Calgon Carbon Corporation 424B3
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-144463
Prospectus
Calgon Carbon
Corporation
$75,000,000
5.00% Convertible
Senior Notes due 2036
Interest payable
February 15 and August 15
Issue Price: 100%
On August 18, 2006, we issued $75,000,000 aggregate
principal amount of 5.00% Convertible Senior Notes due 2036 in a
private offering. This prospectus covers resales from time to
time by selling securityholders of any or all of their notes,
including the related guarantees, and shares of our common stock
into which the notes are convertible. We will not receive any
proceeds from the resale by the selling securityholders of the
notes or the shares of common stock hereunder.
The notes bear interest at a rate of 5.00% per year.
Interest on the notes accrues from August 18, 2006.
Interest is payable semiannually in arrears on February 15 and
August 15 of each year, beginning February 15, 2007. The
notes will mature on August 15, 2036.
Prior to June 15, 2011,
holders may convert their notes under the following
circumstances: (1) during any calendar quarter (and only
during such calendar quarter) commencing after
September 30, 2006, if the last reported sale price of our
common stock is greater than or equal to 120% of the conversion
price of the notes for at least 20 trading days in the period of
30 consecutive trading days ending on the last trading day of
the preceding calendar quarter; (2) during the five
business day period after any 10 consecutive trading-day period
(the measurement period) in which the trading price
per note for each day in the measurement period was less than
103% of the product of the last reported sale price of our
common stock and the conversion rate on such day; or
(3) upon the occurrence of specified corporate transactions
described in this prospectus. On or after June 15, 2011,
holders may convert their notes at any time prior to
5:00 p.m., New York City time, on the business day
immediately preceding the maturity date. Upon conversion, we
will pay cash and shares of our common stock, if any, based on a
daily conversion value (as described herein) calculated on a
proportionate basis for each day of the 25 trading-day
observation period.
The initial conversion rate is
196.0784 shares of our common stock per $1,000 principal
amount of notes, equivalent to an initial conversion price of
approximately $5.10 per share of common stock. The
conversion rate is subject to adjustment in some events but will
not be adjusted for accrued interest. In addition, following
certain fundamental changes that occur prior to August 15,
2011, we will increase the conversion rate for holders who elect
to convert notes in connection with such fundamental changes in
certain circumstances.
We may not redeem the notes before
August 20, 2011. On or after that date, we may redeem all
or a portion of the notes at any time. Any redemption of the
notes will be for cash at 100% of the principal amount of the
notes to be redeemed, plus accrued and unpaid interest to, but
excluding, the redemption date.
Holders may require us to purchase
all or a portion of their notes on each of August 15, 2011,
August 15, 2016 and August 15, 2026. In addition, if
we experience specified types of fundamental changes, holders
may require us to purchase the notes. Any repurchase of the
notes pursuant to these provisions will be for cash at a price
equal to 100% of the principal amount of the notes to be
purchased plus any accrued and unpaid interest to, but
excluding, the purchase date.
The notes are our senior unsecured
obligations, and rank equally in right of payment with all of
our other existing and future senior unsecured indebtedness. The
notes are guaranteed by certain of our domestic subsidiaries on
a senior unsecured basis. The subsidiary guarantees are general
unsecured senior obligations of the subsidiary guarantors and
rank equally in right of payment with all of the existing and
future senior unsecured indebtedness of the subsidiary
guarantors. If we fail to make payment on the notes, the
subsidiary guarantors must make them instead. The notes are
effectively subordinated to any indebtedness of our
non-guarantor subsidiaries. The notes are effectively junior to
all of our existing and future secured indebtedness to the
extent of the value of the assets securing such indebtedness.
We do not intend to apply for listing of the notes on any
securities exchange or for inclusion of the notes in any
automated quotation system. The notes originally issued in the
private offering are eligible for trading on The
PORTALsm
Market of the National Association of Securities Dealers, Inc.
However, the notes sold pursuant to this prospectus will no
longer be eligible for trading in The
PORTALsm
Market of the National Association of Securities Dealers, Inc.
Our common stock is listed on the
New York Stock Exchange under the symbol CCC. The
last reported sale price of our common stock on the New York
Stock Exchange on July 17, 2007 was $13.15 per share.
See Risk factors
beginning on page 6 for a discussion of certain risks that
you should consider in connection with an investment in the
notes.
The notes, including the related guarantees, and the common
stock may be sold from time to time by the selling
securityholders named in this prospectus through public or
private transactions, at prevailing market prices or at
privately negotiated prices, either directly or through agents
or broker-dealers acting as principal or agent. The selling
securityholders may engage underwriters, brokers, dealers or
agents, who may receive commissions or discounts from the
selling securityholders. We will pay substantially all of the
expenses incident to the registration of the notes, including
the related guarantees, and shares of our common stock, except
for the selling commissions, if any. See Plan of
Distribution.
The date of this prospectus is July 18, 2007
In making your investment decision, you should rely only on
the information contained or incorporated by reference in this
prospectus. We have not authorized anyone to provide you with
any other information. If anyone provides you with different or
inconsistent information, you should not rely on it.
Neither we nor our representatives are making an offer to
sell these securities in any jurisdiction where the offer is not
permitted.
You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the
front cover of this prospectus. You should not assume that the
information contained in the documents incorporated by reference
in this prospectus is accurate as of any date other than the
respective dates of those documents. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
TABLE OF
CONTENTS
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3
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5
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6
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23
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28
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55
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62
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63
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68
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74
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76
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76
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77
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77
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F-1
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Calgon Carbon
Corporation
We are one of the leading global suppliers of activated carbon,
producing approximately 130 million pounds annually, or
approximately 31% of estimated annual U.S. demand and
approximately 11% of estimated global demand. We specialize in
the manufacture and supply of activated carbon in granular form,
and the design of innovative treatment systems and value-added
technologies and services for the purification of water and air
and other process streams. We have approximately 850 employees,
16 operational facilities and 23 sales and service centers in
North America, Europe and Asia.
Products and
services
We offer a diverse range of products, services and equipment
specifically developed for the purification, separation and
concentration of liquids and gases through three business
segments.
Activated Carbon
and Service segment84% of 2006 net sales
The Activated Carbon and Service segment primarily consists of
activated carbon products and field services, including
reactivation. The sale of activated carbon is the principal
component of this business segment. We produce and sell a broad
range of activated carbons, in granular, powdered 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. We also have 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®.
