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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, 2001 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
(Address of principal 15205
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 22, 2002, there were outstanding 38,889,108 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 22, 2002 was $287,916,896.
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, 2001.................................................................. I, II and IV
Proxy Statement filed pursuant to Regulation 14A in connection with registrant's
Annual Meeting of Stockholders to be held on April 23, 2002.............................. III
INDEX
PART I
Item 1. Business........................................................................ 3
Item 2. Properties...................................................................... 11
Item 3. Legal Proceedings............................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders............................. 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 13
Item 6. Selected Financial Data......................................................... 13
Item 7. Management's Discussion and Analysis............................................ 13
Item 8. Financial Statements and Supplementary Data..................................... 13
Item 9. Disagreements with Accountants.................................................. 15
PART III
Item 10. Directors and Executive Officers of the Registrant.............................. 15
Item 11. Executive Compensation.......................................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 15
Item 13. Certain Relationships and Related Transactions.................................. 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................. 16
SIGNATURES..................................................................................... 18
2
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
2001 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, but are not
limited to, 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 Company is a global leader in services, products and solutions for
purifying water and air. 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 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. In February 2001, the Company increased its equity ownership in its
Japanese joint venture, Calgon Far East Co. Ltd., from 60% to 100%. During the
third quarter of 2001, the Company began construction of a carbon manufacturing
facility in the People's Republic of China. That facility is expected to be
fully operational by mid 2002.
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 caused the composition of its
reportable segments to change. As a result, the Company has four reportable
segments: Activated Carbon, Service, Engineered Solutions and Consumer. These
reportable segments 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 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 40 through 42 of the Annual Report to
Stockholders for the year ended
3
December 31, 2001 should be considered in the following discussion and is
incorporated by reference.
Products and Services:
The Company's four segments design and market products and services
specifically developed for the purification, separation and concentration of
liquids and gases. The Carbon and Service segments utilize activated carbon
while the Engineered Solutions segment relies on other technologies. The
Consumer segment 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 activated, 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.
Sales for the Activated Carbon segment were $109.3 million, $124.7 million
and $144.5 million for the years ended December 31, 2001, 2000 and 1999,
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
4
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. 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:
2001 2000 1999
--------------------------------------------------------------------------------------------
Percentage Percentage Percentage
(Dollars in thousands) Amount of Total Amount of Total Amount of Total
- -----------------------------------------------------------------------------------------------------------------------
Service $83,301 90% $84,348 93% $84,091 89%
Equipment 9,035 10 6,630 7 10,178 11
- -----------------------------------------------------------------------------------------------------------------------
Total net sales $92,336 100% $90,978 100% $94,269 100%
- -----------------------------------------------------------------------------------------------------------------------
5
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.
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 $48.2 million, $32.7 million
and $37.7 million for the years ended December 31, 2001, 2000 and 1999,
respectively.
Consumer. Currently, the primary products offered in the Consumer 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 and carbon cloth are used as the primary raw material in the Company's
new consumer products that have been developed for the retail market. The
Company currently has two primary products that it markets in the Consumer
segment. The first product, Purrfectly Fresh(TM), uses activated carbon to
absorb odors and extend the life of kitty litter. The second product,
PreZerve(TM), consists of a carbon cloth lining used in jewelry and silver
boxes to absorb contaminants that are known to cause tarnish.
Sales for the Consumer segment were $20.7 million, $20.6 million and $19.7
million for the years ended December 31, 2001, 2000 and 1999, respectively.
Markets:
The Company offers its Activated Carbon, Service and Engineered Solutions
systems and services to the Potable Water, Industrial Process, Environmental
Water and Air, Food, and Specialty Markets. Potable Water applications include
Municipal drinking water purification as well as point of entry and point of use
devices. Applications in the Industrial Process, Environmental and Food markets
include catalysis, product recovery, and purification of chemical,
pharmaceutical, process waters as well as groundwater remediation and emissions
control treatment. Carbon is used in medical, personnel protection, cigarette,
automotive and precious metals industries in Specialty applications. Consumer
products are sold primarily to the retail, industrial and medical markets as
discussed previously.
