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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Commission file number 1-10776

CALGON CARBON CORPORATION

(Exact name of registrant as specified in its charter)

P.O. Box 717, Pittsburgh, PA 15230-0717

(Address of principal executive offices)           (Zip Code)

(412) 787-6700

(Registrant’s telephone number, including area code)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

Yes x   No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    

Yes x   No ¨

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     

Yes ¨   No ¨

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CALGON CARBON CORPORATION

FORM 10-Q

QUARTER ENDED March 31, 2003

The Quarterly Report on Form 10-Q contains historical information and forward-looking statements. Statements looking forward in time are included in this Form 10-Q pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. They involve known and unknown risks and uncertainties that may cause the Company’s actual results in the future to differ from performance suggested herein. A specific example of such uncertainties includes references to reductions in working capital. In the context of forward-looking information provided in this Form 10-Q and in other reports, please refer to the discussion of risk factors detailed in, as well as the other information contained in the Company’s filings with the Securities and Exchange Commission.

I N D E X

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

INTRODUCTION TO THE FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements included herein have been prepared by Calgon Carbon Corporation (the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Management of the Company believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the Company’s audited consolidated financial statements and the notes included therein for the year ended December 31, 2002 filed with the Securities and Exchange Commission by the Company in Form 10-K.

In management’s opinion, the unaudited interim consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, which are necessary for a fair presentation, in all material respects, of financial results for the interim periods presented. Operating results for the first three months of 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

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CALGON CARBON CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

(Dollars in Thousands Except Share and Per Share Data)

(Unaudited)

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The accompanying notes are an integral part of these financial statements.

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CALGON CARBON CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands except share data)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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CALGON CARBON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

The accompanying notes are an integral part of these financial statements.

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CALGON CARBON CORPORATION

SELECTED NOTES TO FINANCIAL STATEMENTS

(Dollars in Thousands)

(Unaudited)

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Item 2.     Management’s Discussion and Analysis of Results of Operations and Financial Condition

This discussion should be read in connection with the information contained in the Consolidated Financial Statements and Selected Notes to Financial Statements.

Results of Operations

Consolidated net sales increased by $0.9 million or 1.4% for the quarter ended March 31, 2003 versus the quarter ended March 31, 2002. Net sales for the quarter ended March 31, 2003 for the Activated Carbon segment were consistent with the quarter ended March 31, 2002. A decrease of $1.9 million is attributed to the change to the equity method of accounting for sales of Calgon Mitsubishi Chemical Corporation for the period ended March 31, 2003 versus the similar 2002 period partially offset by the positive impact of foreign currency translation of $1.5 million. Net sales for the Service segment decreased by $0.3 million or 1.5% for the quarter ended March 31, 2003 versus the similar 2002 period. The decrease was primarily due to reduced demand of the Company’s industrial customers as a result of the economic slowdown in the U.S. partially offset by the positive impact of foreign currency translation. Revenues associated with the Engineered Solutions segment decreased by $0.8 million or 8.3% due to reduced capital spending in the industrial sector and delays in new contracts for perchlorate removal versus the comparable 2002 period. Sales in the Consumer segment for the quarter ended March 31, 2003 increased by $2.0 million or 41.1% compared to the quarter ended March 31, 2002. The increase was due to higher sales of new consumer products and charcoal cloth as well as a $1.0 million positive impact of foreign currency translation. The total positive impact for foreign currency translation on consolidated net sales for the quarter ended March 31, 2003 was $3.7 million.

Gross profit, before depreciation, as a percentage of net sales was 29.4% for the quarter ended March 31, 2003 compared to 31.0% for the similar 2002 period, a 1.6 percentage point decline. The decline was primarily due to startup costs related to the Company’s new carbon facility in the People’s Republic of China and higher plant maintenance and employee benefit costs. These costs were partially offset by manufacturing efficiencies as a result of process improvements and the lower cost of U.S. sourced carbon products shipped to the Company’s Belgian branch as a result of the strengthening of the Euro in 2003 versus the comparable 2002 period.

The depreciation and amortization increase of $0.3 million during the quarter ended March 31, 2003 versus the quarter ended March 31, 2002 was related primarily to depreciation for the Company’s new carbon facility in the People’s Republic of China.

Selling, general and administrative expenses for the quarter ended March 31, 2003 were higher than the comparable 2002 quarter by $3.3 million or 30.5%. The increase is primarily the result of severance payments and continuation of benefits for the Company’s former chief executive officer of $1.9 million, who resigned during the quarter ended March 31, 2003 as well as increased insurance, pension and medical expenses. Research and development expenses for the quarter ended March 31, 2003 were consistent with the quarter ended March 31, 2002.

Other expense for the quarter ended March 31, 2003 increased by $0.3 million as compared to March 31, 2002 periods. The primary reason for the increase is the equity loss in Calgon Mitsubishi Chemical Corporation of $0.2 million.

Interest expense, net of interest income, for the quarter ended March 31, 2003 was below the quarter ended March 31, 2002 by $0.1 million or 23.0%. The decrease in interest expense was primarily the result of the combination of lower interest rates and a lower average level of borrowings during the comparable period.