The primary raw material used in the production of our 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. Our technological
expertise in adjusting the pore structure in the activation
process has been one of the factors that has enabled us to
develop many special types of activated carbon.
We also market lower priced, lower value-added activated carbon
produced by other suppliers outside the United States,
principally in China, as well as activated carbons made from
other raw materials, including coconut or wood, produced by
industry partners and suppliers.
The other significant component of this business segment is the
reactivation of activated carbons. Reactivation is a process by
which organic compounds that have been adsorbed by the carbon
are destroyed. The process entails passing the spent activated
carbon through a high temperature furnace. The reactivated
carbon can then be re-used. Our reactivation service includes
handling and transportation of the activated carbon. Another
component of this business segment is various services
associated with the supply of media, such as activated carbon,
ion exchange resins and anthracite, among others and systems for
purification, separation and concentration as well as the supply
of equipment through leasing arrangements.
1
These services are particularly suited for treating fluids at a
customers facility containing hazardous or non-hazardous
organic compounds.
We also provide a perchlorate removal service for groundwater
treatment which utilizes ion exchange resins and equipment. This
service includes feasibility studies, process and equipment
design, assembly and supply of systems with a selected ion
exchange resin, treatment services and major maintenance of
Company owned equipment. We also provide resin exchange service
along with disposal of the spent resins.
We lease 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.
Our purification services 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.
Equipment
segment12% of 2006 net sales
We design and sell equipment which employs activated carbon and
ion exchange resins for purification, separation and
concentration, and proprietary ion exchange technology based
continuous ion exchange units for the purification of many
products in the food, pharmaceutical and biotechnology
industries. We also provide a wide range of odor control
equipment that utilizes catalytic or activated carbon to control
odors at municipal wastewater treatment facilities and pumping
stations.
Our ultraviolet (UV) light equipment is effective for
disinfecting both drinking water and wastewater. In drinking
water, UV light alters the DNA of pathogens, such as
Cryptosporidium and Giardia, making it impossible for them to
reproduce and infect humans. Our drinking water disinfection
product line is designed to protect municipal drinking water
supplies from such pathogens. Our wastewater disinfection
product line is designed to disinfect municipal wastewater. In
addition, UV light is effective in combination with hydrogen
peroxide in destroying many contaminants common in groundwater
remediation applications via our advanced oxidation equipment.
Consumer
segment4% of 2006 net sales
The primary product offered in the Consumer segment is carbon
cloth, which is activated carbon in cloth form. Carbon cloth is
sold to the medical, industrial and military markets.
Activated carbon and carbon cloth are used as the primary raw
material in our consumer home products group. We currently have
two primary product lines that we market to the retail market.
The first product line,
PreZerve®
storage products, uses carbon cloth to protect and preserve
jewelry and keepsakes from deterioration. The second product
line,
AllGonetm,
is an odor elimination system that utilizes activated carbon
discs to adsorb odors and impurities from the air safely and
naturally.
Our principal executive offices are located at 400 Calgon Carbon
Drive, Pittsburgh, PA
15230-0717,
and our telephone number is
(412) 787-6700.
Our website is www.calgoncarbon.com. The information on our
website is not part of this prospectus.
2
Summary
consolidated financial and operating data
The following summary consolidated financial and operating data
as of December 31, 2006 and for the years ended
December 31, 2004, 2005 and 2006 have been derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The following summary consolidated financial
and operating data as of March 31, 2007 and for the three
months ended March 31, 2006 and March 31, 2007 have
been derived from our unaudited condensed consolidated financial
statements incorporated by reference in this prospectus.
In the opinion of management, the unaudited condensed
consolidated financial statements as of March 31, 2007 and
for the three months ended March 31, 2006 and
March 31, 2007 have been prepared on a basis consistent
with the audited consolidated financial statements. In the
opinion of management, such unaudited condensed consolidated
financial statements include all adjustments, which are normal
and recurring adjustments, necessary for a fair presentation of
our financial position and results of operations as of and for
these periods. Operating results for the three months ended
March 31, 2007 are not necessarily indicative of the
results that may be expected for any corresponding interim
period or for the year ending December 31, 2007.
The following summary consolidated financial and operating data
should be read together with, and are qualified by reference to,
our audited Consolidated Financial Statements, including the
accompanying notes, included elsewhere in this prospectus and
Selected Financial Data and Managements
Discussion and Analysis of Financial Condition and Results of
Operations appearing in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and our
unaudited condensed consolidated financial statements, including
the accompanying notes, appearing in our Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2007, which are
incorporated by reference into this prospectus.
