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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, 1996 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 15205
PITTSBURGH, PENNSYLVANIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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 New York Stock Exchange
share
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 3, 1997, there were outstanding 39,674,660 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 3, 1997 was $346,022,909.
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, 1996................................................. II and IV
Proxy Statement filed pursuant to Regulation 14A in connection with
registrant's Annual Meeting of Stockholders to be held on April 22,
1997............................................................... III
INDEX
PART I
Item 1. Business..................................................... 1
Item 2. Properties................................................... 8
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 10
Matters.....................................................
Item 6. Selected Financial Data...................................... 10
Item 7. Management's Discussion and Analysis......................... 10
Item 8. Financial Statements and Supplementary Data.................. 10
Item 9. Disagreements with Accountants............................... 10
PART III
Item 10. Directors and Executive Officers of the Registrant........... 10
Item 11. Executive Compensation....................................... 10
Item 12. Security Ownership of Certain Beneficial Owners and 11
Management..................................................
Item 13. Certain Relationships and Related Transactions............... 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 11
8-K.........................................................
SIGNATURES................................................................ 13
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 1996 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") 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 equipment business. 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. Both of these transactions
were accounted for as purchases and provided the Company with an entry into
the oxidative water treatment market. 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 for odor control in medical
and industrial applications where granular activated carbon is not feasible.
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.
Products and Services:
Calgon Carbon is engaged in the manufacture and marketing of products and
services employed for separation, concentration or purification of liquids and
gases.
The Company's activities consist of four areas: (1) activated carbons--the
production and sale of a broad range of untreated, impregnated or acid washed
carbons, in either powdered, granular, pellet or cloth form; (2) services--the
provision of carbon reactivation, handling and transportation and on-site
purification, separation and concentration services; (3) systems--the design,
assembly and sales of systems that employ activated carbon, advanced
oxidation, ion exchange or chromatographic separation technology for
purification, separation and concentration; and (4) charcoal--the production
and sale of charcoal to consumer markets in Germany.
1
Activated Carbons. The Company's principal product is activated carbon.
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 produces activated carbon in cloth form, using rayon as the
primary raw material. The Company also markets other activated carbons
including products based on coconut or wood which it purchases from
independent suppliers.
Activated carbons are produced in granular, pellet, powdered and cloth
forms, although the Company has historically concentrated on granular and
pelletized activated carbon. The Company 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.
Once activated carbon is saturated with organic materials and can no longer
adsorb any additional organic compounds, its adsorption capacity can be
restored by "reactivation." Reactivation is a process by which the organic
compounds are driven off activated carbon particles by passing the spent
activated carbon through a high temperature furnace. Granular activated carbon
is employed in reactivation applications for economic reasons or to destroy
hazardous adsorbed organic compounds.
Services. The principal service sold by the Company is the Calgon Carbon
Service(TM) which supplies customers with a complete wastewater treatment
service, particularly suited for treating wastewater 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. 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.
The Company also offers services to clean water from contaminated aquifers
and surface impoundments and to clean accidental spills on a fee basis. These
services include both activated carbon and advanced oxidation processes. The
Company maintains an inventory of mobile adsorption equipment which can be
dispatched on twenty-four hours notice and can be 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.
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.
2
Systems. In 1978, the Company began marketing equipment which employs
activated carbon in various purification, separation and concentration
processes, as a means for expanding the market for its products and for
revenue growth. In 1996, the Company added, through acquisition, the
manufacture and marketing of advanced oxidation equipment, continuous ion
exchange and chromatographic separation equipment.
