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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the fiscal year ended December 31, 2000 or
[_] Transition Report Pursuant to Section 12 or 15(d) of the Securities Exchange
Act of 1934.
For the transition period from to .
Commission file number 0-15903
Calgon Carbon Corporation
(Exact name of registrant as specified in its charter)
Delaware 25-0530110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Calgon Carbon Drive
Pittsburgh, Pennsylvania 15205
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 787-6700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $0.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
As of March 20, 2001, there were outstanding 38,801,509 shares of Common Stock,
par value of $0.01 per share.
The aggregate market value of the voting stock held by non-affiliates as of
March 20, 2001 was $242,046,907.
The following documents have been incorporated by reference:
Form 10-K
Document Part Number
-------- -----------
Portions of Annual Report to Stockholders for the Year Ended December 31, 2000 .......... I, II and IV
Proxy Statement filed pursuant to Regulation 14A in connection with registrant's
Annual Meeting of Stockholders to be held on May 1, 2001................................. III
INDEX
PART I
Item 1. Business.................................................................. 1
Item 2. Properties................................................................ 9
Item 3. Legal Proceedings......................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders....................... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 10
Item 6. Selected Financial Data................................................... 11
Item 7. Management's Discussion and Analysis...................................... 11
Item 8. Financial Statements and Supplementary Data............................... 11
Item 9. Disagreements with Accountants............................................ 11
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 12
Item 11. Executive Compensation.................................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and Management............ 12
Item 13. Certain Relationships and Related Transactions............................ 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........... 13
SIGNATURES .......................................................................... 15
PART I
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The statements contained in this Annual Report on Form 10-K, specifically
those contained in Item 1 "Business" and Item 7 "Management's Discussion and
Analysis" and statements incorporated by reference into this Form 10-K from the
2000 Annual Report to Stockholders along with statements in other reports filed
with the Securities and Exchange Commission, external documents and oral
presentations, which are not historical are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements represent Calgon Carbon Corporation's (the
"Company's") present expectations or beliefs concerning future events. The
Company cautions that such statements are qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements. Those factors which specifically relate to the
Company's business include the following: worldwide economy, competition,
worldwide environmental and drinking water regulations, weather conditions,
customers' growth, productivity improvements at its locations, and new
technologies that could affect the use of the Company's products.
Item 1. Business:
The Company:
The predecessor of the Company's activated carbon business was formed in
1942. In April 1985, the Company's predecessor business was purchased by its
management in a leveraged buyout. On June 9, 1987, the Company completed its
initial public offering of common stock. In May 1988, the Company acquired an
activated carbon and charcoal business which provided the Company with two
additional manufacturing facilities located in Germany. The acquisition was
accounted for as a purchase. In September 1990, the Company purchased the assets
of TMPC, Inc. (Vara International) in order to strengthen its vapor phase and
solvent recovery equipment business. This business uses principally activated
carbon as its adsorption media. During the fourth quarter 1994, it was decided
to close one of the German plants due to high operating costs. In accordance
with the plan, the Brilon Wald plant was closed during 1995. In February 1996,
the Company acquired the business and operating assets of the perox-pure(TM)
operations of Vulcan Peroxidation Systems, Inc. and in June 1996 also acquired
the common stock of Solarchem Enterprises, Inc. to form the Company's Advanced
Oxidation Technologies unit. Both of these transactions were accounted for as
purchases and provided the Company with an entry into the advanced oxidative
water treatment market using ultra violet light (UV) technology. In December
1996, the Company acquired the common stock of Charcoal Cloth (International)
Limited and Charcoal Cloth Limited. This acquisition was also accounted for as a
purchase. The acquired companies produce activated carbon in cloth form
primarily for odor control in medical and industrial applications where granular
activated carbon is not feasible. These products also exhibit electrical
properties which make them useful in applications other than those in which
other forms of activated carbon are utilized. Also in December 1996, the Company
purchased the common stock of Advanced Separation Technologies Incorporated.
This Company designs and assembles proprietary separation equipment for use in
the industrial process and environmental markets utilizing ion exchange and
chromatographic separation technologies. During the fourth quarter of 1997, the
Company initiated a plan to consolidate the manufacturing operations and
research activities of its Advanced Oxidation Technologies unit in Tucson,
Arizona into its Markham, Ontario, Canada site. During the fourth quarter of
1998, the Company essentially completed the disposition of the Brilon Wald,
Germany, plant by transferring ownership of the facility to the local community.
During the fourth quarter of 1999, the Company began the process of closing and
centralizing activities from a number of facilities. This effort was completed
in 2000 and included the transfer of production and administrative activities
from Markham, Ontario, Canada and Lakeland, Florida to Pittsburgh, Pennsylvania
and the shutdown of activated carbon production lines in Feluy, Belgium, Neville
Island, Pennsylvania and at the Big Sandy, Kentucky location. The Company also
transferred office activity from its current location in Brussels, Belgium to
the Feluy, Belgium plant in July 2000.
1
Through 1999, the Company's operations were principally conducted in two
business segments: Activated Carbon and Engineered Systems. Both segments
included the production, design and marketing of products and services
specifically developed for the purification, separation and concentration of
liquids and gases, and both sold to the same markets. As of January 1, 2000, the
Company, as a result of a new strategy to transform the Company from a product
supplier to a service and solutions provider, has changed the structure of its
internal organization in a manner that causes the composition of its reportable
segments to change. As a result, the Company has four reportable segments :
Activated Carbon, Service, Engineered Solutions and Consumer Health. These
reportable segments (platforms) are composed of global profit centers that make
and sell different products and services.