3
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Three months
ended March 31,
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Year ended
December 31,
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(unaudited)
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(in thousands,
except per share amounts and ratios)
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2004
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2005
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2006
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2006
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2007
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Income Statement Data:
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Net sales
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$
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295,877
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$
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290,835
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$
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316,122
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$
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76,579
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$
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83,030
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Cost of products sold (excluding
depreciation)
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207,523
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215,330
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236,673
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57,411
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58,424
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Depreciation and amortization
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22,004
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21,042
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18,933
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4,798
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4,261
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Selling, general and administrative
expenses
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54,543
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59,547
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62,003
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14,372
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14,606
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Research and development expenses
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3,801
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4,506
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4,248
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1,197
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828
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(Gain) loss from insurance
settlement
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1,000
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(8,072
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)
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Goodwill impairment charge
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6,940
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Gulf Coast facility impairment
charge
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2,158
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Restructuring charges
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412
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7
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6
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Income (loss) from continuing
operations
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8,006
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(13,160
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)
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(4,610
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)
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(1,205
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)
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4,911
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Interest income
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697
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719
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822
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86
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302
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Interest expense
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(3,409
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)
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(4,891
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)
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(5,977
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)
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(1,574
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)
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(1,450
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Other expense net
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(3,238
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)
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(2,138
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)
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(2,209
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)
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(844
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)
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(403
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)
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Income (loss) from continuing
operations before income taxes, equity in income (loss), and
minority interest
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2,056
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(19,470
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)
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|
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(11,974
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)
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(3,537
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)
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3,360
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Income tax (benefit) provision
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(846
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)
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(9,688
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)
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(2,676
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)
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(345
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)
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2,380
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Income (loss) from continuing
operations before equity in income (loss) and minority interest
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2,902
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(9,782
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)
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(9,298
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)
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(3,192
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)
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980
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Equity in income (loss) of equity
investments
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1,000
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(725
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)
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|
286
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|
|
203
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1,054
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Minority interest
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|
66
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Income (loss) from continuing
operations
|
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3,968
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(10,507
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)
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(9,012
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)
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(2,989
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)
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2,034
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Income from discontinued operations
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1,920
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|
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3,091
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|
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1,214
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|
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1,575
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|
|
|
|
|
|
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Net income (loss)
|
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5,888
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(7,416
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)
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(7,798
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)
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|
|
(1,414
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)
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2,034
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Other comprehensive income (loss),
net of tax provision (benefit) of $(816), $(3,019) and $2,752,
respectively
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3,939
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(9,811
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)
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|
|
9,238
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Comprehensive income (loss) (2006
restated)
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|
$
|
9,827
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$
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(17,227
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)
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|
$
|
1,440
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|
|
|
|
|
|
|
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Basic and diluted earnings per
share:
|
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Income (loss) from continuing
operations
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$
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0.10
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$
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(0.27
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)
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|
$
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(0.23
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)
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|
$
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(0.08
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)
|
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$
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0.05
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Income from discontinued operations
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$
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0.05
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|
|
$
|
0.08
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$
|
0.03
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|
|
$
|
0.04
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|
|
$
|
0.00
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Net income (loss)
|
|
$
|
0.15
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|
|
$
|
(0.19
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)
|
|
$
|
(0.20
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)
|
|
$
|
(0.04
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)
|
|
$
|
0.05
|
|
Weighted average shares outstanding:
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|
|
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Basic
|
|
|
39,054
|
|
|
|
39,615
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|
|
|
39,927
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|
|
|
39,855
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|
|
|
40,225
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|
Diluted
|
|
|
39,456
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|
|
|
39,615
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|
|
|
39,927
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|
|
|
39,855
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|
|
|
42,661
|
|
Other Financial Data:
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Capital expenditures
|
|
$
|
12,413
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|
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$
|
15,996
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|
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$
|
12,855
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|
|
$
|
3,093
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|
|
$
|
1,965
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|
Net cash provided by (used in)
operating activities
|
|
|
20,074
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|
|
|
12,840
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|
|
|
(5,785
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)
|
|
|
(4,129
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)
|
|
|
3,423
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|
Net cash provided by (used in)
investing activities
|
|
|
(46,823
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)
|
|
|
(15,496
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)
|
|
|
14,210
|
|
|
|
16,079
|
|
|
|
(1,818
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)
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Net cash provided by (used in)
financing activities
|
|
|
26,510
|
|
|
|
(1,180
|
)
|
|
|
(8,733
|
)
|
|
|
(12,399
|
)
|
|
|
975
|
|
4
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|
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|
|
|
|
|
|
|
|
|
March 31,
2007
|
|
(In thousands,
except par value and number of shares)
|
|
December 31,
2006
|
|
|
(unaudited)
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,631
|
|
|
$
|
8,898
|
|
Inventories
|
|
|
70,339
|
|
|
|
59,792
|
|
Total assets
|
|
|
322,364
|
|
|
|
323,521
|
|
|
|
|
|
|
|
|
|
|
Total debt (including current
portion of long-term debt):
|
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
|
|
|
|
|
|
|
5.00% Convertible Senior Notes
due 2036(1)
|
|
|
71,911
|
|
|
|
72,056
|
|
Other debt
|
|
|
2,925
|
|
|
|
3,829
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
74,836
|
|
|
|
75,885
|
|
Other liabilities
|
|
|
99,655
|
|
|
|
99,450
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
174,491
|
|
|
$
|
175,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par
value, 5,000,000 shares authorized, no shares issued
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value,
100,000,000 shares authorized, 42,550,290 and
42,550,290 shares issued, respectively(2)
|
|
|
425
|
|
|
|
425
|
|
Additional paid-in capital
|
|
|
70,851
|
|
|
|
71,274
|
|
Retained earnings
|
|
|
94,035
|
|
|
|
91,731
|
|
Accumulated other comprehensive
income
|
|
|
10,305
|
|
|
|
12,067
|
|
Deferred compensation
|
|
|
(506
|
)
|
|
|
|
|
Treasury stock, at cost, 2,819,690
and 2,842,390 shares, respectively
|
|
|
(27,237
|
)
|
|
|
(27,311
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$
|
147,873
|
|
|
$
|
148,186
|
|
|
|
(1) Includes debt discount of $3,089,000 and $2,943,000 as
of December 31, 2006 and March 31, 2007, respectively.
(2) Excludes (i) 1,982,000 and
1,914,150 shares issuable upon exercise of options
outstanding as of December 31, 2006 and March 31,
2007, respectively (having a weighted average exercise price of
$6.69 per share and $6.61 per share,
respectively), under our Employee Stock Option Plan,
(ii) 510,257 and 510,257 shares issuable upon
exercise of options outstanding as of December 31, 2006 and
March 31, 2007, respectively (having a weighted average
exercise price of $7.16 per share and $7.16 per
share, respectively), under our 1993 Non-Employee
Directors Stock Option Plan and (iii) shares issuable
upon conversion of the notes offered hereby.
Ratios of
Earnings to Fixed Charges
Our consolidated ratios of earnings to fixed charges for the
years ended December 31, 2002, 2003, 2004, 2005 and 2006
and for the three months ended March 31, 2007 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31,
|
|
|
March 31,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
Ratios of earnings to fixed
charges(1)
|
|
|
2.29
|
x
|
|
|
1.66
|
x
|
|
|
1.37
|
x
|
|
|
(1.52
|
)x
|
|
|
(0.30
|
)x
|
|
|
2.77
|
x
|
|
|
(1) For purposes of calculating the ratio of earnings to
fixed charges, earnings consist of income from continuing
operations before provision for income taxes plus equity income
plus deferred fixed charges less capitalized interest, and fixed
charges consist of interest expensed and capitalized,
amortization of debt discount and deferred expenses related to
indebtedness, write-off of deferred expenses related to
indebtedness and the portion of rental expenses deemed to be
representative of the interest factor attributable to leases for
rental property. Fixed charges exceeded earnings by
$19.0 million and $12.0 million in 2005 and 2006,
respectively.