The Company sells a line of adsorption and filtration equipment to clean
water from contaminated aquifers, industrial wastewater and surface
impoundments, to eliminate odors from municipal wastewater plants
(Phoenix(TM)) 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. The adsorption equipment product line varies in size from fifty-
five-gallon to twelve-foot- diameter vessels. Through its Vara International
Division, the Company sells customized engineered systems for solvent recovery
and volatile organic compound abatement. The technologies provided include
steam regenerable fixed bed adsorption, distillation and adsorption/catalytic
oxidation (CADRE(TM)). The Company also designs and markets systems that
employ advanced oxidation technology, specifically ultraviolet irradiation in
conjunction with hydrogen peroxide and/or other oxidizing agents, to destroy
waterborne organic contaminants. Through its wholly owned subsidiary, Advanced
Separation Technologies Incorporated (AST), the Company also designs and
markets proprietary ISEP--(Ionic Separator) continuous ion exchange units for
separation of organic and inorganic compounds, principally for process
applications in the food, pharmaceutical and biotechnology industries. AST
also designs and markets the CSEP--(Chromatographic Separator), a continuous
chromatography separation system for applications in the food, pharmaceutical
and fine chemicals market segments.
Charcoal. This product is manufactured in Germany and used for barbecue
grilling by consumers and restaurants.
Markets:
The Company offers its activated carbon products and services, as well as
its adsorption systems (activated carbon and ion exchange) to the Industrial
Process Market and the Environmental Market. Its advanced oxidation systems
are used primarily in the Environmental Market with increasing activity in the
process water market. Applications involving advanced oxidation include the
treatment of ultra pure water for the semi-conductor industry and the
recycling of heavy water in the nuclear industry. Industrial process
applications 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, wastewater and sewage treatment, groundwater
remediation and emissions control in both industrial and municipal markets.
Charcoal products are used primarily in Germany for barbecue grilling. The
following table details total net sales by market for the past three years.
PERCENTAGE OF
TOTAL NET SALES
---------------------
1996 1995 1994
----- ----- -----
Industrial Process Market:
Food.................................................. 14% 12% 12%
Original equipment manufacturers...................... 16 10 9
Chemical and pharmaceutical........................... 7 14 14
Other................................................. 10 11 10
----- ----- -----
Subtotal Industrial................................. 47 47 45
----- ----- -----
Environmental Market:
Industrial............................................ 26 25 27
Municipal............................................. 20 21 21
----- ----- -----
Subtotal Environmental.............................. 46 46 48
----- ----- -----
Consumer Market:........................................ 7 7 7
----- ----- -----
Total net sales..................................... 100% 100% 100%
===== ===== =====
3
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 direct incorporation into their
product. The Industrial Process Market includes four significant sub-markets:
the food market, the original equipment manufacturers market, the chemical and
pharmaceutical 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 manufacture of artificial sweeteners and cane sugar.
Other food processing applications include decolorization of monosodium
glutamate; 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.
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.
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 and hydrogen.
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 industrial market and the municipal market.
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.
4
Activated carbon is also used in the chemical, pharmaceutical and refining
industries for purification of air discharges to remove contaminants such as
benzene, toluene and other volatile organics. The Company offers carbon,
services and equipment for these applications.
Municipal Market. The Company sells activated carbons, systems and services
to municipal customers in connection with the treatment of potable water to
remove pesticides and other dissolved organic material to meet current
regulations and to remove tastes and odors to make the water aesthetically
acceptable to the public. The Company primarily sells 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.
Municipal sewage treatment plants purchase the Company's odor control
systems and activated carbon products to remove objectionable odors emanating
from the plant 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.
Consumer Market:
The Consumer Market consists of sales of charcoal (Grillis(R) and Der
Sommer-Hit(R)) for outdoor barbecue grilling. The Company's charcoal is
primarily sold through distributors principally in Germany. This market is
weather dependent, with the majority of the sales in the spring and summer
months.
Sales and Marketing:
The Company sells activated carbons, systems and services throughout the
world and in Germany sells charcoal. In areas outside of the United States and
Europe, the Company's primary activity is the sale of activated carbons.
Approximately 90% of its products and services are sold through its direct
sales force, while 10% is through agents and distributors.
The Company has a direct sales force in the United States in offices located
in Pittsburgh, Pennsylvania; Tucson, Arizona; Richmond, California; Lakeland,
Florida; Vero Beach, Florida; Lisle, Illinois; Houston, Texas; and
Bridgewater, New Jersey. The Company conducts sales in Canada through a
distributor under direction of its wholly owned subsidiary. The Company also
has a sales office in Toronto, Ontario, Canada. The Company maintains an
office in Singapore to manage its business in Malaysia, Thailand, Indonesia,
India and Singapore.