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 also sells to
OEM manufacturers of home water purification systems. 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.
Industrial Process Market. Our customers 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: Liquid chemicals, catalyst, gas
and water processing.
6
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, glycerin, analgesics, antibiotics and vitamins and removal of trace
impurities from neon, carbon dioxide, acetylene and hydrogen. Systems that
employ ion exchange technology contribute to sales within this market.
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.
Environmental Market: The Environmental Market consists of customers that use
the Company's products to control air and water pollutants. The Environmental
Market has multiple sub-segments.
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.
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.
Food Market. Sweetener manufacturers are the principal purchasers of the
Company's products in the food market. 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 and purification
of many different foods and beverages.
Specialty Markets 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 spill cleanup equipment, solvent recovery equipment and
gasoline vapor recovery equipment.
7
Cigarette manufacturers use activated carbons in charcoal filters and precious
metals producers use activated carbons to recover gold and silver from low-grade
ore.
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 and Mexico through distributor relationships. 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 Oceania.
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., through purchases of the Company's products for resale
in Japan. Calgon Far East Co. Ltd. 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 42 of the
Annual Report to Stockholders for the Year Ended December 31, 2001.
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 $16.0 million and $19.1 million as of
February 28, 2002 and 2001, respectively, in the Engineered Solutions segment.
The Company expects the 2002 balance to be substantially recognized by year-end.
Competition:
The Company has two principal competitors in the world-wide market with
respect to the production and sale of activated carbon related products: Norit,
N.V., a wholly owned subsidiary of Nuon, 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
worldwide 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.
8
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 competitor in this product
line is Trojan Technologies, Inc.
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, the principal sales market for the Company's
charcoal product.
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. 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, substantially all natural gas is purchased pursuant to
various annual contracts with natural gas companies.
The Company purchases hydrogen peroxide via an annual supply contract 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
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 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 within the Company's Activated Carbon, Service
and Engineered Solutions segments. The Company has also developed carbons for
the Activated Carbon and Service segments specifically designed to remove lead
and methyl tertiary butyl ether (MTBE) from drinking water. In the Engineered
Solutions segment, the ISEP Plus system has been developed and patented for the
removal and destruction of perchlorate from water. Another key technology in
the Engineered Solutions segment is the Sentinel Ultraviolet light system that
has been developed and patented for the disinfection and inactivation of
cryptosporidium in drinking water. The carbon cloth line in the Consumer segment
is the first commercial entry into the shaped carbon business.
Research and development expenses were $5.6 million, $7.4 million, and $7.7
million in 2001, 2000 and 1999, respectively.
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Patents and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 71 United States patents and 172 patents in other countries
expiring in various years from 2002 through 2019. 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
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 has filed for these permits at its Pittsburgh and
Catlettsburg facilities. 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. In this regard,
the Company has agreed with the state of Kentucky that it will either install
additional control equipment at its Catlettsburg, Kentucky facility by November,
2002 or cease operations of one of its three activated carbon lines. The Company
is currently in negotiations with the state of Kentucky to extend the November,
2002 deadline and has not determined if it plans to install such equipment or
cease operation of this line. The total cost of the equipment is estimated at
approximately $7.0 million. The Company believes that the cessation of
production of the activated carbon line will not have a material impact upon the
Company's operations due to the fact that the Company has alternative sources of
activated carbon supply if required.
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, 2001, the Company employed 960 persons on a full-time
basis, 569 of whom were salaried production, office, supervisory and sales
personnel. The 240 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, 2005 and March 13, 2005 at the
Pittsburgh, Pennsylvania and Catlettsburg, Kentucky facilities,
10
respectively. 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 March 31, 2002. The hourly personnel at the Company's
Belgian facility are represented by two national labor organizations with
contracts expiring on July 31, 2003. The Company has hourly employees at three
non-union United Kingdom facilities (one of which is a customer location).
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 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
11
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.
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.
