Calgon Carbon Corp. (CCC, Financial) filed Quarterly Report for the period ended 2009-09-30.
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 $819.5 million; its shares were traded at around $14.97 with a P/E ratio of 30.6 and P/S ratio of 2.
Selling, general and administrative expenses was comparable for the quarter ended September 30, 2009 versus 2008 and increased $1.8 million for the year-to-date period ended September 30, 2009 versus the similar 2008 period. The increase for the year-to-date period ended was primarily caused by higher employee-related costs of $2.1 million and increased selling related expenses of $0.5 million. Bad debt expense also increased by $0.8 million in part due to the recovery of $0.4 million that occurred in 2008 related to receivables previously considered uncollectible thereby reducing the 2008 expense. Offsetting these increases was the favorable impact of foreign exchange translation of $1.9 million.
Cash flows provided by operating activities were $49.1 million for the period ended September 30, 2009 compared to $23.9 million for the comparable 2008 period. The $25.2 million increase is primarily due to improved working capital changes of $30.6 million which were primarily driven by decreases of $10.5 million in receivables, $15.5 million in inventory, and $10.2 million of revenue in excess of billings on uncompleted contracts and other current assets. Partially offsetting this increase was an increase in pension contributions of $5.9 million.
During the period of August 20, 2008 through November 10, 2008, the Company converted and exchanged $69.0 million of the Notes for cash of $11.0 million and approximately 13.0 million shares of its common stock. A pre-tax loss of $6.3 million was recorded on extinguishment related primarily to the outstanding discount and deferred financing fees for the conversion of $44.2 million of the Notes during the quarter ended September 30, 2008. During the quarter ended September 30, 2009, the Company exchanged for approximately 1.2 million shares of its common stock for the remaining $6.0 million of Notes. A pre-tax loss of $0.9 million was recorded on extinguishment related primarily to the outstanding discount and deferred financing fees of the Notes upon conversion. Due to the conversion rights of the holders of the Notes, the Company classified the remaining principal amount of outstanding Notes as a current liability as of December 31, 2008.
Effective January 1, 2009, the Company implemented guidance within Accounting Standards Codification (ASC) 470-20 “Debt with Conversion and Other Options.” This new guidance required 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. The Company s $75.0 million principal amount of Notes had an initial measurement that consisted 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 was zero and $0.6 million (after tax) at September 30, 2009 and December 31, 2008, respectively.
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. Similarly, for the three and nine months ended September 30, 2008, the Company recorded interest expense of $1.5 million and $5.4 million related to the Notes, of which $0.8 million and $2.8 million related to the amortization of the discount and $0.7 million and $2.6 million related to contractual coupon interest, respectively. The effect of the retrospective adjustment for the three and nine month periods ended September 30, 2008 was to decrease previously reported net income from continuing operations by $4.1 million and $5.1 million or $0.08 and $0.10 per diluted common share, respectively.
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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 $819.5 million; its shares were traded at around $14.97 with a P/E ratio of 30.6 and P/S ratio of 2.
