Calgon Carbon Corp. (CCC, Financial) filed Quarterly Report for the period ended 2009-03-31.
Calgon Carbon Corporation has four reportable segments Activated Carbon Service Engineered Solutions and Consumer Health. These reportable segments are composed of global profit centers that make and sell different products and services.In addition to offering services to clean water from contaminated aquifers and surface impoundments and to clean accidental spills on a fee basis the Company also sells a line of adsorption and filtration equipment to clean water from contaminated aquifers and industrial wastewater and surface impoundments. Calgon Carbon Corp. has a market cap of $784.3 million; its shares were traded at around $14.4 with a P/E ratio of 25.7 and P/S ratio of 2.
Net sales less cost of products sold, as a percentage of net sales, was 32.5% for the quarter ended March 31, 2009 compared to 31.6% for the similar 2008 period, a 0.8% increase or $0.8 million. The Activated Carbon and Service segment increased by 0.6% or $0.6 million which was primarily related to higher pricing for certain carbon and service products which more than offset increased activated carbon product costs that the Company experienced. The Equipment segment increased 1.1% or $1.1 million principally related to the favorable mix of equipment revenue recognized as higher margin ultra violet light and ion exchange systems made up a larger proportion of 2009 sales. The Consumer segment decreased by 0.9% or $0.9 million due to higher costs associated with production issues with carbon cloth raw material quality. The Company s cost of products sold excludes depreciation; therefore it may not be comparable to that of other companies.
Effective January 1, 2009, the Company implemented FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer s nonconvertible debt borrowing rate. This new accounting method has been applied retrospectively to all periods presented with an impact to retained earnings of $9.2 million as of January 1, 2009. Under FSP APB 14-1, the Company s $75.0 million principal amount of Notes has an initial measurement that consists of a liability component of $53.1 million and an equity component of $18.6 million ($11.5 million after the associated deferred tax liability). The carrying amount of the equity component is $0.6 million (after tax) at March 31, 2009 and December 31, 2008, respectively. At March 31, 2009, the if-converted value of the Notes exceeded its principal amount by approximately $10.6 million.
In accordance with FSP APB 14-1, the debt discount of $21.9 million is 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 is approximately 13.8%. The Company also incurred original issuance costs of $0.4 million which have been deferred and are being amortized over the same period as the discount. For the three months ended March 31, 2009, the Company recorded interest expense of $0.2 million related to the Notes, of which $0.1 million related to the amortization of the discount and $0.1 million related to contractual coupon interest. The effect on net income and earnings per share was not material for the three month period ended March 31, 2009. Similarly, for the three months ended March 31, 2008, the Company recorded interest expense of $1.9 million related to the Notes, of which $1.0 million related to the amortization of the discount and $0.9 million related to contractual coupon interest. The effect of the retrospective adjustment for the adoption of FSP APB 14-1 for the three month period ended March 31, 2008 was to decrease previously reported net income by $0.5million or $0.01 per diluted common share.
As of March 31, 2009, the collateral value of assets pledged was $56.5 million. The collateral value as of March 31, 2009 for domestic, U.K., and Belgian borrowers were $47.5 million, $5.3 million, and $3.7 million, respectively. The Credit Facility contains a fixed charge coverage ratio covenant which becomes effective when total domestic availability falls below $11.0 million. As of March 31, 2009, total availability was $44.9 million. Availability as of March 31, 2009 for domestic, U.K., and Belgian borrowers was $38.9 million, $4.2 million, and $1.8 million, respectively. The Company can issue letters of credit up to $20 million of the available commitment amount under the Credit Facility. Sub-limits for letters of credit under the U.K. sub-facility and the Belgian sub-facility are $2.0 million and $6.0 million, respectively. Letters of credit outstanding at March 31, 2009 totaled $11.6 million.
Capital expenditures for property, plant and equipment totaled $12.9 million for the three months ended March 31, 2009 (with $1.8 million of this amount reflected as a non-cash increase in accounts payable and accrued liabilities) compared to expenditures of $6.6 million for the same period in 2008. The expenditures for the period ended March 31, 2009 consisted primarily of improvements to the Company s manufacturing facilities of $10.4 million, of which $5.4 million was directly related to the April 2009 re-start of a previously idled production line at the Company s Catlettsburg, Kentucky facility, and $1.3 million for customer capital. The comparable 2008 period consisted primarily of improvements to the Company s manufacturing facilities of $5.0 million, of which $3.5 million was directly related to the aforementioned production line, $0.7 million related to improvements of information systems, and $0.8 million for customer capital. Capital expenditures for 2009 are projected to be approximately $55.0 million to $60.0 million. The aforementioned expenditures are expected to be funded by operating cash flows, cash on hand, and borrowings.
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Calgon Carbon Corporation has four reportable segments Activated Carbon Service Engineered Solutions and Consumer Health. These reportable segments are composed of global profit centers that make and sell different products and services.In addition to offering services to clean water from contaminated aquifers and surface impoundments and to clean accidental spills on a fee basis the Company also sells a line of adsorption and filtration equipment to clean water from contaminated aquifers and industrial wastewater and surface impoundments. Calgon Carbon Corp. has a market cap of $784.3 million; its shares were traded at around $14.4 with a P/E ratio of 25.7 and P/S ratio of 2.
