Calgon Carbon Corp. (CCC, Financial) filed Quarterly Report for the period ended 2009-06-30.
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 $722.3 million; its shares were traded at around $13.2 with a P/E ratio of 23.2 and P/S ratio of 1.8.
Net sales less cost of products sold, as a percentage of net sales, was 31.8% for the quarter ended June 30, 2009 as compared to 34.5% for the similar 2008 period, a decline of 2.7% or $5.4 million. Net sales less cost of products sold, as a percentage of net sales, was 32.1% for the year-to-date period ended June 30, 2009 as compared to 33.2%, a decline of 1.1% or $4.8 million for the similar 2008 period. The Activated Carbon and Service segment decreased by 3.2% or $5.4 million and 1.4% or $4.8 million, respectively, for the quarter and year-to-date periods ended June 30, 2009 which was related to a shift in sales mix from company-produced carbons to more costly outsourced carbons. Also contributing to the decline were increased plant maintenance costs at certain of the Company s production facilities which had been delayed in 2008 in order to meet demand of $1.4 million and $3.0 million for the quarter and year-to-date periods ended June 30, 2009, respectively, versus the similar 2008 periods. With the April 2009 re-start of B-Line at the Company s Cattletsburg, Kentucky facility, which added increased capacity, the Company has focused on executing these maintenance activities which are expected to continue, to a lesser extent, possibly throughout the remainder of the year. The Equipment segment increased 0.5% or $0.9 million and 0.6% and $2.1 million, respectively, for the quarter and year-to-date periods ended June 30, 2009 which was principally related to stronger pricing. The Consumer segment was comparable for the quarter ended June 30, 2009, but decreased by 0.3% or $1.1 million, for the year-to-date period ended June 30, 2009 as compared to the 2008 period due to higher costs associated with plant production issues and carbon cloth raw material. The Company s cost of products sold excludes depreciation therefore it may not be comparable to that of other companies.
Selling, general and administrative expenses increased $1.2 million and $1.8 million for the quarter and year-to-date periods ended June 30, 2009, respectively, versus the comparable 2008 periods. The increase for both periods was due to increased employee-related benefit costs of $1.0 million and $1.7 million, respectively. Bad debt expense also increased by $0.5 million and $0.7 million, respectively, for both periods in part due to a 2008 recovery of $0.4 million related to receivables previously considered uncollectible. Partially offsetting the increase for the year-to-date period ended June 30, 2009 was a decrease in legal expense of $0.6 million.
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 $0.4 million (after tax) at June 30, 2009 and December 31, 2008, respectively. At June 30, 2009, the if-converted value of the Notes exceeded its principal amount by approximately $10.3 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 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. Similarly, for the three and six months ended June 30, 2008, the Company recorded interest expense of $2.0 million and $3.9 million related to the Notes, of which $1.0 million and $2.0 million related to the amortization of the discount and $1.0 million and $1.9 million related to contractual coupon interest, respectively. The effect of the retrospective adjustment for the adoption of FSP APB 14-1 for the three and six month periods ended June 30, 2008 was to decrease previously reported net income from continuing operations by $0.5 million and $1.0 million or $0.01 and $0.02 per diluted common share, respectively.
Capital expenditures for property, plant and equipment totaled $28.2 million for the six months ended June 30, 2009 (with $0.5 million of this amount reflected as a non-cash decrease in accounts payable and accrued liabilities) compared to expenditures of $11.8 million for the same period in 2008. The expenditures for the period ended June 30, 2009 consisted primarily of improvements to the Company s 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 Company s Catlettsburg, Kentucky facility and $7.8 million related to a new pulverization facility at the same location, and $2.2 million for customer capital. The comparable 2008 period consisted primarily of expenditures to the Company s manufacturing facilities of $9.1 million, of which $5.3 million was directly related to the planned re-start of a previously idled a production line at the Company s Catlettsburg, Kentucky facility, $0.9 million related to improvements to information systems, and customer capital of $1.3 million. 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 $722.3 million; its shares were traded at around $13.2 with a P/E ratio of 23.2 and P/S ratio of 1.8.