The Activated Carbon segment manufactures granular activated carbon for use
in applications to remove organic compounds from water, air and other liquids
and gases. The Service segment consists of reactivation of spent carbon and the
leasing, monitoring and maintenance of mobile carbon adsorption (explained
below) equipment. The Engineered Solutions segment provides solutions to
customers' air and water purification problems through the design, fabrication,
and operation of systems that utilize a combination of the Company's enabling
technologies: carbon adsorption, ultra violet light and advanced ion exchange
separation. The Consumer Health segment primarily consists of the manufacture of
carbon cloth, lump charcoal and briquettes, and new consumer products based on
the Company's technologies already proven in large-scale industrial
applications.
Segment information disclosed on pages 38 through 40 of the Annual Report
to Stockholders for the year ended December 31, 2000 should be considered in
the following discussion and is incorporated by reference.
Products and Services:
The Company's four platforms design and market products and services
specifically developed for the purification, separation and concentration of
liquids and gases. The Carbon and Service Platforms utilize activated carbon
while the Engineered Solutions segment relies on other technologies. The
Consumer Platform integrates carbon products into commercial products for
everyday use by consumers.
Activated Carbon. The Activated Carbon segment involves the production and
sale of a broad range of untreated, impregnated or acid washed carbons, in
powdered, granular or pellet form. Activated carbon is a porous material that
removes organic compounds from liquids and gases by a process known as
"adsorption." In "adsorption" organic molecules contained in a liquid or gas are
attracted and bound to the surface of the pores of the activated carbon as the
liquid or gas is passed through it. The Company also has a patented
manufacturing process which enhances the catalytic functionality of activated
carbon, expanding its capability to remove inorganic compounds; the product was
introduced in 1994 and is called Centaur(R).
The primary raw material used in the production of the Company's activated
carbons is bituminous coal which is crushed, mixed with pitch, sized and
processed in low temperature bakers followed by high temperature furnaces. This
heating process is known as "activation" and develops the pore structure of the
carbon. Through adjustments in the "activation" process, pores of the required
size for a particular purification application are developed. The Company's
technological expertise in adjusting the pore structure in the activation
process has been one of the factors that has enabled the Company to develop many
special types of activated carbon. Currently, the Company offers many types of
activated carbon with most available in several particle sizes. The Company also
markets other activated carbons including products based on coconut or wood
which it purchases from independent suppliers.
Although the Company has historically concentrated on granular and
pelletized activated carbon. The Company also manufactures powdered activated
carbon, as a by-product and/or by crushing granular activated carbons. Granular
activated carbon is generally used in fixed filter beds for continuous flow
purification processes, while powdered activated carbon is generally used in
batch purification processes. Use of fixed filter beds of activated carbon for
continuous flow processing of a liquid or gas achieves a lower cost of operation
and avoids the disposal costs associated with powdered carbon.
2
Sales for the Activated Carbon segment were $124.7 million, $144.5 million
and $158.0 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Service. The Service segment is comprised of carbon reactivation, handling
and transportation, and on-site purification, separation and concentration
services, as well as the design, assembly and sale of systems that employ
activated carbon for purification, separation or concentration. The principal
service sold is the Calgon Carbon ServiceTM which supplies customers with a
complete process and wastewater treatment service, particularly suited for
treating water containing hazardous organic chemicals at the customer's
facility. The service is based primarily on reactivation of spent carbon and
transportation of activated carbon to and from the reactivation facility, but
also includes feasibility testing, process design, on-site equipment, initial
activated carbon supply, performance monitoring and major maintenance of
Company-owned equipment. Reactivation is a process by which organic compounds
are driven off activated carbon particles that have been saturated with organic
materials by passing the spent activated carbon through a high temperature
furnace. Granular activated carbon is reactivated for economic reasons or to
destroy hazardous adsorbed organic compounds. The Company also provides a number
of service packages which include two or more elements of the complete service.
Services are provided under contract at a fixed minimum monthly fee subject to
additional charges for increased carbon usage. The Company provides services in
packages ranging from a fifty-five-gallon drum to truckload quantities.
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,
and other equipment to purify gases and liquids in industrial process
applications. Equipment for these applications can be custom designed and
fabricated for a specific project or can be drawn from the Company's inventory,
dispatched on twenty-four hours notice and operational within forty-eight hours
after arrival on site.
Purification services provided by the Company are used to improve the
quality of food, chemical, pharmaceutical and petrochemical products. Such
services may be utilized in permanent installations or in temporary
applications, as pilot studies for new manufacturing processes or recovery of
off-specification products.
The Company also provides custom reactivation services, primarily in
Europe, but also through Calgon Far East Co. Ltd., a joint venture. As part of
this service, the Company picks up spent carbon at a customer's site, transports
it to the Company's reactivation facilities, reactivates it and then returns the
same carbon to the customer.
The following table details total net sales for the Service segment in the
past three years:
2000 1999 1998
------------------------------------------------------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- --------------------------------------------------------------------------------------------
Service $84,348 93% $84,091 89% $80,628 92%
Equipment 6,630 7 10,178 11 7,320 8
- --------------------------------------------------------------------------------------------
Total net sales $90,978 100% $94,269 100% $87,948 100%
- --------------------------------------------------------------------------------------------
Engineered Solutions. The Company designs and markets proprietary ISEP(R)
(Ionic Separator) continuous ion exchange units for the purification of many
products in the food, pharmaceutical and biotechnology industries. The ISEP(R)
units are also used to remove nitrate and perchlorate contaminants from drinking
water. The Company also designs and markets CSEP(R) (Chromatographic Separator),
a continuous chromatographic separation system for applications in the food,
pharmaceutical and fine chemicals market segments.
