of any Successor Voting Trust. For all purposes of this Agreement, the term "Successor Voting Trust" shall mean any voting trust into which persons who are now beneficial owners of shares in the Existing Voting Trust deposit shares of the Company's capital stock having voting power sufficient to cause the nominees of such persons to be elected as a majority of the directors of the Company. 2 (e) If Employee dies during her employment hereunder, payment of compensation shall thereupon be discontinued. If for any reason Employee is physically or mentally disabled so as to be unable to perform all her duties hereunder and the employment of employee is not terminated pursuant to paragraph 4, then payment of compensation hereunder (other than severance pay, if any, pursuant to paragraph 5(b) shall be discontinued during the period beginning twelve months after such disability begins and ending on the date when Employee is able to resume full-time employment hereunder, provided that the proceeds of any disability insurance maintained by the Company and payable to Employee during the period of her disability shall be credited against the Company's obligation to pay compensation to Employee under this paragraph 2(e). 3. Compensation. Subject to paragraph 2, the Company shall pay Employee a salary at the rate of at least $5,205 per month until the termination of Employee's employment hereunder. Such salary rate shall be reviewed at least annually by the Board of Directors of the company and may be increased or decreased (but not below the rate specified above) to reflect the performance by Employee of her duties hereunder, the results of the operations of the Company's business or other factors. Employee shall be entitled to receive bonuses and other incentive compensation, stock options, stock appreciation rights, other forms of compensation and other employee benefits on no less favorable a basis than the basis applicable to other employees of the Company having similar rank and status, except for benefits not legally available to Employee because of her status, compensation or similar factors. Employee shall also be reimbursed by the Company for reasonable out-of-pocket expenses incurred by her in performing her duties hereunder. 4. Termination. ----------- (a) The employment of Employee hereunder may be terminated by the Company at any time, without notice, for Employee's dishonesty, disloyalty or refusal to perform her duties hereunder in good faith and to the best of her ability or for Employee's resignation at a time or in a manner not permitted by this Agreement or for any other material breach of this Agreement by Employee (a "Termination for Cause"). (b) At any time prior to the date, if ever, when a Change of Control occurs, the employment of Employee hereunder may also be terminated by the Company, on not less than 60 days' notice to Employee, for Employee's failure or inability to perform such duties in a manner reasonably satisfactory to the President of the Company in the President's judgment rendered in good faith (a "Performance-Based Termination"). After a Change of Control, no termination by the Company of Employee's employment hereunder shall be deemed a Performance-Based Termination. 3 (c) If a Change of Control occurs, Employee may terminate employment hereunder as of any date which is within the period beginning on the first anniversary, of such Change of Control and ending on the second such anniversary, on not less than 30 days' notice to the Company. Any such termination by Employee may be for any reason which is sufficient to Employee, in Employee's sole discretion. 5. Severance pay. ------------- (a) If the employment of Employee hereunder is terminated by the Company in a Termination for Cause or a Performance-based Termination, no severance pay shall be paid to Employee by reason of such termination. (b) If the employment of Employee hereunder is terminated by the Company in any manner other than a Termination for Cause or a Performance-Based Termination (except a termination pursuant to paragraph 2(c)), or is terminated by Employee pursuant to paragraph 4 (c) after a Change of Control, then during the Severance Period the Company shall pay to Employee as severance pay each month an amount equal to one-twelfth of Severance Compensation. "Severance Compensation, " for purposes of this Agreement, shall mean the amount of salary (but not bonus or other incentive compensation) received by Employee from the Company for the calendar year immediately prior to the year of termination. "Severance Period," for purposes of this Agreement, shall mean the period of 12 months after the date of such termination, but in any event the Severance Period shall end on the date, if ever, when Employee is employed by another employer for total cash compensation equal to at least 90% of Severance Compensation. In addition, in the event of any such termination the Company shall provide for Employee during the Severance Period the same or equivalent medical, dental, vision, disability and insurance benefits as were provided for Employee at the time of such termination. (c) Upon any termination of the employment of Employee hereunder, inc1uding but not limited to a Termination for Cause or an Employment-Based Termination, Employee shall be entitled to receive all vested benefits under all incentive compensation and other employee benefit programs applicable to Employee, and shall be entitled to exercise all, stock options and stock appreciation rights previously granted to Employee by the Company regardless of any deferred vesting or deferred exercise provisions of such stock options or stock appreciation rights. 