Highlight of Business Operations:
Consolidated net sales increased by $0.3 million or 0.3% for the quarter ended March 31, 2009 versus the quarter ended March 31, 2008. Net sales for the quarter ended March 31, 2009 for the Activated Carbon and Service segment increased $0.9 million or 1.1% versus the similar 2008 period. The increase was primarily due to higher pricing for certain carbon products and services in the food and municipal drinking water markets which was partially offset by lower demand in the home water filter and specialty carbon markets and foreign currency translation which had a negative impact of $4.7 million due to the stronger U.S. dollar. Net sales for the Equipment segment increased $1.2 million or 12.4% in the first quarter 2009 versus the comparable 2008 period. The increase was primarily due to higher revenue for ultra violet light and ion exchange systems, which was partially offset by a decrease in revenue for carbon adsorption and odor control systems. Foreign currency translation had a negative impact of $0.1 million. Net sales for the quarter ended March 31, 2009 for the Consumer segment decreased by $1.8 million or 47.2% versus the quarter ended March 31, 2008. The decrease was primarily attributable to the lower demand for PreZerve® products and activated carbon cloth as well as the negative impact of foreign currency translation of $0.5 million. The total negative impact of foreign currency translation on consolidated net sales for the quarter ended March 31, 2009 was $5.3 million.Net sales less cost of products sold, as a percentage of net sales, was 32.5% for the quarter ended March 31, 2009 compared to 31.6% for the similar 2008 period, a 0.8% increase or $0.8 million. The Activated Carbon and Service segment increased by 0.6% or $0.6 million which was primarily related to higher pricing for certain carbon and service products which more than offset increased activated carbon product costs that the Company experienced. The Equipment segment increased 1.1% or $1.1 million principally related to the favorable mix of equipment revenue recognized as higher margin ultra violet light and ion exchange systems made up a larger proportion of 2009 sales. The Consumer segment decreased by 0.9% or $0.9 million due to higher costs associated with production issues with carbon cloth raw material quality. The Company s cost of products sold excludes depreciation; therefore it may not be comparable to that of other companies.
Effective January 1, 2009, the Company implemented FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer s nonconvertible debt borrowing rate. This new accounting method has been applied retrospectively to all periods presented with an impact to retained earnings of $9.2 million as of January 1, 2009. Under FSP APB 14-1, the Company s $75.0 million principal amount of Notes has an initial measurement that consists of a liability component of $53.1 million and an equity component of $18.6 million ($11.5 million after the associated deferred tax liability). The carrying amount of the equity component is $0.6 million (after tax) at March 31, 2009 and December 31, 2008, respectively. At March 31, 2009, the if-converted value of the Notes exceeded its principal amount by approximately $10.6 million.
In accordance with FSP APB 14-1, the debt discount of $21.9 million is 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 is approximately 13.8%. The Company also incurred original issuance costs of $0.4 million which have been deferred and are being amortized over the same period as the discount. For the three months ended March 31, 2009, the Company recorded interest expense of $0.2 million related to the Notes, of which $0.1 million related to the amortization of the discount and $0.1 million related to contractual coupon interest. The effect on net income and earnings per share was not material for the three month period ended March 31, 2009. Similarly, for the three months ended March 31, 2008, the Company recorded interest expense of $1.9 million related to the Notes, of which $1.0 million related to the amortization of the discount and $0.9 million related to contractual coupon interest. The effect of the retrospective adjustment for the adoption of FSP APB 14-1 for the three month period ended March 31, 2008 was to decrease previously reported net income by $0.5million or $0.01 per diluted common share.
As of March 31, 2009, the collateral value of assets pledged was $56.5 million. The collateral value as of March 31, 2009 for domestic, U.K., and Belgian borrowers were $47.5 million, $5.3 million, and $3.7 million, respectively. The Credit Facility contains a fixed charge coverage ratio covenant which becomes effective when total domestic availability falls below $11.0 million. As of March 31, 2009, total availability was $44.9 million. Availability as of March 31, 2009 for domestic, U.K., and Belgian borrowers was $38.9 million, $4.2 million, and $1.8 million, respectively. The Company can issue letters of credit up to $20 million of the available commitment amount under the Credit Facility. Sub-limits for letters of credit under the U.K. sub-facility and the Belgian sub-facility are $2.0 million and $6.0 million, respectively. Letters of credit outstanding at March 31, 2009 totaled $11.6 million.
Capital expenditures for property, plant and equipment totaled $12.9 million for the three months ended March 31, 2009 (with $1.8 million of this amount reflected as a non-cash increase in accounts payable and accrued liabilities) compared to expenditures of $6.6 million for the same period in 2008. The expenditures for the period ended March 31, 2009 consisted primarily of improvements to the Company s manufacturing facilities of $10.4 million, of which $5.4 million was directly related to the April 2009 re-start of a previously idled production line at the Company s Catlettsburg, Kentucky facility, and $1.3 million for customer capital. The comparable 2008 period consisted primarily of improvements to the Company s manufacturing facilities of $5.0 million, of which $3.5 million was directly related to the aforementioned production line, $0.7 million related to improvements of information systems, and $0.8 million for customer capital. Capital expenditures for 2009 are projected to be approximately $55.0 million to $60.0 million. The aforementioned expenditures are expected to be funded by operating cash flows, cash on hand, and borrowings.
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