3
The Company also sells customized engineered systems for solvent recovery
and volatile organic compound abatement. The technologies provided include steam
regenerable fixed bed adsorption, distillation, and continuous solvent recovery
and abatement of volatile organic compounds and odors.
Sales for the Engineered Solutions segment were $32.7 million, $37.7
million and $32.8 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Consumer Health. Currently, the primary products offered in the Consumer
Health segment are charcoal, liquids and carbon cloth. The charcoal is
manufactured in Germany and used for barbecue grilling by consumers and
restaurants. The liquids are organic acids recovered and purified during the
process of charcoal production and sold to the retail and industrial markets in
Europe. Sales of charcoal and liquids are weather dependent with the majority of
sales occurring in the spring and summer months. Carbon cloth, which is
activated carbon in cloth form, is manufactured in England and primarily sold to
the medical and specialty markets.
Carbon cloth is also used as the primary raw material in many of the
Company's new consumer products that are being developed for home wellness. The
first such product, the WaveZorb(TM), absorbs cellular phone microwaves and was
launched in the third quarter of 2000. Another new product introduced in the
third quarter was Purrfectly Fresh(TM), a product that uses activated carbon to
absorb odors and extend the life of kitty litter. The Company sells its home
wellness products through many market channels and the Company's website.
Sales for the Consumer Health segment were $20.6 million, $19.7 million and
$22.3 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
Markets:
The Company offers its Activated Carbon, Service and Engineered Solutions
products and services to the Industrial Process and Environmental markets.
Industrial process applications for the Company's products and services include
purification, catalysis and product recovery within the food, chemical,
pharmaceutical, biotechnology, medical, personnel protection, cigarette and
precious metals industries. Environmental applications include drinking water
purification, municipal wastewater and sewage treatment, groundwater remediation
and emissions control in both industrial and municipal markets. Consumer Health
products are sold primarily to the retail, industrial and medical markets as
discussed previously.
Industrial Process Market:
The Industrial Process Market consists of customers that use the Company's
products either for purification, separation or concentration of their products
in the manufacturing process or for direct incorporation into their product. The
Industrial Process Market includes four significant sub-markets: the food
market, the chemical and pharmaceutical market, the original equipment
manufacturers market and a group of other sub-markets.
Food Market. Sweetener manufacturers are the principal purchasers of the
Company's products in the industrial process market. In terms of revenue, the
Company is the major supplier of activated carbons used in the purification of
dextrose and high fructose corn syrup. Activated carbons are also sold for use
in the purification of cane sugar. Ion exchange systems are also used in this
market for the production of lysine and vitamin E.
Other food processing applications include decolorization of monosodium
glutamate and purification of citric acid, artificial sweeteners, soya oils,
protein hydrolysates and wine and spirits; process water treatment in the
beverage industry; and decaffeination of coffee utilizing the water process.
Chemical and Pharmaceutical Market. The Company sells a wide range of
activated carbons to the chemical and pharmaceutical market for the purification
of organic and inorganic chemicals, by-product recovery, gas treatment and
catalysis. Applications of these activated carbons include decolorization of
hydrochloric acid, purification of soda ash, glycerine, analgesics, antibiotics
and vitamins and removal of trace impurities from neon, carbon dioxide,
acetylene
4
and hydrogen. Systems that employ ion exchange technology contribute to sales
within this market.
Original Equipment Manufacturers Market. Manufacturers of various types of
equipment purchase activated carbons for incorporation in such equipment. The
Company is the sole supplier of activated carbons to manufacturers of gas masks
and filters used by the United States military and is a major supplier of
activated carbons to manufacturers of such products used by the European
military. The Company sells activated carbons for use in protective respirators
and collective filters for both private industry and the military. Other
purchasers in the market include manufacturers of home water filters, spill
cleanup equipment, commercial and residential water filters, solvent recovery
equipment and gasoline vapor recovery equipment.
Other Markets. The Company sells its products to a number of additional
industrial process markets. Petroleum refining and petrochemical processing
industries use activated carbons for the removal of sulfur compounds from
natural gas, amine purification and spirits decolorization. The liquefied
natural gas industry uses activated carbons to remove mercury compounds which
would otherwise corrode process equipment. Cigarette manufacturers use activated
carbons in charcoal filters and precious metals producers use activated carbons
to recover gold and silver from low grade ore.
Environmental Market:
The Environmental Market consists of customers that use the Company's
products to control air and water pollutants. The Environmental Market has two
sub-markets, the municipal market and the industrial market.
Municipal Market. The Company sells activated carbons, equipment, services
and ion exchange technologies to municipal customers in connection with the
treatment of potable water to remove pesticides and other dissolved organic and
inorganic material to meet current regulations and to remove tastes and odors to
make the water aesthetically acceptable to the public. The Company sells
primarily granular activated carbon products to this market and in many cases
the granular carbon functions both as the primary filtration media as well as an
adsorption media to remove the contaminants from the water. In addition, the
Company sells UV systems for the destruction or inactivation of waterborne
contaminants.
Municipal sewage treatment plants purchase the Company's odor control
systems and activated carbon products to remove objectionable odors emanating
from the plants and to treat the wastewater to meet operating requirements.
