Calgon Carbon Announces Third Quarter 2016 Results

Calgon Carbon Corporation (NYSE: CCC) announced results for the third quarter ended September 30, 2016.

Net sales for the third quarter of 2016 were $124.0 million, as compared to $133.0 million for the comparable period in 2015. Currency translation had a $0.5 million negative impact on sales for the third quarter 2016 primarily due to the negative effect of a stronger U.S. dollar versus the British pound sterling that was partially offset by a weaker U.S. dollar versus the Japanese yen. As anticipated, third quarter sales declined sequentially as compared to second quarter 2016 sales of $132.6 million.

Income from operations for the third quarter of 2016 was $9.3 million versus $17.0 million for the third quarter of 2015. Third quarter 2016 income from operations includes $0.6 million of transaction-related costs attributable to the Company's acquisition of the European activated carbon and filter aid business of CECA (a subsidiary of the Arkema Group) that was completed on November 2, 2016.

Net income was $6.4 million for the third quarter of 2016 versus $12.1 million for the comparable period in 2015. On a fully diluted share basis, net income per common share for the third quarter of 2016 was $0.13 compared to $0.23 reported for last year's third quarter.

For the third quarter of 2016, sales for the Activated Carbon and Service segment declined to $112.5 million as compared to $121.3 million for the same period a year ago. This decline was primarily due to lower sales of powdered activated carbon for removing mercury from coal-fired power plant emissions in the North American Environmental Air market, as well as lower Environmental Water market sales resulting from the impact of continued soft global economic conditions on industrial sector customer demand. These declines were partially offset by higher Potable Water market sales, particularly in North America, and higher respirator and metal recovery Specialty Carbon market sales.

Equipment segment sales in the third quarter of 2016 were $9.8 million compared to $9.7 million for the same period a year ago. Higher sales of carbon adsorption equipment were offset by lower ion exchange equipment and ballast water treatment system sales.

Sales in the Consumer segment declined to $1.7 million in the third quarter of 2016 compared to $2.0 million in last year's third quarter due to the negative currency translation impact of the weaker British pound sterling.

Net sales less the cost of products sold (excluding depreciation and amortization), as a percentage of net sales for the third quarter of 2016 was 31.1%, compared to 36.2% reported for the third quarter of 2015. The lower margin percentage was primarily due to a decline in the volume of higher margin products, including the absence of a higher margin legacy mercury removal contract, coupled with an increase in the volume of lower margin products.

Selling, administrative and research expense for the third quarter of 2016 was $20.2 million versus $22.6 million in last year's third quarter. The decrease is primarily due to lower employee related costs, including lower expenses related to retiree lump sum pension plan payments, as well as lower costs from consulting services including those from the Company's SAP re-implementation project that was completed last year. Partially offsetting these decreases were transaction-related costs of $0.6 million attributable to the acquisition of CECA's activated carbon and filter aid business.

The effective tax rate for the third quarter of 2016 declined to 20.2% compared to 31.3% for the same period last year due to changes in the mix of earnings in taxing jurisdictions where the tax rate is lower than the U.S. rate and the favorable impact of permanent income tax differences related to discrete return to provision items.

On November 1, 2016, Calgon Carbon's Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on December 15, 2016, to shareholders of record on December 5, 2016.

Commenting on the Company's third quarter results, Randy Dearth, Calgon Carbon's Chairman, President and Chief Executive Officer said, "While our results reflect the anticipated decline in our mercury removal revenues and margins due to the expiration of a legacy contract, ongoing global softness in industrial end markets caused this sector's demand to lag our already dampened expectations.

"In the face of prolonged weakness in global industrial end markets, we continue to focus on things that we can control, including new cost reduction initiatives and executing on opportunities in other areas of our diverse end market and product exposures that are benefiting from positive market dynamics.

