Calgon Carbon Corp. has a market cap of $689.2 million; its shares were traded at around $12.27 with a P/E ratio of 16.3 and P/S ratio of 1.7. Calgon Carbon Corp. had an annual average earning growth of 2.3% over the past 10 years.CCC is in the portfolios of Manning & Napier Advisors, Inc.
Highlight of Business Operations:Net sales for the quarter and year-to-date periods ended June 30, 2010 for the Activated Carbon and Service segment increased $21.0 million or 23.5% and $33.7 million or 20.2%, respectively, versus the similar 2009 periods. The acquisitions completed in the first quarter of 2010 had an impact of $8.9 million and $7.8 million, respectively, on the quarter and year-to-date periods ended June 30, 2010, versus the comparable periods in 2009. The remaining increase for both the quarter and year-to-date periods was primarily due to higher demand for certain activated carbon and service products in the Potable Water and Environmental Air Treatment markets. Net sales for the Equipment segment for the quarter ended June 30, 2010 were comparable to the similar 2009 period and declined $0.9 million or 4.2% for the year-to-date period ended June 30, 2010 primarily due to lower revenues for ion exchange systems. Net sales for the Consumer segment for the quarter ended June 30, 2010 declined $0.3 million or 13.3% versus the comparable 2009 period principally due to lower demand for activated carbon cloth. However, net sales for the year-to-date period ended June 30, 2010 were comparable to the similar 2009 period.
Other expense for the quarter and year-to-date periods ended June 30, 2010 decreased $1.3 million and $1.5 million, respectively, as compared to the similar 2009 periods. The decrease for both periods is primarily due to the write-off of $0.8 million of financing fees related to the Companys Prior Credit Facility which occurred during the quarter ended June 30, 2009. Also contributing to the decrease was the positive impact of foreign exchange of $0.6 million and $0.8 million, respectively, for the quarter and year-to-date periods ended June 30, 2010 as compared to the similar 2009 periods.
In accordance with guidance within ASC 470-20, the debt discount of $21.9 million was being amortized over the period from August 18, 2006 (the issuance date) to June 15, 2011 (the first put date on the Notes). The effective interest rate for all periods on the liability component was approximately 13.8%. The Company also incurred original issuance costs of $0.4 million which had been deferred and were being amortized over the same period as the discount. For the three and six months ended June 30, 2009, the Company recorded interest expense of $0.2 million and $0.3 million related to the Notes, of which $0.1 million and $0.2 million related to the amortization of the discount and $0.1 million and $0.1 million related to contractual coupon interest, respectively.
The Credit Agreement provides for an initial $95.0 million revolving credit facility (the Revolving Credit Facility) which expires on May 8, 2014. So long as no event of default has occurred and is continuing, the Company from time to time may request one or more increases in the total revolving credit commitment under the Revolving Credit Facility of up to $30.0 million in the aggregate. No assurance can be given, however, that the total revolving credit commitment will be increased above $95.0 million. Availability under the Revolving Credit Facility is conditioned upon various customary conditions. A quarterly nonrefundable commitment fee is payable by the Company based on the unused availability under the Revolving Credit Facility and is currently equal to 0.25%. Any outstanding borrowings under the Revolving Credit Facility on July 2, 2012, up to $50.0 million, automatically convert to a term loan maturing on May 8, 2014 (the Term Loan), with the total revolving credit commitment under the Revolving Credit Facility being reduced at that time by the amount of the Term Loan. Total availability under the Revolving Credit Facility at June 30, 2010 was $92.0 million, after considering outstanding letters of credit.
Capital expenditures for property, plant and equipment totaled $17.0 million for the six months ended June 30, 2010 compared to expenditures of $28.2 million for the same period in 2009. The expenditures for the period ended June 30, 2010 consisted primarily of improvements to the Companys manufacturing facilities of $11.6 million and $2.7 million for customer capital. The expenditures for the period ended June 30, 2009 consisted primarily of improvements to the Companys manufacturing facilities of $23.1 million, of which $7.9 million was directly related to the April 2009 re-start of a previously idled production line at the Companys Catlettsburg, Kentucky facility and $7.8 million related to a new pulverization facility at the same location, and $2.2 million for customer capital. Capital expenditures for 2010 are projected to be approximately $50.0 million to $60.0 million. The aforementioned expenditures are expected to be funded by operating cash flows, cash on hand, and borrowings.
On March 20, 2007, the Company and ADA-ES entered into a Memorandum of Understanding (MOU) providing for cooperation between the companies to attempt to jointly market powdered activated carbon (PAC) to the electric power industry for the removal of mercury from coal fired power plant flue gas. The MOU provided for commissions to be paid to ADA-ES in respect of product sales. The Company terminated the MOU effective as of August 24, 2007 for convenience. Neither party had entered into sales or supply agreements with prospective customers as of that date. On March 3, 2008, the Company entered into a supply agreement with a major U.S. power generator for the sale of powdered activated carbon products with a minimum purchase obligation of approximately $55 million over a 5 year period. ADA-ES claimed that it is entitled to commissions of at least $8.25 million over the course of the 5 year contract, which the Company denies. On September 29, 2008, the Company filed suit in the United States District Court for the Western District of Pennsylvania for a declaratory judgment from the Court that the Company has no obligation to pay ADA-ES commissions related to this contract or for any future sales made after August 24, 2007. The Company has been countersued alleging breach of contract. A jury trial was concluded in July 2010 and the Company received an adverse jury verdict determining that it breached its contract with ADA-ES by failing to pay commissions on sales of PAC to the mercury removal market. The jury awarded $3.0 million for past damages and $9.0 million in a lump sum for future damages, which is recorded as a component of current liabilities at June 30, 2010. The Company recorded a litigation contingency of $11.5 million for the quarter ended June 30, 2010. The Company previously recorded a $250 thousand litigation contingency in the quarter ended September 30, 2009 and a $250 thousand litigation contingency in the quarter ended June 30, 2008. The Company will appeal the verdict.
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