Granular activated carbon is used in odor control applications, but both
granular and powdered activated carbons are used to treat wastewater. The
granular activated carbon is used as a filtration/adsorption medium, and the
powdered activated carbon is used to enhance the performance of existing
biological waste treatment processes.
Industrial Market. The Company offers its products and services to private
industry to meet wastewater discharge requirements imposed by various
governmental entities. Most of the Company's sales to this market are sales of
the Calgon Carbon Service TM for wastewater treatment. The reactivation portion
of this service is an important element if the contaminants in the wastewater
are hazardous organic chemicals. The hazardous organic chemicals which are
adsorbed from the water by the activated carbons are decomposed at the high
temperatures of the reactivation furnace and thereby removed from the
environment. Reactivation saves customers the difficulty of having to find a
method of long-term containment (such as a landfill) for hazardous organic
chemicals removed from their industrial wastewater.
The cleanup of contaminated groundwater, surface impoundments and
accidental spills comprise a significant market for the Company. The Company
provides emergency and temporary cleanup services for public and private
entities.
Activated carbon is also used in the chemical, pharmaceutical and refining
industry for purification of air discharges to remove contaminants such as
benzene, toluene and other volatile organics. The Company offers carbon,
services and carbon equipment for these applications.
5
Sales and Marketing:
The Company has a direct sales force in the United States with offices
located in Pittsburgh, Pennsylvania; Monterey, California; Houston, Texas; Vero
Beach, Florida and Flemington, New Jersey. The Company conducts activated carbon
related sales in Canada through a distributor under direction of its wholly
owned subsidiary. In 2000, the Company closed its sales offices in Markham,
Ontario, Canada and Lakeland, Florida and transferred those activities to
Pittsburgh, Pennsylvania. The Company maintains an office in Singapore to manage
its business in Southeast Asia, including Malaysia, Thailand, Indonesia, India,
Singapore and Oceana.
In 1997, the Company established a subsidiary in Singapore to oversee all
activities in Asia. A representative office was established in Tokyo, Japan to
manage its business in Korea, Taiwan and the People's Republic of China. Sales
of the Company's activated carbon products in Japan are conducted exclusively by
Calgon Far East Co. Ltd., a joint venture in which the Company is a 60% owner.
The joint venture purchases the Company's products for resale in Japan. The
joint venture also owns and operates a reactivation facility in Fukui, Fukui
Prefecture, Japan and sells related services.
In Europe the Company has sales offices in Feluy, Belgium; Paris, France;
Manchester, England; and Frankfurt, Germany. The Company also has a network of
agents and distributors that conduct sales in certain countries in Europe, the
Middle East, Africa, Latin America, the Far East, Australia and New Zealand.
All offices can play a role in sales of products or services from any of
the Company's segments.
Geographic sales information is incorporated by reference to page 39 of the
Annual Report to Stockholders for the Year Ended December 31, 2000.
Over the past three years, no single customer accounted for more than 10%
of the total sales of the Company in any year.
Backlog:
The Company had a sales backlog of $19.1 million and $6.0 million as of
February 28, 2001 and 2000, respectively, in the Engineered Solutions segment.
The Company expects the 2001 balance to be substantially recognized by year end.
Competition:
The Company has two principal competitors with respect to the production
and sale of activated carbon related products: Norit, N.V., a Dutch company, and
Westvaco Corporation, a United States company. Chinese producers of coal-based
activated carbon and certain East Asian producers of coconut-based activated
carbon participate in the market on a worldwide basis and sell principally
through resellers. Competition in activated carbons, carbon equipment and
services is based on price, quality and performance. Other sources of
competition for the Company's activated carbon services and systems are
purification, filtration and extraction processes that do not employ activated
carbons.
A number of other smaller competitors engage in the production and sale of
activated carbons in local markets, but do not compete with the Company on a
world-wide basis. These companies compete with the Company in the sale of
specific types of activated carbons, but do not generally compete with the
Company in the worldwide activated carbon business.
In the United States and Europe the Company also competes with several
small regional companies for the sale of its reactivation services and carbon
equipment.
In North America, the Company has competition for its UV technology product
line from products not involving UV technology and from a number of smaller
firms offering some form of advanced oxidation. A significant competitor in this
product line is Trojan Technologies, Inc.
6
Ion exchange related systems competition comes primarily from U.S. Filter,
a subsidiary of Vivendi, and Applexion.
There are a number of competitors in the consumer charcoal market whose
production facilities are located in Eastern European countries, Spain,
Portugal, South Africa and South America. These competitors offer inexpensive
products to the market in Germany.
Raw Materials:
The principal raw material purchased by the Company for its Activated
Carbon and Service segments is bituminous coal from mines in the Appalachian
Region and mines outside the United States, under both long-term and annual
supply contracts. The Company purchases wood for its German charcoal operations
through long-term contracts and on the open market, primarily waste slabs from
saw mills or as off-cuts from the furniture industry. Most of the wood is
sourced in Germany and the supply of wood is adequate.
The Company purchases natural gas from various suppliers for use in its
Activated Carbon and Service segments' production facilities. In both the United
States and Europe, this natural gas is purchased pursuant to various annual
contracts with natural gas companies.
The Company purchases hydrogen peroxide via long-term fixed-price contracts
for its UV Technologies business.
The only other raw material that is purchased by the Company in significant
quantities is pitch, which is used as a binder in the carbon manufacturing
process. The Company purchases pitch from various suppliers in the United States
and Europe under annual supply contracts.
The purchase of key equipment components is coordinated through agreements
with various suppliers.