5
Risk
factors
The following information describes certain significant risks
and uncertainties inherent in our business. Some of these risks
are described below and in the documents incorporated by
reference in this prospectus, and you should take these risks
into account in evaluating us or any investment decision
involving us or in deciding whether to purchase notes. This
section does not describe all risks applicable to us, our
industry or our business. You should carefully consider such
risks and uncertainties, together with the other information
contained herein and in the documents incorporated herein by
reference, including our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 and our
Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007. If any of such
risks and uncertainties actually occurs, our business, financial
condition or operating results could be harmed substantially and
could differ materially from the plans, projections and other
forward-looking statements included elsewhere herein and in the
section titled Managements Discussion and Analysis
of Financial Condition and Results of Operations in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 and our
Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007.
Risks relating to
our business
Our pension plans
are currently underfunded, and we expect to be subject to
significant increases in pension contributions to our defined
benefit pension plans, thereby restricting our cash
flow.
We sponsor various pension plans in the United States and Europe
that are underfunded and require significant cash payments. We
contributed $2.4 million and $9.2 million to our
U.S. pension plans and $2.1 million and
$2.2 million to our European pension plans in 2005 and
2006, respectively. We currently expect to be required to
contribute approximately $3.2 million to our
U.S. pension plans and approximately $2.3 million to
our European pension plans in 2007. If our cash flow from
operations is insufficient to fund our worldwide pension
liability, we may be forced to reduce or delay capital
expenditures, seek additional capital or restructure or
refinance our indebtedness
The funding status of our pension plans is determined using many
assumptions, such as inflation, investment rates, mortality,
turnover and discount rates, any of which could prove to be
different than projected. If the performance of the assets in
our pension plans does not meet our expectations, or if other
actuarial assumptions are modified, we may be required to
contribute more to our pension plans than we currently expect.
For example, an approximate 25-basis point decline in the
current liability interest rate, which is used under the
Employee Retirement Income Security Act of 1974, or ERISA, for
funding purposes, would increase our minimum required
contribution to our U.S. pension plans by approximately
$0.9 million over the next three years.
Our pension plans in the aggregate are underfunded by
approximately $35 million as of December 31, 2006
(based on the actuarial assumptions used for FAS 87
purposes and comparing our projected benefit obligation to the
fair value of plan assets) and require a certain level of
mandatory contributions as prescribed by law. Our
U.S. pension plans, which are underfunded by approximately
$18 million as of December 31, 2006, are subject to
ERISA. In the event our U.S. pension plans are terminated
for any reason while the plans are less than fully funded, we
will incur a liability to the Pension Benefit Guaranty
Corporation that may be equal
6
to the entire amount of the underfunding at the time of the
termination. In addition, changes in required pension funding
rules that were affected by the enactment of the Pension
Protection Act of 2006 will significantly increase our
funding requirements beginning in 2008, which will have an
adverse effect on our cash flow and could require us to reduce
or delay our capital expenditures, seek additional capital or
restructure or refinance our indebtedness. See Note 14 to
our consolidated financial statements contained in our Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006.
Our financial
results could be adversely affected by an interruption of supply
or an increase in coal prices.
We use bituminous coal as the main raw material in our granular
activated carbon production process. We estimate that coal will
represent approximately 37% of our carbon product costs in 2007.
We have various annual and multi-year contracts in place for the
supply of coal that expire at various intervals from 2007 to
2011. Interruptions in coal supply caused by mine accidents,
labor disputes, transportation delays, or other events for other
than a temporary period could have an adverse effect on our
being able to meet our customer demand. In addition, increases
in the prices we pay for coal under our supply contracts could
adversely affect our financial results by significantly
increasing production costs. During 2006, our aggregate costs
for coal increased by $2.1 million, or 15.6%, compared to
2005. Based upon the estimated usage of coal in 2007, a
hypothetical 10% increase in the price of coal would result in
$1.1 million of additional pre-tax expenses to us.
Historically, we have generally not been able to pass through
raw materials price increases to our customers, and we may in
the future continue to be generally unable to do so.
Our financial
results could be adversely affected by shortages in energy
supply or increases in energy costs.
The prices for and availability of energy resources could be
volatile as they are affected by political and economic
conditions that are outside our control. We utilize natural gas
as a key component in our activated carbon manufacturing process
and have annual and multi-year contracts for the supply of
natural gas at each of our major facilities. If shortages of or
restrictions on the delivery of natural gas occur, production at
our activated carbon facilities would be reduced, which could
result in missed deliveries or lost sales. We also have exposure
to fluctuations in energy costs as they relate to the
transportation and distribution of our products. For example,
natural gas prices have increased significantly in recent years.
We may not be able to pass through natural gas and other fuel
price increases to our customers.
Increases in U.S.
and European imports of Chinese manufactured activated carbon
could have an adverse effect on our financial results.
We historically have faced pressure and competition in our U.S.
and European markets from brokers of low cost imported activated
carbon products, primarily from China. We believe that we offer
the market technically superior products and related customer
support. However, Chinese products have become accepted as
viable alternatives to our products because they frequently have
been sold at less than fair value in the market. As a result, we
have had to deal with significant price compression, which has
contributed to a reduction in both our sales and profitability
in recent years.
7
To combat the low-cost Chinese products, in March 2006, the
Company participated in filing a petition with the U.S.
Department of Commerce (the DOC) requesting the
imposition of antidumping duties on all steam activated carbon
imports from China. That petition was provisionally approved and
duties were imposed beginning in October 2006.
In March 2007, the DOCs decision was supported by the
International Trade Commission (the ITC), which
determined that these unfairly priced steam activated carbon
imports from China caused material injury to the U.S. activated
carbon industry. This affirmative decision by the ITC triggered
the imposition of significant antidumping duties in the form of
cash deposits, ranging from 62% to 228%. The antidumping duties
will be imposed for at least five years but are subject to
periodic review and could be modified within that time frame.
The significant antidumping duties imposed by the DOC and the
affirmative decision by the ITC will have an adverse impact on
the cost of Chinese manufactured activated carbon imported into
the United States. However, the antidumping duties could be
reduced or eliminated in the future, which could adversely
affect demand or pricing for our product.
Our inability to
successfully negotiate new collective bargaining agreements upon
expiration of the existing agreements could have an adverse
effect on our financial results.
We have collective bargaining agreements in place at four of our
production facilities covering approximately 33% of our
full-time workforce as of December 31, 2006. Those
collective bargaining agreements expire from 2007 to 2010. Any
work stoppages as a result of disagreements with any of the
labor unions or our failure to renegotiate any of the contracts
as they expire could disrupt production and significantly
increase product costs as a result of less efficient operations
caused by the resulting need to rely on temporary labor.