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 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 also currently a party in two cases involving alleged
infringement of its U.S. patent No. 6,129,893 ("893 patent") for the method of
preventing cryptosporidium infection in drinking water. In the first case,
Wedeco Ideal Horizons, Inc. (Wedeco) has filed suit against the Company seeking
a declaratory judgment that it does not infringe the Company's "893 patent".
This matter is currently pending in the United States District Court for the
District of New Jersey. In the second case, the Company has pending litigation
against the Town of Ontario, NY and Robert Wykle, et al. in the United States
District Court for the Western District of New York alleging that the defendant
is practicing the method claimed within the "893 patent" without a license.
Neither the Company nor its counsel can predict with any certainty the outcome
of the two matters.
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:
12
No matters were submitted to a vote of security holders during the fourth
quarter of 2001.
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 44 of the Annual Report to Stockholders
for the Year Ended December 31, 2001 and is incorporated in this Annual 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 43 of the Annual
Report to Stockholders for the Year Ended December 31, 2001 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 14 through 17 of the Annual Report to Stockholders for the Year
Ended December 31, 2001 and is incorporated in this Annual Report by reference.
Item 7a. Market Risk
The information required by this Item 7a appears on pages 16 through 17 of the
Annual Report to Stockholders for the Year Ended December 31, 2001 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, 2001, 2000 and 1999 required by
this Item 8 appear on pages 19 through 44 of the Annual Report to Stockholders
for the Year Ended December 31, 2001 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, 2001 and 2000 and
for the years then ended appears on page 18 of the annual report to stockholders
for the year ended December 31, 2001, 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 for the year then
ended is presented below.
13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Calgon Carbon Corporation
In our opinion, the consolidated statements of income and comprehensive income,
of cash flows and of changes in stockholders' equity for the year ended December
31, 1999 (appearing on pages 19, 21 and 22 of the Calgon Carbon Corporation 2001
Annual Report to Shareholders which has been incorporated by reference in this
Form 10-K) present fairly, in all material respects, the results of operations
and cash flows of Calgon Carbon Corporation and its subsidiaries for the year
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 audit. We conducted our audit
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
audit provides 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
14
Item 9. Disagreements with Accountants:
On April 7, 2000, the Board of Directors of the Company, upon recommendation
of the Audit Committee, approved the dismissal of the Company's independent
accountants, PricewaterhouseCoopers LLP ("PWC") to be effective immediately.
The audit reports of PWC on the Company's financial statements as of December
31, 1999 and 1998 and for the years then ended did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainly, audit scope or accounting principles. In connection with the
audits of the Company's financial statements as of December 31, 1999 and 1998
and for the years then ended and through the date of this report, the Company
believes there were no disagreements (as defined in Item 304 of Regulation S-K).
PWC believes that discussions surrounding two potential charges to the Company's
restructuring reserve, which were never recorded, constitute a disagreement as
defined in Item 304 of Regulation S-K. With the exception of this difference of
opinion, there were no issues with PWC on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which matters, if not resolved to the satisfaction of PWC, would have caused PWC
to make reference to the matter in its reports on the financial statements for
such years. The Company's Audit Committee was informed by PWC about the
discussions related to the restructuring reserve. PWC stated that they agreed
with the accounting for the final restructure reserve. The Company has also
authorized PWC to respond fully to any and all inquiries of the successor
accountant.
During the years ended December 31, 1999 and 1998 and through April 7, 2000,
there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-
K.
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 2002 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 2002 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 2002 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 2002 Annual Meeting of its Stockholders.