The Company does not presently anticipate any problems in obtaining
adequate supplies of any of its raw materials or equipment components.
Research and Development:
The Company's research and development activities are conducted primarily
at a research center in Pittsburgh, Pennsylvania, under the direction of a
Senior Vice President. A pilot plant located near Pittsburgh is used for the
production of experimental activated carbon, activated charcoal cloth products,
and equipment for testing and applications development. Experimental systems are
also designed and evaluated at this location.
The principal goals of the Company's research program are growing the
Company as a technological leader in satisfying customers with its products,
services and equipment; developing new products and services; and providing
technical support to customers and operations of the Company.
The Company's research programs include new and improved methods for
manufacturing and utilizing improved activated carbons. Emerging
purification/separation/concentration technologies are rigorously evaluated. The
Centaur(R) product line represents a family of activated carbons developed for
adsorptive/catalytic applications. The Company has also developed carbons
specifically designed to remove lead and methyl tertiary butyl ether (MTBE) from
drinking water. The charcoal cloth line is the first commercial entry into the
shaped carbon business.
Research and development expenses were $7.4 million, $7.7 million, and $8.4
million in 2000, 1999 and 1998, respectively.
Patents and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 145 United States patents and 251 patents in other countries.
The technology embodied in these patents, trade secrets and technical knowledge
applies to all phases of the Company's business including production processes,
product formulations and
7
application engineering. The Company considers this body of technology important
to the conduct of its business, although it considers no individual item
material to its business.
Regulatory Matters:
USA. The Company is subject to extensive environmental laws and regulations
concerning emissions to the air, discharges to waterways and the generation,
handling, storage, transportation, treatment and disposal of waste materials and
is also subject to other federal and state laws regarding health and safety
matters. The Company believes it is presently in substantial compliance with
these laws and regulations. These laws and regulations are constantly evolving,
and it is impossible to predict the effect these laws and regulations may have
on the Company in the future.
The Environmental Protection Agency (EPA) has issued certain regulations
under the Resource Conservation and Recovery Act (RCRA) dealing with the
transportation, storage and treatment of hazardous waste that impact the Company
in its carbon reactivation services. Once activated carbon supplied to a
customer can no longer adsorb contaminating organic substances, it is returned
to the Company's facilities for reactivation and subsequent reuse. If the
substance(s) adsorbed by the spent carbon is (are) considered hazardous, under
these EPA regulations the activated carbon used in the treatment process is also
considered hazardous. Therefore, a permit is required to transport the hazardous
carbon to the Company's facility for reactivation. The Company possesses the
necessary federal and state permits to transport hazardous waste. Once at the
Company's reactivation site, the hazardous spent activated carbon is placed in
temporary storage tanks. Under the EPA regulations, the Company is required to
have a hazardous waste storage permit. The Company has obtained RCRA Part B
permits to store hazardous waste at its Pittsburgh and Catlettsburg facilities.
The process of reactivating the spent activated carbon, which destroys the
hazardous organic substances, is subject to permitting as a thermal treatment
unit under RCRA. The Company does not accept for reactivation carbons containing
certain hazardous materials.
Each of the Company's domestic production facilities has permits and
licenses regulating air emissions and water discharges. All of the Company's
domestic production facilities are controlled under permits issued by state and
federal air pollution control entities. The Company is presently in substantial
compliance with these permits. Continued compliance will require administrative
control and will be subject to any new or additional standards.
Europe. The Company is also subject to various environmental health and
safety laws and regulations at its facilities in Belgium, England and Germany.
These laws and regulations address substantially the same issues as those
applicable to the Company in the United States. The Company believes it is
presently in substantial compliance with these laws and regulations.
Indemnification. The Company has a limited indemnification agreement with
the previous owner of the Company which will fund certain environmental costs if
they are incurred at the Company's Catlettsburg, Kentucky plant. The Company
believes that the amount of the indemnification is sufficient to fund these
liabilities if they arise.
Employee Relations:
As of December 31, 2000, the Company employed 995 persons on a full-time
basis, 545 of whom were salaried production, office, supervisory and sales
personnel. The 249 hourly personnel in the United States are represented by the
United Steelworkers of America. The current contracts with the United
Steelworkers of America expire on February 1, 2002 at the Pittsburgh facility
and on June 6, 2001 at the Catlettsburg facility. The hourly personnel at the
Bodenfelde plant in Germany are represented by the German Chemical Industry
Union. Agreements are between the National Chemical Union and the German
Chemical Federation. The current agreement expires on February 1, 2002. The
hourly personnel at the Company's Belgian facility are represented by two
national labor organizations with contracts expiring on July 31, 2001. The
Company has hourly employees at three non-union United Kingdom facilities (one
of which is a customer location).
8
Item 2. Properties:
The Company owns ten production facilities, three of which are located in
Pittsburgh, Pennsylvania; and one each in the following locations: Catlettsburg,
Kentucky; Pearlington, Mississippi; Blue Lake, California; Feluy, Belgium;
Grays, England; Bodenfelde, Germany; Fukui, Fukui Prefecture, Japan. The Company
leases one production facility in Houghton Le Spring, England. In 2000, the
Company transferred its production and administrative activities from Markham,
Ontario, Canada and Lakeland, Florida to Pittsburgh, Pennsylvania and shutdown
activated carbon production lines in Feluy, Belgium, Neville Island,
Pennsylvania and Catlettsburg, Kentucky. The cessation of activated carbon
production at the Feluy, Belgium location resulted in underutilized office
facilities that enabled the Company to transfer the office activity from
Brussels, Belgium to the plant.