We have
operations in multiple foreign countries and, as a result, are
subject to foreign exchange translation risk, which could have
an adverse effect on our financial results.
We conduct significant business operations in several foreign
countries. Of our 2006 net sales, approximately 44% were
sales to countries other than the United States, and
2006 net sales denominated in
non-U.S. dollars
represented approximately 32% of our overall net sales. We
conduct business in the local currencies of each of our foreign
subsidiaries or affiliates. Those local currencies are then
translated into U.S. dollars at the applicable exchange
rates for inclusion in our consolidated financial statements.
The exchange rates between some of these currencies and the
U.S. dollar in recent years have fluctuated significantly
and may continue to do so in the future. Changes in exchange
rates, particularly the strengthening of the U.S. dollar,
could significantly reduce our sales and profitability from
foreign subsidiaries or affiliates from one period to the next
as local currency amounts are translated into fewer
U.S. dollars.
Our European and
Japanese activated carbon businesses are sourced from both the
United States and China, which subjects these businesses to
foreign exchange transaction risk.
Our only production facilities for virgin granular activated
carbon are in the United States and China. Those production
facilities are used to supply all of our global demand for
virgin granular activated carbon. All of our foreign operations
purchase from the U.S. operations in U.S. dollars, yet
sell in local currency, resulting in foreign exchange
transaction risk. We generally execute foreign currency
derivative contracts of not more than one year in duration to
cover a portion of our known or projected foreign currency
exposure. However, those contracts do not protect us from
longer-term trends of a strengthening U.S. dollar, which
could
8
significantly increase our cost of activated carbon delivered to
our European and Japanese markets, and we may not be able to
offset these costs by increasing our prices.
Our business
includes capital equipment sales which could have extreme
fluctuations due to the cyclical nature of that type of
business.
Our Equipment segment represented approximately 12% of our net
sales for 2006. This business generally has a long project life
cycle from bid solicitation to project completion and often
requires customers to make large capital commitments well in
advance of project execution. In addition, this business is
usually affected by the general health of the overall economy.
As a result, sales and earnings from the Equipment segment could
be volatile.
We could find it
difficult to fund the capital needed to complete our growth
strategy due to borrowing restrictions under our current credit
facility.
We are extended credit under our current credit facility,
subject to compliance with certain financial covenants. For
example, our current credit facility contains various
affirmative and negative covenants, including limitations on us
with respect to our ability to pay dividends, make loans, incur
indebtedness, grant liens on our property, engage in certain
mergers and acquisitions, dispose of assets and engage in
certain transactions with our affiliates. Borrowing availability
under our current credit facility is based on the value, from
time to time, of certain of our accounts receivable, inventory
and equipment. As a result, these restrictions may prevent us
from being able to borrow sufficient funds under our current
credit facility to meet our future capital needs, and alternate
financing on terms acceptable to us may not be available.
We had to amend our prior revolving credit facility several
times in order to cure violations or remain compliant as
financial results have declined. Through June 30, 2006, we
were in default of our prior revolving credit facility as a
result of a violation of a financial covenant and were required
to reclassify the borrowings outstanding under our prior
revolving credit facility as short-term debt. During the period
of default, the lenders had the right to accelerate the debt. In
addition, under our current credit facility, we obtained
covenant default waivers to extend the dates upon which audited
financial statements for our fiscal year ended December 31,
2006 and our financial plan information had to be provided to
our lenders due to delays in filing our Annual Report on
Form 10-K. We may have similar issues in the future with
respect to our current revolving credit facility. If our
liquidity remains constrained for more than a temporary period,
we may need to either delay certain strategic growth projects or
access higher cost capital markets in order to fund our
projects, which may adversely affect our financial results.
Our required
capital expenditures may exceed our estimates.
Our capital expenditures were $12.9 million in 2006,
primarily including improvements to our manufacturing
facilities, repair of our Pearl River manufacturing facility as
a result of damage sustained from Hurricane Katrina and
equipment to be utilized in our service business. Of the amount
spent on capital expenditures in 2006, $2.3 million was
funded by insurance proceeds obtained from a settlement with our
insurance carrier related to damage sustained from Hurricane
Katrina. Future capital expenditures may be significantly higher
and may vary substantially if we are required to undertake
certain actions to comply with new regulatory requirements or
compete with new technologies. We may not have the capital to
undertake these capital investments. If we are unable to do so,
we may not be able to effectively compete.
9
Our financial
results could be adversely affected by the continued idling of
one of our reactivation facilities.
In January 2006, we announced the temporary idling of our
reactivation facility in Blue Lake, California. It currently is
our intention to resume operation of the plant in late 2007. If
we conclude that the idling of facility beyond 2007 is
warranted, our financial results may be adversely affected by
the resulting impairment charges of approximately
$1.3 million.
Declines in the
operating performance of one of our business segments could
result in an impairment of the segments
goodwill.
As of March 31, 2007, we had consolidated goodwill of
approximately $27.5 million recorded in our business
segments, primarily from our Activated Carbon and Service and
Equipment segments. We test our goodwill on an annual basis, or
when an indication of possible impairment exists, in order to
determine whether the carrying value of our assets is still
supported by the fair value of the underlying business. To the
extent that it is not, we are required to record an impairment
charge to reduce the asset down to fair value. For the year
ended December 31, 2006, we recorded a $6.9 million impairment
charge associated with our acquisition of our UV equipment
reporting unit, principally as a result of the fourth quarter
decision by the Federal Court of Canada, which found that our
patent for the use of ultraviolet light to prevent infection
from Cryptosporidium in drinking water is invalid. As a result,
our estimate of future royalty income used in determining the
fair value of the reporting unit declined substantially from the
prior year. A decline in the operating performance of any of our
business segments or the sale of a business at an amount less
than book value could result in a goodwill impairment charge
which could have a material effect on our financial results.
Delays in
enactment of new state or federal regulations could restrict our
ability to reach our strategic growth targets and lower our
return on invested capital.
Our strategic growth initiatives are reliant upon more
restrictive environmental regulations being enacted for the
purpose of making water and air cleaner and safer. If stricter
regulations are delayed or are not enacted or enacted but
subsequently repealed or amended to be less strict, or enacted
with prolonged phase-in periods, our sales growth targets could
be adversely affected and our return on investor capital could
be reduced.