In Europe the Company has sales offices in Brussels, 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.
The following table details total net sales to customers by geographic areas
in the past three years:
PERCENTAGE OF TOTAL NET SALES
---------------------------------
1996 1995 1994
--------- --------- ---------
United States................................. 57% 54% 56%
Europe........................................ 34 37 35
Other......................................... 9 9 9
---- ---- ----
Total net sales............................ 100% 100% 100%
==== ==== ====
Refer to Note 16 to the Consolidated Financial Statements for a discussion
of other financial information classified by major geographic areas in which
the Company operates.
5
Sales of the Company's products in Japan, South Korea, Taiwan and the
People's Republic of China are conducted exclusively by Calgon Far East Co.
Ltd., a joint venture in which the Company is a 50% participant. The joint
venture purchases the Company's products for resale in the four designated
countries. The joint venture also owns and operates a reactivation facility in
Japan and sells related services. Sales to the joint venture have not been a
significant portion of the Company's total net sales.
The Company's products and services were purchased by approximately 4,000
active customers in 1996. Over the past three years, no single customer
accounted for more than 10% of the total sales of the Company in any year.
Competition:
The Company has three principal competitors with respect to the production
and sale of activated carbons: Norit, N.V., a Dutch company; CECA, a
subsidiary of Elf-Aquitaine, a French company; and Westvaco Corporation, a
United States company. Recently, Chinese producers of coal-based activated
carbon and certain East Asian producers of coconut-based activated carbon have
entered the market on a worldwide basis and sell principally through
resellers. Competition in activated carbons, systems and services is based
both on price 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 the United States and throughout the world. 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 competes with several small
regional companies for the sale of its reactivation services and equipment.
In North America, the Company has competition for its advanced oxidation
product line from products not involving oxidation and from a number of
smaller firms offering some form of advanced oxidation. In Europe, competition
comes primarily from manufacturers of ozone generation equipment, principally
Ozonia, a division of Lyonnaise des Eaux, Trailigaz, a subsidiary of Compagnie
General des Eaux and Wedeco, a German-based supplier of ozone and
ozone/ultraviolet based systems.
In the advanced separation technologies market, competitors range from a few
large companies such as U.S. Filter and Applexion to hundreds of small local
companies, with a few competitors providing a full range of
filtration/separation equipment, technologies and service.
There are a number of competitors in the consumer charcoal market who are
located in Eastern European countries, Spain, Portugal, South Africa and South
America. These competitors offer inexpensive, low-quality products to the
market.
Capital Expenditures:
In 1996, the Company invested $14.4 million for capital expenditures. The
Company's 1997 capital expenditure budget approximates $40.0 million and
includes carbon production capacity increases at the Big Sandy, Kentucky,
Pearl River, Mississippi and Feluy, Belgium plants and an improved coal
handling system at the Big Sandy, Kentucky plant. The Company believes that
the funds generated from operations, supplemented as necessary with funds from
lines of credit and its cash reserves, will provide sufficient funds required
for such capital expenditures.
Raw Materials:
The principal raw material purchased by the Company 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 the coal
used in its Belgian production facility from a number of coal companies
throughout the world under similar arrangements. The Company purchases beech
wood for its German charcoal operations through
6
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 significant amounts of natural gas from various
suppliers for use in its 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.
The only other raw material that is purchased by the Company in significant
quantities is coal tar pitch, which is used as a binder in the manufacturing
process. The Company purchases coal tar pitch from various suppliers in the
United States and Europe under annual supply contracts.
The purchase of key equipment components for all areas 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.
Research and Development:
The Company's research and development activities are conducted at a
research center near Pittsburgh, Pennsylvania, under the direction of an
Executive Director with a staff of 63 employees. A pilot plant located near
Pittsburgh is used for the production of experimental activated carbon
products for testing and applications development.
The principal goals of the Company's research program are maintaining the
Company as a technological leader in the production and utilization of
activated carbon, systems and services; developing new products and services;
and providing technical support to the manufacturing and marketing operations
of the Company.