The Catlettsburg, Kentucky plant is the Company's largest facility, with
plant operations occupying approximately 50 acres of a 226-acre site. This
plant, which serves the Activated Carbon and Service segments, produces granular
and powdered activated carbons and acid washed granular activated carbons and
reactivates spent granular activated carbons.
The Pittsburgh, Pennsylvania carbon production plant occupies a four-acre
site and serves the Activated Carbon and Service segments. Operations at the
plant include the reactivation of spent granular activated carbons, the
impregnation of granular activated carbons, the grinding of granular activated
carbons into powdered activated carbons and the production of pelletized
carbons. The plant also has the capacity to produce coal-based or coconut-based
granular activated carbons.
The Pearlington, Mississippi plant occupies a site of approximately 100
acres. The plant has one production line that produces granular activated
carbons and powdered carbons for the Activated Carbon segment.
The Blue Lake plant, located near the city of Eureka, California occupies
approximately two acres. The primary operation at the plant includes
reactivation of spent granular activated carbons for the Service segment.
The Pittsburgh, Pennsylvania Equipment and Assembly plant is located on
Neville Island in close proximity to the carbon and Engineered Solutions Plant
and is situated within a 16-acre site that includes a 300,000 square foot
building. The equipment and assembly plant occupies 95,000 square feet with the
remaining space used as a centralized warehouse for carbon inventory. The plant,
which serves the Engineered Solutions and Service segments, manufactures and
assembles fully engineered carbon equipment for purification, concentration and
separation systems. This plant also serves as the east coast staging and
refurbishment point for carbon service equipment.
The Pittsburgh, Pennsylvania Engineered Solutions plant, established in
1998, is a 37,500 sq. ft. production facility located on Neville Island in close
proximity to the carbon and Equipment and Assembly plants. The primary focus of
this facility is the manufacture of UV and Ion Exchange (ISEP) equipment,
including mechanical and electrical assembly, controls systems integration and
validation testing of equipment. This location also serves as the Pilot Testing
facility for Process Development, as well as the spare parts distribution center
for UV and ISEP systems.
The Markham, Ontario, Canada ultra violet equipment plant was closed during
2000 and its activities were moved to Pittsburgh, Pennsylvania.
The Lakeland, Florida ion exchange separation equipment plant was closed
during 2000 and its activities were moved to Pittsburgh, Pennsylvania.
The Feluy plant occupies a site of approximately 21 acres located 30 miles
south of Brussels, Belgium. Operations at the plant include both the
reactivation of spent granular activated carbons and the grinding of granular
activated carbons into powdered activated carbons for the Service segment. The
granular activated carbon production line that was on site was shut down and
dismantled during 2000.
9
The Grays plant occupies a three-acre site near London, England. Operations
at the plant include both the reactivation of spent granular activated carbons
and the impregnation of granular activated carbon for the Service segment.
The Bodenfelde plant occupies a site of approximately 40 acres and is
situated in the State of Lower Saxony, Germany. Operations at the plant include
the manufacture of charcoal for the Consumer Health segment. Also a by-product,
acetic acid of various grades, is produced and sold.
The Houghton Le Spring plant, located near the city of Newcastle, England,
occupies approximately two acres. Operations at the plant include the
manufacture of woven and knitted activated carbon textiles and their
impregnation and lamination for the Consumer Health segment.
The Fukui, Fukui Prefecture, Japan plant is owned by Calgon Far East Co.,
Ltd., a joint venture of which the Company has been a 60% owner. The plant,
which serves the Activated Carbon and Service segments, occupies a site of
approximately 6 acres and has one production line which reactivates spent
granular activated carbon mainly for water plants. In addition, the operations
at the plant includes acid rinsing for reactivated and virgin carbons.
The Company believes that the plants are adequate and suitable for its
operating needs.
Item 3. Legal Proceedings:
On April 18, 2000, the Company reached a settlement with Trojan
Technologies, Inc. (Trojan) with respect to the litigation in Canada and the
U.S. based upon Trojan's claim that the Company infringed on patents related to
products made and sold for UV disinfection of municipal wastewater. The Company
will continue to focus its efforts on the use of UV oxidation and disinfection
technology for the treatment of water, but has agreed to cease the manufacture
and sale of the AuroraTM UV disinfection system. The impact of the settlement
and litigation costs incurred was not material to the financial statements.
On December 31, 1996, the Company purchased the common stock of Advanced
Separation Technologies Incorporated (AST) from Progress Capital Holdings, Inc.
and Potomac Capital Investment Corporation.
On January 12, 1998, the Company filed a claim for unspecified damages in
the United States District Court in the Western District of Pennsylvania
alleging among other things that Progress Capital Holdings and Potomac Capital
Investment Corporation materially breached various AST financial and operational
representations and warranties included in the Stock Purchase Agreement. Based
upon information obtained since the acquisition and corroborated in the course
of pre-trial discovery, the Company believes that it has a reasonable basis for
this claim and intends to vigorously pursue reimbursement for damages sustained.
Neither the Company nor its counsel can predict with certainty the amount, if
any, of recovery that will be obtained from the defendants in this matter.
Accordingly, the Company has not recorded a receivable for this gain contingency
pending further developments in the litigation.