Highlight of Business Operations:
Consolidated net sales decreased by $5.4 million or 5.0% and $5.1 million or 2.6% for the quarter and year-to-date periods ended June 30, 2009, respectively, versus the quarter and year to date periods ended June 30, 2008. Net sales for the quarter and year-to-date periods ended June 30, 2009 for the Activated Carbon and Service segment decreased $5.9 million or 6.2% and $5.0 million or 2.9%, respectively, versus the similar 2008 periods. The decline in sales for the quarter and year-to-date periods ended June 30, 2009 was primarily the result of reduced sales volume and foreign currency translation partially offset by favorable carbon product pricing. The sales volume decline experienced during the quarter and year-to-date periods ended June 30, 2009, was 17.6% and 15.4%, respectively, as compared to the similar 2008 periods as a result of the global economic slowdown. The volume descreases were primarily in the potable water, environmental water treatment, industrial process, and food markets. Foreign currency translation had a negative impact of $5.1 million and $9.8 million, respectively, for the quarter and year-to-date periods ended June 30, 2009 due to the stronger U.S. dollar. Partially offsetting the negative effects of volume and foreign currency translation was favorable pricing of approximately 21%, respectively, for the quarter and year-to-date periods ended June 30, 2009 as compared to the similar 2008 periods. Net sales for the Equipment segment increased $0.6 million or 5.4% and $1.8 million or 8.7%, respectively, for the quarter and year-to-date periods ended June 30, 2009 versus the comparable 2008 periods. The increase for both periods was primarily due to higher revenue for ultra violet light (UV) systems used in the disinfection of drinking water related to major contracts for installations that were awarded in 2008. Also contributing to the year-to-date increase was an increase in demand for ion exchange systems in Asia. Foreign currency translation had a negative impact of $0.3 million and $0.5 million, respectively, for the quarter and year-to-date periods ended June 30, 2009. Net sales for the Consumer segment for the quarter ended June 30, 2009 were comparable to the similar 2008 period. However, net sales for the year-to-date period ended June 30, 2009 decreased by $1.8 million or 29.7% versus the similar 2008 period primarily due to the negative impact of foreign currency translation of $1.1 million. Also contributing to the decline, was the lower demand for activated carbon cloth that occurred in the first three months of 2009 of approximately $0.3 million as well as the continued decline in demand for the Company s PreZerve® products of $0.4 million. The total negative impact of foreign currency translation on consolidated net sales for the quarter and year-to-date periods ended June 30, 2009 was $6.0 million and $11.3 million, respectively.Net sales less cost of products sold, as a percentage of net sales, was 31.8% for the quarter ended June 30, 2009 as compared to 34.5% for the similar 2008 period, a decline of 2.7% or $5.4 million. Net sales less cost of products sold, as a percentage of net sales, was 32.1% for the year-to-date period ended June 30, 2009 as compared to 33.2%, a decline of 1.1% or $4.8 million for the similar 2008 period. The Activated Carbon and Service segment decreased by 3.2% or $5.4 million and 1.4% or $4.8 million, respectively, for the quarter and year-to-date periods ended June 30, 2009 which was related to a shift in sales mix from company-produced carbons to more costly outsourced carbons. Also contributing to the decline were increased plant maintenance costs at certain of the Company s production facilities which had been delayed in 2008 in order to meet demand of $1.4 million and $3.0 million for the quarter and year-to-date periods ended June 30, 2009, respectively, versus the similar 2008 periods. With the April 2009 re-start of B-Line at the Company s Cattletsburg, Kentucky facility, which added increased capacity, the Company has focused on executing these maintenance activities which are expected to continue, to a lesser extent, possibly throughout the remainder of the year. The Equipment segment increased 0.5% or $0.9 million and 0.6% and $2.1 million, respectively, for the quarter and year-to-date periods ended June 30, 2009 which was principally related to stronger pricing. The Consumer segment was comparable for the quarter ended June 30, 2009, but decreased by 0.3% or $1.1 million, for the year-to-date period ended June 30, 2009 as compared to the 2008 period due to higher costs associated with plant production issues and carbon cloth raw material. The Company s cost of products sold excludes depreciation therefore it may not be comparable to that of other companies.
Selling, general and administrative expenses increased $1.2 million and $1.8 million for the quarter and year-to-date periods ended June 30, 2009, respectively, versus the comparable 2008 periods. The increase for both periods was due to increased employee-related benefit costs of $1.0 million and $1.7 million, respectively. Bad debt expense also increased by $0.5 million and $0.7 million, respectively, for both periods in part due to a 2008 recovery of $0.4 million related to receivables previously considered uncollectible. Partially offsetting the increase for the year-to-date period ended June 30, 2009 was a decrease in legal expense of $0.6 million.
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 $0.4 million (after tax) at June 30, 2009 and December 31, 2008, respectively. At June 30, 2009, the if-converted value of the Notes exceeded its principal amount by approximately $10.3 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 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. Similarly, for the three and six months ended June 30, 2008, the Company recorded interest expense of $2.0 million and $3.9 million related to the Notes, of which $1.0 million and $2.0 million related to the amortization of the discount and $1.0 million and $1.9 million related to contractual coupon interest, respectively. The effect of the retrospective adjustment for the adoption of FSP APB 14-1 for the three and six month periods ended June 30, 2008 was to decrease previously reported net income from continuing operations by $0.5 million and $1.0 million or $0.01 and $0.02 per diluted common share, respectively.
Capital expenditures for property, plant and equipment totaled $28.2 million for the six months ended June 30, 2009 (with $0.5 million of this amount reflected as a non-cash decrease in accounts payable and accrued liabilities) compared to expenditures of $11.8 million for the same period in 2008. The expenditures for the period ended June 30, 2009 consisted primarily of improvements to the Company s 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 Company s Catlettsburg, Kentucky facility and $7.8 million related to a new pulverization facility at the same location, and $2.2 million for customer capital. The comparable 2008 period consisted primarily of expenditures to the Company s manufacturing facilities of $9.1 million, of which $5.3 million was directly related to the planned re-start of a previously idled a production line at the Company s Catlettsburg, Kentucky facility, $0.9 million related to improvements to information systems, and customer capital of $1.3 million. 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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