The Company's research programs include new and improved methods of
activated carbon manufacturing, new and improved activated carbons for
applications as physical adsorbents and adsorptive catalysts and other
emerging purification/separation/concentration technologies. The Centaur(R)
product line represents a new family of activated carbons developed for
adsorptive catalytic applications.
Research and development expenses were $6.5 million, $5.6 million and $6.3
million in 1996, 1995 and 1994, respectively.
Patent and Trade Secrets:
The Company possesses a substantial body of technical knowledge and trade
secrets and owns 70 United States patents and 98 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 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:
Domestic. 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.
7
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 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, including
PCBs, dioxins and radioactive 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, 1996, the Company employed 1,297 persons on a full-time
basis, 774 of whom were salaried production, office, supervisory and sales
personnel. The 302 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, 1999 with respect to the
Pittsburgh facility and on June 6, 2001 with respect to the Catlettsburg
facility. The 98 hourly personnel at the Bodenfelde plant in Germany are
represented by the German Chemical Industry Union. Agreements are reached
every two years between the National Chemical Union and the German Chemical
Federation. The current agreement expires on March 31, 1998. The 69 hourly
personnel at the Company's Belgian facility are represented by two national
labor organizations with contracts expiring on July 31, 1997. The Company has
54 hourly employees at its three non-union United Kingdom facilities.
ITEM 2. PROPERTIES:
The Company owns nine production facilities, two 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; Brilon-Wald and Bodenfelde, Germany. The
Company closed its Brilon-Wald plant in 1995. The Company leases four
production facilities as follows: Lakeland, Florida; Tucson, Arizona; Markham,
Ontario, Canada; Houghton Le Spring, England.
The Catlettsburg, Kentucky plant is the Company's largest facility, with
plant operations occupying approximately 50 acres of a 226-acre site. This
plant produces granular and powdered activated carbons, acid washed granular
activated carbons and reactivates spent granular activated carbons.
8
The Pittsburgh, Pennsylvania carbon production plant occupies a four-acre
site. 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.
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. The Company closed its
powdered carbon operation at this location in 1995 due to a shortage of
acceptable fly ash from the lumber industry.
The Pittsburgh, Pennsylvania equipment and assembly plant is located
approximately one mile from the carbon production 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 assembles fully
engineered equipment for purification, concentration and separation systems.
The Tucson, Arizona equipment and assembly plant occupies approximately two
acres. The site includes a 15,000 square foot building with the remaining site
space used for service equipment storage. The plant designs and assembles
fully engineered advanced oxidative process purification equipment.
The Markham, Ontario, Canada assembly facility is housed in a 19,000 square
foot building near Toronto, Ontario, Canada. Assembly of ultraviolet oxidation
equipment takes place at this location. In addition, this facility houses a
testing laboratory and pilot plant operations.
The Lakeland, Florida ion separation equipment plant occupies a 26,400
square foot building on approximately one and a half acres of property. The
primary operations are the assembly of both small size ion exchange systems
and components of larger ion exchange systems, plus the operation of pilot
plant testing of customer ion exchange processes.
The Feluy plant occupies a site of approximately 21 acres located 30 miles
south of Brussels, Belgium. It has one production line which manufactures
granular activated carbons. In addition, operations at the plant include the
reactivation of spent granular activated carbons and the grinding of granular
activated carbons into powdered activated carbons.
The Grays plant occupies a three-acre site near London, England. Operations
at the plant include the reactivation of spent granular activated carbons and
the impregnation of granular activated carbon.
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 market. Also a by-
product, acetic acid of various grades, is produced and sold.
The Brilon-Wald plant occupies a site of approximately 40 acres and is
situated in the North Rhine-Westphalia Region, Germany. This plant was closed
in 1995. The Company has been approached by potential purchasers of this
facility; however, at this time a suitable buyer has not been identified.
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.
The Company believes that the plants are adequate and suitable for its
operating needs.
9
ITEM 3. LEGAL PROCEEDINGS:
There are no material pending legal proceedings to which the Company or any
of its subsidiaries is a party or of which any of their property is the
subject, except proceedings which arise in the ordinary course of business. In
the opinion of management, any ultimate liability arising from pending
litigation will not have a material adverse effect on the consolidated
financial position, results of operations or cash flows 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 1996.
