Calgon Carbon Corp. has a market cap of $842.9 million; its shares were traded at around $15.18 with a P/E ratio of 17.8 and P/S ratio of 1.9. 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:Consolidated net sales increased by $16.9 million or 15.7% and $49.7 million or 16.5% for the quarter and year-to-date periods ended September 30, 2010, respectively, versus the quarter and year to date periods ended September 30, 2009. The net effect on sales from the acquisitions completed in the first quarter of 2010 was $16.2 million and $26.2 million for the quarter and year-to-date periods ended September 30, 2010. The impact of foreign currency translation on consolidated net sales was ($2.1) million and ($1.4) million for the quarter and year-to-date periods ended September 30, 2010 versus the comparable 2009 periods.
Net sales for the quarter and year-to-date periods ended September 30, 2010 for the Activated Carbon and Service segment increased $15.8 million or 16.7% and $49.5 million or 18.9%, respectively, versus the similar 2009 periods. The net effect of the acquisitions completed in the first quarter of 2010 was $14.5 million and $23.3 million on the quarter and year-to-date periods ended September 30, 2010, respectively, versus the similar 2009 periods. Higher demand in the Environmental Air Treatment, Industrial Process, and Food markets of $3.2 million, $0.7 million, and $0.6 million, respectively, also contributed to the quarter over quarter increase. However, this was partially offset by lower demand in the Environmental Water Treatment and Potable Water markets of $0.8 million and $1.7 million. Sales in the Potable Water market for the quarter ended September 30, 2009 included a supply of a large quantity of activated carbon for a new potable water treatment facility in Asia that did not repeat in 2010. The increase for the year-to-date period ended September 30, 2010 was primarily due to higher demand in the Environmental Air Treatment, Potable Water, and Industrial Process markets of $16.2 million, $5.9 million, and $3.4 million, respectively. Net sales for the Equipment segment increased $1.5 million or 14.7% and $0.6 million or 1.9%, respectively, versus the similar 2009 periods. Although the acquisition of Hyde Marine Inc. (Hyde) in the first quarter of 2010 contributed $1.7 million and $2.9 million to the quarter and year-to-date periods ended September 30, 2010, respectively, lower revenue recognized for ultraviolet light systems of $2.1 million and $2.5 million offset it. However, higher revenue recognized for traditional carbon adsorption equipment of $2.0 million was the primary reason for the overall increase for the quarter ended September 30, 2010 versus the similar 2009 period. Net sales for the Consumer segment for the quarter and year-to-date periods ended September 30, 2010 declined $0.4 million or 16.4% and $0.4 million or 5.9%, respectively, versus the similar 2009 periods. The decrease was due to lower demand for both activated carbon cloth and PreZerve® products of $0.2 million and $0.2 million, respectively, for each of the quarter and year-to-date periods ended September 30, 2010.
Cash flows provided by operating activities were $25.7 million for the period ended September 30, 2010 compared to $49.1 million for the comparable 2009 period. The $23.4 million decrease is primarily as a result of working capital changes related to receivables and inventories. The higher sales volume for the period ended September 30, 2010 contributed to an increase in receivables of $3.6 million whereas receivables declined $3.8 million during the similar 2009 period due to improved cash collections. Inventory for the period ended September 30, 2010 increased $4.4 million primarily as a result of an increase in finished goods whereas it declined $7.4 million in the similar 2009 period as a result of inventory control measures in Europe and the U.S. as well as the reduction of outsourced carbon products.
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 nine months ended September 30, 2009, the Company recorded interest expense of $0.1 million and $0.4 million related to the Notes, of which $47 thousand and $0.2 million related to the amortization of the discount and $38 thousand and $0.2 million related to contractual coupon interest, respectively.
Capital expenditures for property, plant and equipment totaled $25.3 million for the nine months ended September 30, 2010 compared to expenditures of $38.3 million for the same period in 2009. The expenditures for the period ended September 30, 2010 consisted primarily of improvements to the Companys manufacturing facilities of $17.4 million and $3.0 million for customer capital. The expenditures for the period ended September 30, 2009 consisted primarily of improvements to the Companys manufacturing facilities of $32.2 million, of which $8.4 million was directly related to the April 2009 re-start of a previously idled production line at the Companys Catlettsburg, Kentucky facility and $12.0 million related to a new pulverization facility at the same location, and
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 was 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 filed post trial motions to reverse or alter the verdict which were denied by the Court in October 2010. The Company has filed an appeal to the Third Circuit Court of Appeals.
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