Financial Condition

Working Capital and Liquidity

Cash flows generated from operating activities were $1.6 million for the period ended March 31, 2003 compared to cash generated from operations of $3.1 million for the comparable 2002 period. The $1.5 million

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decrease represents lower earnings, excluding the cumulative effect of change in accounting principle, partially offset by a decrease in operating working capital (exclusive of debt) in 2003 versus the comparable 2002 period.

Common stock dividends paid during the quarter ended March 31, 2003 represented $.03 per common share which was consistent with the quarter ended March 31, 2002.

Total debt at March 31, 2003 was $59.1 million, an increase of $1.5 million from December 31, 2002. The additional borrowings were used primarily to pay the severance obligation to the Company’s former chief executive officer.

The Company expects that current cash from operating activities plus cash balances and available external financing will be sufficient to meet its future requirements.

The Company had a $113.4 million credit facility consisting of an $86.8 million five-year revolving credit facility expiring in May 2004 and a $26.6 million 364-day revolving credit facility. On March 21, 2003, the Company closed on a three-year $100.0 million unsecured revolving credit facility that expires in March 2006. This facility replaces the then existing $113.4 million credit facility. Included in the agreement is a letter of credit sub-facility that may not exceed $30.0 million. The Company has the option at any point during the term of the facility to request an expansion of the facility at its original terms and conditions by an amount not to exceed $25.0 million. The participating lenders are not required to participate in the facility expansion, but do retain the right of first refusal before the Company can negotiate with other lenders. The interest rate is based upon Euro-based rates with other interest rate options available. The applicable Euro Dollar margin ranges from 0.80% to 1.40% and the annual facility fee ranges from 0.20% to 0.35% of the committed amount and is based upon the Company’s ratio of debt to earnings before interest, tax, depreciation and amortization (EBITDA). At March 31, 2003, borrowings under the facility were being charged a weighted average interest of 2.73%. The credit facility’s covenants impose financial restrictions on the Company, including maintaining certain ratios of debt to EBITDA, operating income to net interest expense and operating assets to debt and minimum net worth. In addition the facility imposes gross spending restrictions on capital expenditures, dividends, treasury share repurchases, acquisitions and investments in non-controlled subsidiaries. The facility contains mandatory prepayment provisions for proceeds in excess of pre-established amounts if certain events as defined by the loan agreement occur.

The Company had entered into an interest rate swap that fixed $10.0 million of its outstanding variable rate U.S. credit facility at 5.48%. The arrangement expired in January 2003.

Restructuring of Operations

The Company currently has two separate restructuring plans requiring continued cash outlays as of the period ended March 31, 2003. The latter of the two initiatives was undertaken during the fourth quarter of 1999 while the former commenced in the third quarter of 1998.

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The restructuring reserve activity for the three months ended March 31, 2003 was:

Management believes the reserve balances are adequate.

Capital Expenditures and Investments

Capital expenditures for property, plant and equipment totaled $1.7 million for the quarter ended March 31, 2003 compared to expenditures of $3.6 million for the same period in 2002. The decrease is primarily the result of the Company’s investment in the construction of a carbon facility in the People’s Republic of China that took place in 2002. Capital expenditures for 2003 are projected to be approximately $20.0 million.

Regulatory Matters

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 local, state and federal air pollution control entities. The Company is presently in 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 temporarily discontinued operations of one of its three activated carbon lines at its Catlettsburg, Kentucky facility which was required by May 2003. The Company will need to install control equipment estimated at approximately $7.0 million in order to remain in compliance with state requirements regulating air emissions before resuming operation of this line. The activated carbon line and associated equipment has a net book value of approximately $3.0 million. Management has not concluded its plan of action for compliance related to this activated carbon line, however, if it is determined that a shutdown of the activated carbon line for other than a temporary period is warranted, current operating results may be adversely affected by increased depreciation or impairment charges.

New Accounting Pronouncements

The FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company has adopted SFAS No. 143 as of January 1, 2003 as required with no resulting impact on the Company’s financial statements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” Interpretation No. 46 requires unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse the risk and rewards of ownership among their owners and other parties involved. The provisions of Interpretation No. 46 are effective immediately to all variable interest entities created after January 1, 2003 and variable interest entities created before this date, the provisions are effective July 31, 2003. The Company presently has no variable interest entities created after January 1, 2003 and is currently evaluating the provisions of this interpretation.

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Item 4. Controls and Procedures

The Company’s principal executive officer and principal financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), within 90 days of the filing date of this Quarterly Report on Form 10-Q. Based upon their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

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PART II – OTHER INFORMATION

 See Note 7 to the unaudited interim Consolidated Financial Statements contained herein.

The annual meeting of stockholders was held April 22, 2003. In connection with the meeting, proxies were solicited pursuant to the Securities Exchange Act. The following are the voting results on the proposals considered and voted upon at the meeting and described in the proxy statement.

(c)    Exhibits

Exhibit 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

A report on Form 8-K, dated February 24, 2003 which furnished information filed under Item 5. Other Events announcing the resignation of James A. Cederna.

A report on Form 8-K, dated March 31, 2003 which furnished information under Item 9. Regulation FD Disclosure detailing the Company’s new Senior Unsecured Credit Facility.

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SIGNATURES

Pursuant to the requirements 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.

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CERTIFICATION

I, John S. Stanik, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Calgon Carbon Corporation.

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

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CERTIFICATION

I, Leroy M. Ball, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Calgon Carbon Corporation.

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

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