For example, stricter regulations surrounding the treatment of
Cryptosporidium and other disease causing microorganisms in
drinking water, as addressed by the EPAs promulgation of
the Long Term 2 Enhanced Surface Water Treatment Rule
(LT2), were expected to be effective as of the
fourth quarter of 2004. LT2 was not ultimately published in the
Federal Register until January 2006, thus delaying
municipalities requirements for testing and any subsequent
need to fund a plan for remediation by over a year. The effect
has been a delay in the timing of the expected growth for our UV
equipment business.
Our industry is
highly competitive. If we are unable to compete effectively with
competitors having greater resources that we do, our financial
results could be adversely affected.
Our activated carbon business faces significant competition from
Norit N.V., MeadWestvaco Corporation and Siemens Water, together
with Chinese producers. Our UV technology products face
significant competition from Trojan Technologies, Inc., which is
owned by Danaher Corporation, and Wedeco Ideal Horizons, which
is owned by ITT Industries. In each case, our
10
competitors include major manufacturers and diversified
companies, a number of which have revenues and capital resources
exceeding ours, which they may use to develop more advanced or
more cost-effective technologies, increase market share or
leverage their distribution networks. We may experience reduced
net sales as a result of having fewer resources than these
competitors.
Encroachment into
our markets by competitive technologies could adversely affect
our financial results.
Activated carbon is utilized in various applications as a cost
effective solution for solving customer problems. If other
competitive technologies, such as membranes, ozone and UV, are
advanced to the stage in which such technologies could
effectively compete with activated carbon technologies, we could
experience a decline in net sales, which could adversely affect
our financial results.
Failure to
innovate new products or applications could adversely affect our
ability to meet our strategic growth targets.
Part of our strategic growth and profitability plans involve the
development of new products or new applications for our current
products in order to replace more mature products or markets
that have seen increased competition. If we are unable to
develop new products or applications, our financial results
could be adversely affected.
A planned or
unplanned shutdown at one of our production facilities could
have an adverse effect on our financial results.
We operate multiple facilities, and source product from
strategic partners who operate facilities, which are close to
water or in areas susceptible to earthquakes. An unplanned
shutdown at any of our or our strategic partners
facilities for more than a temporary period as a result of a
hurricane, typhoon, earthquake or other natural disaster, or as
a result of fire, explosions, war, terrorist activities,
political conflict or other hostilities, could significantly
affect our ability to meet our demand requirements, thereby
resulting in lost sales and profitability in the short-term or
eventual loss of customers in the long-term. In addition, a
prolonged planned shutdown of any of our production facilities
due to a change in business conditions could result in
impairment charges that could have an adverse impact on our
financial results.
A recent example of an unplanned shutdown of one of our
production facilities is the shutdown of our Pearl River
facility in Pearlington, Mississippi due to damage caused by
Hurricane Katrina in August 2005. The plant did not become
operational again until November 2005 and was not operating
again at full capacity until January 2006. Certain customer
shipments were either delayed or cancelled during the plant
outage, the consequences of which adversely affected us during
2006. We estimated our pre-tax business interruption losses
during 2005 and 2006 to be approximately $4.4 million in
the aggregate due to the effect of the unplanned shutdown of the
Pearl River facility.
11
We hold a variety
of patents that give us a competitive advantage in certain
markets. An inability to defend those patents from competitive
attack could have an adverse effect on both current results and
future growth targets.
From time to time in the course of our business, we have to
address competitive challenges to our patented technology. We
are currently in litigation in multiple jurisdictions to defend
our process patent for the use of ultraviolet light in the
prevention of infection from Cryptosporidium and Giardia in
drinking water. In June 2006, the U.S. District Court for
the District of New Jersey granted the plaintiff Wedeco Ideal
Horizons, Inc.s motion for summary judgment, holding that
our patent was invalid. We appealed this ruling. On
April 24, 2007, the U.S. Court of Appeals for the
Federal Circuit affirmed the District Courts judgment that
was appealed. We are currently evaluating our options. In
another case, we filed suit in Canada, alleging that the
defendants are practicing the method claimed in our patent
without a license. In November 2006, the Federal Court of Canada
entered a judgment after trial, finding that our process patent
for the use of ultraviolet light to prevent infection from
Cryptosporidium and Giardia in drinking water is invalid. In
March 2007, we and Trojan Technologies, the defendant, entered
into a settlement whereby, in exchange for a nominal cash
payment and relief of legal fees, we granted Trojan Technologies
worldwide immunity from all current and future legal action
related to our UV patents.
Finally, certain competitors have opposed our process patent for
the use of ultraviolet light in the prevention of infection from
Cryptosporidium and Giardia in drinking water in Germany.
Further descriptions of these cases can be found under the
heading Legal Proceedings in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, which is
incorporated by reference in this prospectus. An unfavorable
outcome in any of these cases could impair our ability to
capitalize on substantial future revenues from the licensing of
that technology.
We have incurred significant legal fees and expenses in
litigating these matters. For example, legal expenses related to
these patent litigation matters totaled approximately
$4.7 million in 2006 and $0.2 million during the three
months ended March 31, 2007. We may be required to incur
additional significant legal expenses to defend our intellectual
property in the future.
Furthermore, these legal disputes over our UV patents may
adversely affect our business and growth prospects because they
may suppress overall demand for UV equipment as municipalities
may decide to wait for the completion of the litigation to
resolve the resulting uncertainties before making investment
decisions.
Our products may
infringe the intellectual property rights of others, which may
cause us to pay unexpected litigation costs or damages or
prevent us from selling our products.
Although it is our intention to avoid infringing or otherwise
violating the intellectual property rights of others, our
products may infringe or otherwise violate the intellectual
property rights of others. We may be subject to legal
proceedings and claims, including claims of alleged infringement
by us of the patents and other intellectual property rights of
third parties. Intellectual property litigation is expensive and
time-consuming, regardless of the merits of any claim.
If we were to discover or be notified that our products
potentially infringe or otherwise violate the intellectual
property rights of others, we may need to obtain licenses from
these parties or substantially re-engineer our products in order
to avoid infringement. We might not be able to obtain the
necessary licenses on acceptable terms, or at all, or be able to
re-engineer our
12
products successfully. Moreover, if we are sued for infringement
and lose the suit, we could be required to pay substantial
damages
and/or be
enjoined from using or selling the infringing products. Any of
the foregoing could cause us to incur significant costs and
prevent us from selling our products.
Environmental
compliance and remediation could result in substantially
increased capital requirements and operating costs.