6. Confidential information, etc. (a) Employee recognizes and acknowledges that: (i) in the course of Employee's employment by the Company it will be necessary for Employee to acquire information which could include, in whole or in part, information. concerning the Company's sales, 4 sales volume, sales methods, sales proposals, customers and prospective customers, identity of customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, amount or kind of customers' purchases from the Company, the Company's sources of supply, computer programs, system documentation, special hardware, product hardware, related software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the Company's affairs (collectively referred to herein as the "Confidential Information") ; (ii) the Confidential Information is the property of the Company; (iii) the use, misappropriation or disclosure of the Confidential Information would constitute a breach of trust and could cause irreparable injury to the Company; and (iv) it is essential to the protection of the Company's good will and to the maintenance of the Company's competitive position that the Confidential Information be kept secret and that Employee not disclose the Confidential Information to others or use the Confidential Information to Employee's own advantage or the advantage of others. (b) Employee further recognizes and acknowledges that it is essential for the proper protection of the business of the Company that Employee be restrained (i) from soliciting or inducing any employee of the Company or of any subsidiary of the Company (collectively, the "Company") to leave the employ of the Company, ( ii ) from hiring or attempting to hire any employee of the Company, (iii) from soliciting the trade of or trading with the customers and suppliers of the Company for any business purpose, and (iv) from competing against the Company for a reasonable period. 7. Non-compete. ----------- (a) Employee agrees to hold and safeguard the Confidential information in trust for the Company, its successors and assigns and agrees that she shall not, without the prior written consent of the Company, disclose or make available to anyone for use outside the Company at any time, either during her, employment by the Company or subsequent to the termination of her employment by the Company for any reason, including without limitation termination by the Company in a Termination for Cause or otherwise, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company. (b) Upon the termination of Employee's employment by the Company or by Employee for any reason, including without limitation termination by the Company in a Termination for Cause or otherwise, Employee shall promptly deliver to the Company all originals and copies of correspondence, drawings, blueprints, financial and business records, marketing and publicity materials, 5 manuals, letters, notes, notebooks, reports, flow-charts, drawings, programs, proposals and any documents concerning the Company's customers or concerning products or processes used by the Company and, without limiting the foregoing, shall promptly deliver to the Company any and all other documents or materials containing or constituting Confidential Information. (c) Employee agrees that during her employment by the Company she shall not, directly or indirectly, solicit the trade of, or trade with, any customer, prospective customer or supplier of the Company for any business purpose other than for the benefit of the Company. Employee further agrees that during the Severance Period or for a period of two years after termination of employment hereunder, whichever is longer, Employee shall not, directly or indirectly, solicit the trade of, or trade with, any customers or suppliers, or prospective customers or suppliers, of the Company, or solicit or induce, or attempt to solicit or induce, any employee of the Company to leave the Company for any reason whatsoever or hire any employee of the Company. (d) Employee covenants and agrees that during the period of Employee's employment hereunder and during the Severance Period or for a period of two years after termination of employment hereunder, whichever is longer, Employee shall not, in any Competitive Territory, engage, directly or indirectly whether as principal or as agent, officer, director, employee, consultant, shareholder or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business. For purposes of this Agreement, (i) the term "Competing Business" shall mean any person, corporation or other entity which sells or attempts to sell any products or services which are the same as or similar to the products and services sold by the Company at any time and from time to time during the last two years prior to the termination of Employee's employment hereunder, and (ii) the term "Competitive Territory" shall mean the United States of America, Great Britain, Belgium, Germany, Japan and any other nation in which, to the knowledge of Employee, the Company has made or considered making such sales, either itself or through a subsidiary, affiliate or joint venture partner, during the last two years prior to the termination of Employee's employment hereunder. 8. Injunctive and other relief. --------------------------- (a) Employee represents that her experience and capabilities are such that the provisions of paragraphs 6 and 7 will not prevent her from earning her, livelihood, and acknowledges that it would cause the Company serious and irreparable injury and cost if Employee were to use her ability and knowledge in competition with the Company or to otherwise breach the obligations contained in said paragraphs. 