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 36 of the Annual Report to Stockholders
for the Year Ended December 31, 1996 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 36 of the Annual
Report to Stockholders for the Year Ended December 31, 1996 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 17 through 20 of the Annual Report to Stockholders for the
Year Ended December 31, 1996 and is incorporated in this Annual Report by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The financial statements and related report on the consolidated financial
statements of Calgon Carbon Corporation and its subsidiaries for the Years
Ended December 31, 1996, 1995 and 1994 required by this Item 8 appear on pages
21 through 36 of the Annual Report to Stockholders for the Year Ended December
31, 1996 and are incorporated in this Annual Report by reference.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS:
None.
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 1997 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 1997 Annual Meeting of its Stockholders.
10
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 1997 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 1997 Annual Meeting of its Stockholders.
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, 1996
--------------------------------------- ------------------
Report of Independent Accountants, dated February 3,
1997 except as to Note 7, which is as of March 3, 1997. 20
Consolidated Statement of Income for the Years Ended
December 31, 1996, 1995 and 1994....................... 21
Consolidated Balance Sheet as of December 31, 1996 and
1995................................................... 22
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995
and 1994............................................... 23
Consolidated Statement of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994........... 24
Notes to the Consolidated Financial Statements.......... 25-35
Quarterly Financial Data--Unaudited..................... 36
C.Exhibits
PAGE
----
3.1 Amended Certificate of Incorporation.............. (d)
3.2 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... (g)
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 50% of
Calgon Far East Co. Ltd., a Japanese corporation.
23.0 Consent of Independent Accountants................ (15)
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.
11
(a) Incorporated herein by reference to Exhibit 3.2 to the Company's
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(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 Company's report
on Form S-8 dated February 16, 1996.
(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 1997 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, 1996.
12
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 17, 1997 /s/ COLIN BAILEY
- ------------------ By___________________________________
(Date) COLIN BAILEY
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/ Colin Bailey President, Chief Executive March 17, 1997
- --------------------------- Officer, Director
COLIN BAILEY
/s/ R. Scott Keefer Senior Vice President, March 17, 1997
- --------------------------- Chief Financial and
R. SCOTT KEEFER Accounting Officer
/s/ Thomas A. McConomy Director, Chairman of the March 17, 1997
- --------------------------- Board
THOMAS A. MCCONOMY
/s/ Robert W. Cruickshank Director March 17, 1997
- ---------------------------
ROBERT W. CRUICKSHANK
/s/ Arthur L. Goeschel Director March 17, 1997
- ---------------------------
ARTHUR L. GOESCHEL
/s/ Nick H. Prater Director March 17, 1997
- ---------------------------
NICK H. PRATER
/s/ Seth E. Schofield Director March 17, 1997
- ---------------------------
SETH E. SCHOFIELD
/s/ Harry H. Weil Director March 17, 1997
- ---------------------------
HARRY H. WEIL
/s/ Robert L. Yohe Director March 17, 1997
- ---------------------------
ROBERT L. YOHE
/s/ Roger H. Zanitsch Director March 17, 1997
- ---------------------------
ROGER H. ZANITSCH
13
EXHIBIT INDEX
EXHIBIT METHOD OF
NO. DESCRIPTION FILING
------- ----------- --------------
3.1 Amended Certificate of Incorporation................. (d)
3.2 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)
Calgon Carbon Corporation Stock Option Plan, as
10.1* Amended.............................................. (e)
Officers Incentive Plan of Calgon Carbon Corporation,
10.3* as Amended........................................... (h)
10.4* 1993 Non-Employee, Directors' Stock Option Plan...... (g)
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
50% of Calgon Far East Co. Ltd., a Japanese
corporation.......................................... Filed herewith
23.0 Consent of Independent Accountants................... 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
registration statement on Form S-1 (File No. 33-13443) effective June 2,
1987.
(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 Company's report
on Form S-8 dated February 16, 1996.
(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 1997 Annual Meeting of its Stockholders.
* Executive compensation plans.
14