Highlight of Business Operations:
Net sales for the quarter and year-to-date periods ended September 30, 2009 for the Activated Carbon and Service segment increased $9.0 million or 10.6% and $4.0 million or 1.5%, respectively, versus the similar 2008 periods. The increase in sales for the quarter and year-to-date periods ended September 30, 2009 was primarily a result of increased volume related to sales of activated carbon products used to remove mercury from flue gas of coal-fired power plants in the U.S. of $5.8 million and $7.0 million, respectively, versus the similar 2008 periods. A major shipment of granular activated carbon in the Asia potable water market of $3.1 million related to a contract awarded in the second quarter of 2009 also contributed to the increase for both periods. In addition, the Company continued to experience favorable pricing of approximately 23% for both the quarter and year-to-date periods ended September 30, 2009 versus the similar 2008 periods. Partially offsetting the increase was the negative impact of foreign currency translation of $2.0 million and $11.7 million, respectively, for the quarter and year-to-date periods ended September 30, 2009 due to the stronger U.S. dollar versus 2008. The Company also continued to experience a decline in volume of 8% and 13%, respectively, for the quarter and year-to-date periods ended September 30, 2009 as compared to the similar 2008 periods as a result of the economic slowdown. Net sales for the Equipment segment decreased $1.1 million or 9.5% and increased $0.7 million or 2.1%, respectively, for the quarter and year-to-date periods ended September 30, 2009 versus the comparable 2008 periods. The decrease for the quarter ended September 30, 2009 was primarily due to decreased sales of traditional carbon and odor control equipment of $2.0 million versus the comparable 2008 period. Partially offsetting this decrease was 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 of $1.0 million. The increase for the year-to-date period ended September 30, 2009 was due to an increase in demand for ion exchange and UV systems of $1.7 million and $2.9 million, respectively. Partially offsetting this increase was a decrease in sales of the aforementioned traditional carbon and odor control equipment of $3.9 million versus the similar 2008 period. Foreign currency translation did not affect the Equipment segment sales comparison for the quarter ended September 30, 2009 as compared to 2008, but it did have a negative impact of $0.5 million for the year-to-date period ended September 30, 2009 versus the similar 2008 period. Net sales for the Consumer segment increased $0.5 million or 23.7% for the quarter ended September 30, 2009 versus the similar 2008 period. The increase was primarily due to higher demand for activated carbon cloth and was partially offset by the negative impact for foreign currency translation of $0.3 million. However, net sales for the year-to-date period ended September 30, 2009 decreased by $1.3 million or 15.7% versus the similar 2008 period primarily due to the negative impact of foreign currency translation of $1.4 million and the continued decline in demand for PreZerve® products of $0.3 million. Partially offsetting this decrease was an increase in demand of $0.4 million for activated carbon cloth that began to occur in the third quarter.Selling, general and administrative expenses was comparable for the quarter ended September 30, 2009 versus 2008 and increased $1.8 million for the year-to-date period ended September 30, 2009 versus the similar 2008 period. The increase for the year-to-date period ended was primarily caused by higher employee-related costs of $2.1 million and increased selling related expenses of $0.5 million. Bad debt expense also increased by $0.8 million in part due to the recovery of $0.4 million that occurred in 2008 related to receivables previously considered uncollectible thereby reducing the 2008 expense. Offsetting these increases was the favorable impact of foreign exchange translation of $1.9 million.
Cash flows provided by operating activities were $49.1 million for the period ended September 30, 2009 compared to $23.9 million for the comparable 2008 period. The $25.2 million increase is primarily due to improved working capital changes of $30.6 million which were primarily driven by decreases of $10.5 million in receivables, $15.5 million in inventory, and $10.2 million of revenue in excess of billings on uncompleted contracts and other current assets. Partially offsetting this increase was an increase in pension contributions of $5.9 million.
During the period of August 20, 2008 through November 10, 2008, the Company converted and exchanged $69.0 million of the Notes for cash of $11.0 million and approximately 13.0 million shares of its common stock. A pre-tax loss of $6.3 million was recorded on extinguishment related primarily to the outstanding discount and deferred financing fees for the conversion of $44.2 million of the Notes during the quarter ended September 30, 2008. During the quarter ended September 30, 2009, the Company exchanged for approximately 1.2 million shares of its common stock for the remaining $6.0 million of Notes. A pre-tax loss of $0.9 million was recorded on extinguishment related primarily to the outstanding discount and deferred financing fees of the Notes upon conversion. Due to the conversion rights of the holders of the Notes, the Company classified the remaining principal amount of outstanding Notes as a current liability as of December 31, 2008.
Effective January 1, 2009, the Company implemented guidance within Accounting Standards Codification (ASC) 470-20 “Debt with Conversion and Other Options.” This new guidance required 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. The Company s $75.0 million principal amount of Notes had an initial measurement that consisted 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 was zero and $0.6 million (after tax) at September 30, 2009 and December 31, 2008, respectively.
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. Similarly, for the three and nine months ended September 30, 2008, the Company recorded interest expense of $1.5 million and $5.4 million related to the Notes, of which $0.8 million and $2.8 million related to the amortization of the discount and $0.7 million and $2.6 million related to contractual coupon interest, respectively. The effect of the retrospective adjustment for the three and nine month periods ended September 30, 2008 was to decrease previously reported net income from continuing operations by $4.1 million and $5.1 million or $0.08 and $0.10 per diluted common share, respectively.
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