Our production facilities are subject to environmental laws and
regulations in the jurisdictions in which they operate or
maintain properties. Costs may be incurred in complying with
such laws and regulations. Each of our domestic production
facilities require permits and licenses issued by local, state
and federal regulators which regulate air emissions and water
discharges. These permits are subject to renewal and, in some
circumstances, revocation. International environmental
requirements vary and could have substantially lesser
requirements that may give competitors a competitive advantage.
Additional costs may be incurred if environmental remediation
measures are required. In addition, the discovery of
contamination at any of our current or former sites or at
locations at which we disposed of waste may expose us to cleanup
obligations and other damages. For example, we and the
Pennsylvania Department of Environmental
Protection (PADEP) recently agreed to
settlement terms with respect to a demand by the PADEP for
response costs relating to a site in Allegheny County,
Pennsylvania, requiring us to pay an aggregate of $515,000. We
received a Notice of Violation (NOV) from the U.S.
Environmental Protection Agency in January 2007. If the result
of the NOV is unfavorable for us, it could have a significant
impact on our financial results. If we receive similar demands
in the future, we may incur significant costs in connection with
the resolution of those matters.
Our international
operations expose us to political and economic uncertainties and
risks from abroad, which could negatively affect our results of
operations.
We have manufacturing facilities and sales offices in Europe,
China, Japan and the United Kingdom which are subject to
economic conditions and political factors within the respective
countries which, if changed in a manner adverse to us, could
negatively affect our results of operations and cash flow.
Political factors include, but are not limited to, taxation,
nationalization, inflation, currency fluctuations, increased
regulation and quotas, tariffs and other protectionist measures.
Approximately 85% of our sales in 2006 were generated by
products sold in the United States, Canada and Western Europe,
while the remaining sales were generated in other areas of the
world, such as Asia, Eastern Europe and Latin America.
We face risks in
connection with our compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 and any related remedial measures
that we may undertake.
During 2005 and 2006, we identified and subsequently remediated
two material weaknesses in our internal controls. If we are
unable to effectively remediate any other material weaknesses or
significant deficiencies in internal control over financial
reporting that are identified in the future and to assert that
disclosure controls and procedures, including internal control
over financial reporting, are effective in any future period, we
could lose investor confidence in the accuracy and completeness
of our financial reports, which could have an adverse effect on
our stock price and potentially subject us to litigation. In
addition, we may be required to incur additional costs including
but not limited to the hiring of additional personnel to improve
our existing internal control system.
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We have
significant domestic and foreign net operating tax loss and
credit carryforwards which, if they are not utilized, would have
an adverse effect on our financial results.
As of December 31, 2006, we had $22.9 million of
deferred tax assets associated with net operating loss
carryforwards (NOLs) and tax credit carryforwards
that were generated from both our domestic and foreign
operations. We have a valuation allowance of $5.7 million
for these deferred tax assets when it is deemed more likely than
not that a portion of these deferred tax assets will not be
realized. If we do not meet our projections of profitability in
the future, we may not be able to realize these NOLs or tax
credits, and we may be required to record an additional
valuation allowance, which would adversely affect our financial
results. In addition, if some or all of these NOLs or tax
credits expire, they will not be available to offset our tax
liability.
Our ability to
utilize our NOLs and certain other tax attributes may be
limited.
As of December 31, 2006, we had NOLs of approximately
$20.0 million for federal income tax purposes and
approximately $75.7 million for state income tax purposes.
Under Section 382 of the Internal Revenue Code, if a
corporation undergoes an ownership change, the
corporations ability to use its pre-change NOLs and other
pre-change tax attributes to offset its post-change income may
be limited. An ownership change is generally defined as a
greater than 50% change in its equity ownership by value over a
three-year period. We may experience an ownership change in the
future as a result of subsequent shifts in our stock ownership.
If we were to trigger an ownership change in the future, our
ability to use any NOLs existing at that time could be limited.
Risks related to
the notes and our common stock
Although the
notes are referred to as senior notes, the notes are
effectively junior to the rights of our and our subsidiary
guarantors existing and future secured creditors and
effectively subordinated to the existing and future indebtedness
and other liabilities of our non-guarantor
subsidiaries.
The notes are our general, unsecured senior obligations and rank
equally in right of payment with all of our existing and future
unsecured senior indebtedness and senior in right of payment to
all of our existing and future subordinated indebtedness. The
notes are effectively junior to any of our existing and future
secured indebtedness to the extent of the value of the assets
securing such indebtedness. In addition, the notes are
effectively subordinated to all existing and future liabilities
of our non-guarantor subsidiaries. These liabilities may include
indebtedness, trade payables, guarantees, lease obligations and
letter of credit obligations.
The notes are guaranteed on a senior unsecured basis by certain
of our domestic subsidiaries, which we refer to as the
subsidiary guarantors. The subsidiary guarantees are general
unsecured senior obligations of the subsidiary guarantors and
rank equally in right of payment with any existing and future
senior indebtedness of the subsidiary guarantors. Our
non-guarantor subsidiaries have no obligation to pay any amounts
due on the notes and have no obligation to provide us with funds
for our payment obligations, whether by dividends,
distributions, loans or other payments. Our right to receive any
assets of any of our non-guarantor subsidiaries upon their
liquidation or reorganization, and therefore the right of the
holders of the notes to participate in those assets, is
subordinated to the claims of that subsidiarys creditors,
including trade creditors. In addition, even if we were a
creditor of any of our subsidiaries, our rights as a
14
creditor would be subordinate to any security interest in the
assets of our subsidiaries and any indebtedness of our
subsidiaries senior to that held by us.
Holders of our existing indebtedness have, and future secured
indebtedness will have, claims that are senior to your claims as
holders of the notes, to the extent of the value of the assets
securing such indebtedness. The notes are effectively junior to
existing secured financings and any future secured indebtedness
incurred by us. As a result, in the event of any distribution or
payment of our assets in any bankruptcy, liquidation or
dissolution, holders of secured indebtedness will have prior
claim to those assets that constitute their collateral. Holders
of the notes will participate ratably with all holders of our
unsecured indebtedness that is deemed to be of the same class as
the notes, and potentially with all of our general creditors,
based on the respective amounts owed to each holder or creditor,
in our remaining assets. In any of the foregoing events, we
cannot assure you that there will be sufficient assets to pay
amounts due on the notes. As of March 31, 2007, we and the
subsidiary guarantors had outstanding approximately
$3 million of indebtedness secured by assets and ranking
senior to the notes to the extent of the value of the assets
securing the indebtedness, and our non-guarantor subsidiaries
had approximately $31 million in liabilities.