"As an example, we are gaining significant traction in the municipal water market from our proactive response to addressing the removal of harmful perfluorinated compounds that are being found in many drinking water sources across the United States. With the September 2016 passage of the International Maritime Organization Convention for the treatment of ballast water discharges, we have experienced a significant increase in quotation activity for our UV treatment systems and we have received positive results from preliminary tests for our Hyde GUARDIAN systems under U.S. Coast Guard testing protocols. And with yesterday's closing of the European activated carbon and filter aid acquisition, we look forward to the positive and synergistic impact that this strategic addition to the Calgon Carbon portfolio is expected to have on our business and financial performance in 2017 and beyond.

"In summary, we believe we are taking the right steps strategically and operationally to mitigate industrial demand softness and to create a more balanced and diverse global growth platform," concluded Mr. Dearth.

Conference Call and Webcast Details

This morning at 9:00 a.m. Eastern Time, the Company will be hosting a live conference call and webcast, including presentation slides, to discuss the third quarter 2016 financial results.

To listen to, or participate in, the conference call, please phone 866-393-4792 shortly before the scheduled start time. International callers should phone +1 706-758-4301. The conference ID is 84098192.

To view and listen to the webcast, as well as access the downloadable presentation slides, go to the Calgon Carbon website at www.calgoncarbon.com, proceed to the investor home page, and click on the link to the webcast.

The conference call will be re-broadcast beginning approximately two hours after the call concludes through November 17, 2016, at midnight Eastern Time. To listen to the re-broadcast, please phone 800-585-8367 or +1 404-537-3406. The ID for the replay is also 84098192.

A re-broadcast of the webcast can be accessed in the investor section of the Calgon Carbon website.

Pure Water. Clean Air. Better World.

Calgon Carbon Corporation (NYSE:CCC) is a global leader in innovative solutions, high quality products and reliable services designed to protect human health and the environment from harmful contaminants in water, and air. As a leading manufacturer of activated carbon, with broad capabilities in ultraviolet light disinfection, the Company provides purification solutions for drinking water, wastewater, pollution abatement, and a variety of industrial and commercial manufacturing processes.

Calgon Carbon is the world's largest producer of granular activated carbon and supplies more than 100 types of activated carbon products - in granular, powdered, pelletized and cloth form - for more than 700 distinct applications.

With the recent acquisition of complementary wood-based activated carbon and filtration media capabilities located in Europe, Calgon Carbon becomes an even more global and diverse industry leader in activated carbon, reactivation, and filtration media in the form of diatomaceous earth and perlites.

Headquartered in Pittsburgh, Pennsylvania, the Company employs approximately 1,400 people at 21 manufacturing, reactivation, and equipment fabrication facilities in the U.S., Asia, and in Europe, where Calgon Carbon is known as Chemviron.

For more information about Calgon Carbon's leading activated carbon, filtration media, and ultraviolet technology solutions, visit www.calgoncarbon.com.

This news release contains historical information and forward-looking statements. Forward-looking statements typically contain words such as "expect," "believe," "estimate," "anticipate," or similar words indicating that future outcomes are uncertain. Statements looking forward in time, including statements regarding the acquisition of the assets and business of the wood-based activated carbon, reactivation and mineral-based filtration media business of CECA, a subsidiary of Arkema Group (the Activated Carbon and Filter Aid Business), future growth and profitability, price increases, cost savings, broader product lines, enhanced competitive posture and acquisitions, are included herein and in the Company's most recent Annual Report on Form 10-K pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested herein, including, without limitation, the Company's ability to successfully integrate the Activated Carbon and Filter Aid Business and achieve the expected results of the acquisition, including any expected synergies and the expected accretion to earnings. Further, the Company operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond the Company's control. Some of the factors that could affect future performance of the Company are changes in or delays in the implementation of regulations that cause a market for our products, higher energy and raw material costs, costs of imports and related tariffs, unfavorable weather conditions and changes in market prices of natural gas relative to prices of coal, labor relations, availability of capital and environmental requirements as they relate both to our operations and to our customers, changes in foreign currency exchange rates, borrowing restrictions, validity of patents and other intellectual property, and pension costs. In the context of the forward-looking information provided in this news release, please refer to the discussions of risk factors and other information detailed in, as well as the other information contained in the Company's most recent Annual Report on Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not intend to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the Federal securities laws of the United States.
Calgon Carbon Corporation
Condensed Consolidated Statements of Comprehensive Income
(Dollars in thousands except per share data)
(Unaudited)        
Quarter Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
 