The Company is involved in various legal proceedings, lawsuits, and claims,
including employment, product warranty, and environmental matters of a nature
considered normal to its business. It is the Company's policy to accrue for
amounts related to these legal matters, if it is probable that a liability has
been incurred and an amount is reasonably estimable. Management believes, after
consulting with counsel, that the ultimate liabilities, if any, resulting from
such lawsuits and claims will not materially affect the consolidated results,
liquidity or financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters:
The information required for this Item 5 appears under the caption "Common
Shares and Market Information" on page 42 of the Annual Report to Stockholders
for the Year Ended December 31, 2000 and is incorporated in this Annual
10
Report by reference.
Item 6. Selected Financial Data:
The information required by this Item 6 appears under the caption "Six-Year
Summary, Selected Financial and Statistical Data" on page 41 of the Annual
Report to Stockholders for the Year Ended December 31, 2000 and is incorporated
in this Annual Report by reference.
Item 7. Management's Discussion and Analysis:
The Discussion and Analysis of Financial Condition required by this Item 7
appears on pages 13 through 16 of the Annual Report to Stockholders for the Year
Ended December 31, 2000 and is incorporated in this Annual Report by reference.
Item 8. Financial Statements and Supplementary Data:
The consolidated financial statements of Calgon Carbon Corporation and its
subsidiaries for the Years Ended December 31, 2000, 1999 and 1998 required by
this Item 8 appear on pages 18 through 42 of the Annual Report to Stockholders
for the Year Ended December 31, 2000 and are incorporated in this Annual Report
by reference. The independent auditors report of Deloitte & Touche LLP on the
Company's consolidated financial statements as of December 31, 2000, and for the
year then ended appears on page 17 of the annual report to stockholders for the
year ended December 31, 2000, and is incorporated in this Annual Report by
reference.
The independent auditors report of PricewaterhouseCoopers LLP on the
Company's consolidated financial statements as of December 31, 1999 and 1998,
and for the years then ended is presented below.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Calgon Carbon Corporation
In our opinion, the consolidated balance sheet as of December 31, 1999 and the
related consolidated statements of income and comprehensive income, of
shareholders' equity and of cash flows for each of the two years in the period
ended December 31, 1999 (appearing on pages 18 through 21 of the Calgon Carbon
Corporation 2000 Annual Report to Shareholders which has been incorporated by
reference in this Form 10-K) present fairly, in all material respects, the
financial position, results of operations and cash flows of Calgon Carbon
Corporation and its subsidiaries at December 31, 1999 and for each of the two
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. We have not audited the consolidated financial
statements of Calgon Carbon Corporation for any period subsequent to
December 31, 1999.
PRICEWATERHOUSECOOPERS LLP
Pittsburgh, Pennsylvania
February 8, 2000
Item 9. Disagreements with Accountants:
Not applicable.
11
PART III
Item 10. Directors and Executive Officers of the Registrant:
Information concerning the directors and executive officers of the
Corporation required by this item is incorporated by reference to the material
appearing under the heading "Election of Directors" in the Company's Proxy
Statement for the 2001 Annual Meeting of its Stockholders.
Item 11. Executive Compensation:
Information required by this item is incorporated by reference to the
material appearing under the heading "Executive Compensation" in the Company's
Proxy Statement for the 2001 Annual Meeting of its Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management:
Information required by this item is incorporated by reference to the
material appearing under the heading "Security Ownership of Management and
Certain Beneficial Owners" in the Company's Proxy Statement for the 2001 Annual
Meeting of its Stockholders.
Item 13. Certain Relationships and Related Transactions:
Information required by this item is incorporated by reference to the
material appearing under the heading "Election of Directors" in the Company's
Proxy Statement for the 2001 Annual Meeting of its Stockholders.
12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K:
A. Financial Statements
The following documents are filed as part of this report:
Page(s) in Annual
Report to
Stockholders
for the Year Ended
Financial Statements and Related Report December 31,2000
--------------------------------------- ----------------
Report of Independent Accountants, dated February 6, 2001................................... 17
Consolidated Statement of Income and Comprehensive Income for the Years Ended December 31, 18
2000, 1999 and 1998.........................................................................
Consolidated Balance Sheet as of December 31, 2000 and 1999................................. 19
Consolidated Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998................................................................................... 20
Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2000, 1999
and 1998............................................................................... 21
Notes to the Consolidated Financial Statements.............................................. 22 - 40
Quarterly Financial Data -- Unaudited....................................................... 42
C. Exhibits
Page
3.1 Amended Certificate of Incorporation................................................ (d)
3.2 Amended By-laws of the Registrant................................................... (a)
4.0 Rights Agreement.................................................................... (f)
9.1 Voting Trust Agreement.............................................................. (b)
9.2 Voting Trust Certificate of Amendment............................................... (c)
10.1* Calgon Carbon Corporation Stock Option Plan, as Amended............................. (e)
10.3* Officers Incentive Plan of Calgon Carbon Corporation, as Amended.................... (h)
10.4* 1993 Non-Employee, Directors' Stock Option Plan, as Amended......................... (g)
13.0 Annual Report to Stockholders for the Year Ended December 31, 2000.................. Filed herewith
21.0 The wholly owned subsidiaries of the Company are Chemviron Carbon GmbH, a
German corporation; Calgon Carbon Canada, Inc., a Canadian corporation;
Chemviron Carbon Ltd., a United Kingdom corporation; Calgon Carbon Investments
Inc., a Delaware corporation; Solarchem Environmental Systems Inc., a Nevada
corporation; Charcoal Cloth (International) Limited, a United Kingdom corporation;
Charcoal Cloth Limited, a United Kingdom corporation; Advanced Separation
Technologies Incorporated, a Florida corporation; and Calgon Carbon Export Inc., a
Barbados corporation. In addition, the Company owns 60% of Calgon Far East Co.