6 (b) In the event of a breach by Employee of the terms of this Agreement, the Company shall be entitled, if it shall so elect, to institute legal proceedings to obtain damages for any such breach, or to enforce the specific performance of this Agreement by Employee and to enjoin Employee from any further violation of this Agreement and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law. Employee acknowledges, however, that the remedies at law for any breach by her of the provisions of this Agreement may be inadequate and that the Company shall be entitled to injunctive relief against her in the event of any breach whether or not the Company may also be entitled to recover damages hereunder. (c) It is the intention of the parties that the provisions of paragraphs 6 and 7 hereof shall be enforceable to the fullest extent permissible under applicable law, but that the unenforceability (or modification to conform to such 1aw) or any provision or provisions hereof shall not render unenforceable, or impair, the remainder thereof. If any provision or provisions hereof shall be deemed invalid or unenforceable, either in whole or in part, this Agreement shall be deemed amended to delete or modify, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it valid and enforceable. 9. Arbitration. Any dispute arising out of or relating to this Agreement or the breach, termination or validity hereof shall be finally settled by arbitration conducted expeditiously in accordance with the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes by three independent and impartial arbitrators. Each party shall appoint one of such arbitrators, and the two arbitrators so appointed shall appoint the third arbitrator. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ss.ss.1-16, and judgment on the award rendered by the arbitrators may be entered by any court having jurisdiction thereof. The place of arbitration shall be Pittsburgh, Pennsylvania. The arbitrators are not empowered to award damages in excess of compensatory damages and each party hereby irrevocably waves any damages in excess of compensatory damages. 10. Governing law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Pennsylvania. 11. Amendments, waivers, etc. No amendment of any provision of ------------------------- this Agreement, and no postponement or waiver of any such provision or of any default, misrepresentation, or breach of 7 warranty or covenant hereunder, whether intentional or not, shall be valid unless such amendment, postponement or waiver is in writing and signed by or on behalf of the Company and Employee. No such amendment, postponement or waiver shall be deemed to extend to any prior or subsequent matter, whether or not similar to the subject-matter of such amendment, postponement or waiver. No failure or delay on the part of the Company or Employee in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 12. Assignment. The rights and duties of the Company under this Agreement may be transferred to, and shall be binding upon, any person or company which acquires the Company or its business by merger, purchase or otherwise. Except as otherwise provided in this paragraph 12, neither the Company nor Employee may transfer any of their respective rights and duties hereunder except with the written, consent of the other party hereto. 13. Interpretation, etc. The Company and Employee have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Company and Employee and no presumption or burden of proof shall arise favoring or disfavoring the Company or Employee because of the authorship of any of the provisions of this Agreement. The word "including" shall mean including without limitation. The rights and remedies expressly specified in this Agreement are cumulative and are not exclusive of any rights or remedies which either party would otherwise have. The paragraph headings hereof are for convenience only and shall not affect the meaning or interpretation of this Agreement. 14. Integration; counterparts. This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, to the extent they relate to the subject matter hereof. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. WITNESS the due execution hereof as of the date first above written 8 EX-99.1 4 dex991.txt CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the Quarterly Report of Calgon Carbon Corporation (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James A. Cederna, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial conditions and result of operations of the Company for the periods presented therein. /s/ James A. Cederna - -------------------------- James A. Cederna - -------------------------- Chief Executive Officer November 14, 2002 This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-99.2 5 dex992.txt CERTIFICATION PURSUANT TO THE SARBANES-OXLEY ACT Exhibit 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the Quarterly Report of Calgon Carbon Corporation (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William E. Cann, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial conditions and result of operations of the Company for the periods presented therein. /s/ William E. Cann ------------------------- William E. Cann - -------------------------- Chief Financial Officer November 14, 2002 This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----