Net Sales $ 123,970   $ 132,976   $ 376,766   $ 404,131  
 
Cost of Products Sold (Excluding Depreciation and Amortization) 85,430 84,804 251,552 256,636
 
Depreciation and Amortization 9,082 8,624 27,318 25,788
 
Selling, Administrative & Research   20,165     22,580     67,969     67,654  
 
  114,677     116,008     346,839     350,078  
 
Income from Operations 9,293 16,968 29,927 54,053
 
Interest Expense - Net (538 ) (248 ) (1,064 ) (449 )
 
Other Income (Expense) - Net   (758 )   890     (555 )   (261 )
 
Income Before Income Tax Provision 7,997 17,610 28,308 53,343
 
Income Tax Provision   1,612     5,504     8,569     17,596  
 
Net Income 6,385 12,106 19,739 35,747
 
Other Comprehensive Income (Loss), Net of Tax
Foreign Currency Translation (284 ) (2,490 ) (595 ) (9,462 )
Defined Benefit Pension Plans 1,028 503 2,291 1,460
Derivatives   100     (559 )   (689 )   (677 )
 
Comprehensive Income $ 7,229   $ 9,560   $ 20,746   $ 27,068  
 
Net Income per Common Share
Basic $ .13 $ .23 $ .39 $ .68
Diluted $ .13 $ .23 $ .39 $ .67
 
Dividends per Common Share $ .05 $ .05 $ .15 $ .15
 
Weighted Average Shares Outstanding (Thousands)
Basic 50,246 51,891 50,260 52,217
Diluted 50,984 52,634 51,004 53,045
 

Calgon Carbon Corporation
Segment Data
(Dollars in thousands)
(Unaudited)
       
3Q16 3Q15 YTD 2016 YTD 2015

Segment Sales
 
Activated Carbon and Service $ 112,504 $ 121,330 $ 339,861 $ 367,644
Equipment 9,784 9,659 30,094 30,003
Consumer   1,682     1,987     6,811     6,484  
 
Net Sales $ 123,970 $ 132,976 $ 376,766 $ 404,131
 
 
 
 

 
3Q16 3Q15 YTD 2016 YTD 2015

Segment Operating Income (loss)*
 
Activated Carbon and Service $ 18,255 $ 26,008 $ 56,958 $ 79,157
Equipment (186 ) (764 ) (1,144 ) (816 )
Consumer   306     348     1,431     1,500  
 
Income from Operations * $ 18,375 $ 25,592 $ 57,245 $ 79,841
 
 
* Before depreciation and amortization.
 

Calgon Carbon Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
   
September 30, December 31,
2016 2015
 
Assets
 
Current assets:
 
Cash and cash equivalents $ 57,234 $ 53,629
 
Receivables 85,739 96,674
 
Inventories 114,416 110,364
 
Other current assets   43,169   47,058
 
Total current assets 300,558 307,725
 
Property, plant and equipment, net 307,268 311,019
 
Other assets   36,678   37,774
 
Total assets $ 644,504 $ 656,518
 
Liabilities and Stockholders' Equity
 
Current liabilities:
 
Current portion of long-term debt $ 7,500 $ 7,500
 
Other current liabilities   64,025   73,141
 
Total current liabilities 71,525 80,641
 
Long-term debt 94,794 103,941
 
Other liabilities   76,407   77,945
 
Total liabilities 242,726 262,527
 
Total stockholders' equity   401,778   393,991
 
Total liabilities and stockholders' equity $ 644,504 $ 656,518

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