15
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, 2001
--------------------------------------- -----------------
Report of Independent Accountants, dated January 30, 2002 (February 5, 2002 as to Note 8) 18
Consolidated Statement of Income and Comprehensive Income for the Years Ended December 31,
2001, 2000 and 1999.......................................................................... 19
Consolidated Balance Sheet as of December 31, 2001 and 2000 20
Consolidated Statement of Cash Flows for the Years Ended December 31, 2001, 2000 and
1999.................................................................................... 21
Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2001, 2000
and 1999................................................................................ 22
Notes to the Consolidated Financial Statements............................................... 23 - 42
Quarterly Financial Data -- Unaudited........................................................ 44
C. Exhibits
Page
----
3.1 Amended Certificate of Incorporation (d)
3.2 Amended By-laws of the Registrant................................................... (a)
4.0 Rights Agreement.................................................................... (e)
9.1 Voting Trust Agreement.............................................................. (b)
9.2 Voting Trust Certificate of Amendment............................................... (c)
10.1* Calgon Carbon Corporation Stock Option Plan, as Amended............................. Filed herewith
10.2* 1999 Non-Employee Directors' Phantom Stock Unit Plan, as Amended.................... Filed herewith
10.3* Executive Incentive Plan of Calgon Carbon Corporation, as Amended................... Filed herewith
10.4* 1993 Non-Employee, Directors' Stock Option Plan, as Amended......................... Filed herewith
10.5* 1997 Directors' Fee Plan............................................................ Filed herewith
10.6 Employment agreement between Calgon Carbon Corporation and James A. Cederna, as
Amended............................................................................. Filed herewith
10.7 Employment agreement between Calgon Carbon Corporation and the other executive
officers............................................................................ Filed herewith
13.0 Annual Report to Stockholders for the Year Ended December 31, 2001.................. 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; Calgon Carbon Export Inc., a
Barbados corporation; and Calgon Far East Co. Ltd., a Japanese corporation. In
addition, the Company owns 80% of Datong Carbon Corporation, a Chinese corporation. Filed herewith
23.1 Consent of Independent Accountants (Deloitte & Touche LLP).......................... Filed herewith
23.2 Consent of Independent Accountants (PricewaterhouseCoopers LLP) Filed herewith
16
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 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
* 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, 2001.
17
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 29, 2002 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 Officer,
- ------------------------ Director March 29, 2002
James A. Cederna
/s/ WIILLIAM E. CANN Chief Financial Officer March 29, 2002
- ----------------------
William E. Cann
/s/ ROBERT W. CRUICKSHANK Director March 29, 2002
- ---------------------------
Robert W. Cruickshank
/s/ ARTHUR L. GOESCHEL Director March 29, 2002
- ------------------------
Arthur L. Goeschel
/s/ THOMAS A. MCCONOMY Director March 29, 2002
- ------------------------
Thomas A. McConomy
/s/ NICK H. PRATER Director March 29, 2002
- --------------------
Nick H. Prater
/s/ JULIE S. ROBERTS Director March 29, 2002
- ----------------------
Julie S. Roberts
/s/ SETH E. SCHOFIELD Director March 29, 2002
- -----------------------
Seth E. Schofield
18
/s/ JOHN P. SURMA Director March 29, 2002
- -------------------
John P. Surma
/s/ HARRY H. WEIL Director March 29, 2002
- -------------------
Harry H. Weil
/s/ ROBERT L. YOHE Director March 29, 2002
- --------------------
Robert L. Yohe
19
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.................................................................... (e)
9.1 Voting Trust Agreement.............................................................. (b)
9.2 Voting Trust Certificate of Amendment............................................... (c)
10.1* Calgon Carbon Corporation Stock Option Plan, as Amended............................. Filed herewith
10.2* 1999 Non-Employee Directors' Phantom Stock Unit Plan, as Amended.................... Filed herewith
10.3* Executive Incentive Plan of Calgon Carbon Corporation, as Amended................... Filed herewith
10.4* 1993 Non-Employee, Directors' Stock Option Plan, as Amended......................... Filed herewith
10.5* 1997 Directors' Fee Plan............................................................ Filed herewith
10.6 Employment agreement between Calgon Carbon Corporation and James A. Cederna, as
Amended............................................................................. Filed herewith
10.7 Employment agreement between Calgon Carbon Corporation and the other executive
officers............................................................................ Filed herewith
13.0 Annual Report to Stockholders for the Year Ended December 31, 2001.................. 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; Calgon Carbon Export Inc., a
Barbados corporation; and Calgon Far East Co. Ltd., a Japanese corporation. In
addition, the Company owns 80% of Datong Carbon Corporation, a Chinese
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 4.0 to the Company's report on
Form 8-A dated February 6, 1995.
* Executive compensation plans.
20