Ltd., a Japanese corporation.
23.1 Consent of Independent Accountants (Deloitte & Touche LLP).......................... 18
23.2 Consent of Independent Accountants (PricewaterhouseCoopers LLP)..................... 19
Note: The Registrant hereby undertakes to furnish, upon request of the
Commission, copies of all instruments defining the rights of holders of
long-term debt of the Registrant and its consolidated subsidiaries. The total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis.
(a) Incorporated herein by reference to Exhibit 3.2 to the Company's
report on Form 10-Q filed for the fiscal quarter ended March 31, 1999.
(b) Incorporated herein by reference to Exhibit 9.1 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
13
(c) Incorporated herein by reference to Exhibit 9.2 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1987.
(d) Incorporated herein by reference to Exhibit 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(e) Incorporated herein by reference to Exhibit 10.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(f) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(g) Incorporated herein by reference to Exhibit 10.4 to material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 2001 Annual Meeting of its Stockholders.
(h) Incorporated herein by reference to Exhibit 10.3 to material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 2001 Annual Meeting of its Stockholders.
* Executive compensation plans.
D. Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 2000.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Calgon Carbon Corporation
March 26, 2001 By /S/ JAMES A. CEDERNA
-------------- --------------------------------------
(Date) James A. Cederna
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ JAMES A. CEDERNA President, Chief Executive March 26, 2001
----------------------------- Officer, Director
James A. Cederna
/S/ WIILLIAM E. CANN Chief Financial Officer March 26, 2001
-----------------------------
William E. Cann
/S/ ROBERT W. CRUICKSHANK Director March 26, 2001
-----------------------------
Robert W. Cruickshank
/S/ ARTHUR L. GOESCHEL Director March 26, 2001
-----------------------------
Arthur L. Goeschel
/S/ THOMAS A. MCCONOMY Director March 26, 2001
-----------------------------
Thomas A. McConomy
/S/ NICK H. PRATER Director March 26, 2001
-----------------------------
Nick H. Prater
/S/ JULIE S. ROBERTS Director March 26, 2001
-----------------------------
Julie S. Roberts
/S/ SETH E. SCHOFIELD Director March 26, 2001
-----------------------------
Seth E. Schofield
15
/S/ JOHN P. SURMA Director March 26, 2001
------------------------------
John P. Surma
/S/ HARRY H. WEIL Director March 26, 2001
------------------------------
Harry H. Weil
/S/ ROBERT L. YOHE Director March 26, 2001
------------------------------
Robert L. Yohe
16
EXHIBIT INDEX
Exhibit Method of
No. Description Filing
- ----------- -----------------
3.1 Amended Certificate of Incorporation.................................................. (d)
3.2 Amended By-Laws of the Registrant..................................................... (a)
4.0 Rights Agreement...................................................................... (f)
9.1 Voting Trust Agreement................................................................ (b)
9.2 Voting Trust Certificate of Amendment................................................. (c)
10.1* Calgon Carbon Corporation Stock Option Plan, as Amended............................... (e)
10.3* Officers Incentive Plan of Calgon Carbon Corporation, as Amended...................... (h)
10.4* 1993 Non-Employee, Directors' Stock Option Plan, as Amended........................... (g)
13.0 Annual Report to Stockholders for the Year Ended December 31, 2000. Filed herewith
21.0 The wholly owned subsidiaries of the Company are Chemviron Carbon GmbH, a
German corporation; Calgon Carbon Canada, Inc., a Canadian corporation;
Chemviron Carbon Ltd., a United Kingdom corporation; Calgon Carbon Investments
Inc., a Delaware corporation; Solarchem Environmental Systems Inc., a Nevada
corporation; Charcoal Cloth (International) Limited, a United Kingdom corporation;
Charcoal Cloth Limited, a United Kingdom corporation; Advanced Separation
Technologies Incorporated, a Florida corporation; and Calgon Carbon Export Inc., a
Barbados corporation. In addition, the Company owns 60% of Calgon Far East Co.
Ltd., a Japanese corporation.......................................................... Filed herewith
23.1 Consent of Independent Accountants (Deloitte & Touche LLP)............................ Filed herewith
23.2 Consent of Independent Accountants (PricewaterhouseCoopers LLP)....................... Filed herewith
Note: The Registrant hereby undertakes to furnish, upon request of the
Commission, copies of all instruments defining the rights of holders of
long-term debt of the Registrant and its consolidated subsidiaries. The total
amount of securities authorized thereunder does not exceed 10% of the total
assets of the Registrant and its subsidiaries on a consolidated basis.
(a) Incorporated herein by reference to Exhibit 3.2 to the Company's
report on Form 10-Q filed for the fiscal quarter ended March 31, 1999.
(b) Incorporated herein by reference to Exhibit 9.1 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(c) Incorporated herein by reference to Exhibit 9.2 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1987.
(d) Incorporated herein by reference to Exhibit 3.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(e) Incorporated herein by reference to Exhibit 10.1 to the Company's report on
Form 10-K filed for the fiscal year ended December 31, 1990.
(f) Incorporated herein by reference to Exhibit 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
(g) Incorporated herein by reference to Exhibit 10.4 to the material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 2001 Annual Meeting of its Stockholders.
(h) Incorporated herein by reference to Exhibit 10.3 to the material appearing
under the heading of "Executive Compensation" in the Company's Proxy
Statement for the 2001 Annual Meeting of its Stockholders.
* Executive compensation plans.
17