Federal or state
laws allow courts, under specific circumstances, to void debts,
including subsidiary guarantees, and could require holders of
notes to return payments received from us and the subsidiary
guarantors.
Under federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, if a subsidiary guarantor becomes a
debtor in a case under the U.S. Bankruptcy Code or suffers
other financial difficulty, a court might avoid (that is,
cancel) its guarantee. A court might do so if it found that
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the subsidiary received less than reasonably equivalent value or
fair consideration for the incurrence of such debt or subsidiary
guarantee; and
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when the subsidiary entered into its guarantee (or, in some
jurisdictions, when it became obligated to make payments under
its guarantee), it either:
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was or was rendered insolvent;
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was left with inadequate capital to conduct its business; or
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believed or should have believed that it would incur debts
beyond its ability to pay such debts as they mature.
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A court might also avoid a subsidiarys guarantee, without
regard to these factors, if it found that the subsidiary entered
into its guarantee with actual intent to hinder, delay or
defraud its creditors.
The measure of insolvency for purposes of these fraudulent
transfer laws will vary depending upon the law applied in any
proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, a court would consider an entity
insolvent if:
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the sum of its debts, including contingent liabilities, was
greater than the fair salable value of all of its assets;
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the present fair salable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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We cannot be sure as to the standards that a court would use to
determine whether or not the subsidiary guarantors were solvent
at the relevant time, or, regardless of the standard that the
court uses, that the issuance of the subsidiary guarantees would
not be voided or subordinated to the subsidiary guarantors
other debt.
If the subsidiary guarantees were legally challenged, they could
also be subject to the claim that, since they were incurred for
our benefit, and only indirectly for the benefit of the
subsidiary guarantors, the obligations of the subsidiary
guarantors were incurred for less than fair consideration.
A court could thus void the obligations under the subsidiary
guarantees or subordinate the subsidiary guarantees to the
subsidiary guarantors other debt or take other action
detrimental to holders of the notes.
We may not have
sufficient funds necessary to settle conversion of the notes or
to purchase the notes upon a fundamental change or other
purchase date, and our future debt may contain limitations on
our ability to pay cash upon conversion or repurchase of the
notes.
Upon conversion of the notes, we will be required to pay a
settlement amount in cash and shares of our common stock, if
any, based upon a 25 trading-day observation period. In
addition, on August 15, 2011, August 15, 2016 and
August 15, 2026, holders of the notes may require us to
purchase their notes for cash. Holders may also require us to
purchase their notes upon a fundamental change, as described
under Description of notesFundamental change permits
holders to require us to purchase notes. A fundamental
change may also constitute an event of default, and result in
the effective acceleration of the maturity of our then-existing
indebtedness under our existing revolving credit facility or
other indebtedness we have may in the future, including under
our new revolving credit facility.
Further, we cannot assure you that we would have sufficient
financial resources, or would be able to arrange financing, to
pay the settlement amount in cash, or the purchase price or
fundamental change purchase price for the notes tendered by the
holders in cash. Our ability to pay the settlement amount in
cash, or the purchase price or fundamental change purchase price
for the notes in cash, will be subject to limitations we may
have in our credit facilities, or any other indebtedness we may
have in the future. If you convert your notes or require us to
purchase them, we may seek the consent of our lenders or attempt
to refinance our debt, but there can be no assurance that we
will be able to do so.
At March 31, 2007, the conversion option described under
Description of notesConversion
rightsConversion upon satisfaction of sale price
condition was triggered based on the trading price of our
common stock during the last 30 trading days of the quarter
ended March 31, 2007. As such, holders of notes have the
right to convert their notes during the quarter ending
June 30, 2007. On May 29, 2007, we amended our credit
agreement to include a provision whereby we may pay up to an
aggregate of $10 million in cash to (i) repurchase,
redeem, retire or otherwise acquire shares of our common stock
or (ii) settle the conversion of notes under certain
circumstances without such payments constituting an event of
default under the credit agreement. As of the date of this
prospectus, no such payments have been made. As a result, a
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portion of the aggregate principal amount of outstanding notes
above this $10 million amount was classified as current
debt.
Failure by us to pay the settlement amount upon conversion or
purchase the notes when required will result in an event of
default with respect to the notes, which may also result in a
default under existing and future agreements governing our
indebtedness. If the repayment of such indebtedness were to be
accelerated after any applicable notice or grace periods, we may
not have sufficient funds to repay such indebtedness and the
notes.
The conditional
conversion feature of the notes until June 15, 2011 could
result in your receiving less than the value of our common stock
into which a note would otherwise be convertible and may impact
the trading price of the notes and make them more difficult to
resell.
Prior to June 15, 2011, the notes are convertible into cash
and shares of our common stock, if applicable, only if specified
conditions are met. If the specific conditions for conversion
are not met, you will not be able to convert your notes, and you
may not be able to receive the value of the cash and common
stock into which the notes would otherwise be convertible. In
addition, an inability to convert may adversely affect the
trading price of the notes
and/or the
resaleability of the notes.
The value of
consideration received by holders upon conversion of the notes
may be less than the conversion value of the notes on the
conversion date.
Upon conversion, we will pay cash and deliver shares of our
common stock, if any, based on a daily conversion value
calculated on a proportionate basis for each day of the 25
trading day observation period. Accordingly, upon conversion of
a note, you may receive less proceeds than you expected because
the value of our common stock may decline between the conversion
date and the day the settlement amount of your notes is
determined. In addition, because of the 25 trading day
observation period, settlement will generally be delayed until
at least the 30th trading day following the related
conversion date. See Description of notesConversion
rightsSettlement upon conversion.
Under certain
circumstances, upon conversion you will not receive the
settlement amount until after maturity.
If you convert after the 30th trading day immediately
preceding the maturity date, you will not receive the settlement
amount until after the maturity date. In addition, if you
convert on or prior to the 30th trading day immediately
preceding the maturity date, you may not receive the settlement
amount until after the maturity date, depending on whether a
market disruption event occurs on one or more trading days
during the 25 trading day observation period.
The notes do not
restrict our ability to take certain actions that could
adversely affect the trading price of the notes.
Neither we nor our subsidiaries are restricted under the notes
from incurring additional debt (including secured debt),
incurring liens, paying dividends, issuing or repurchasing
securities or entering into transactions with our affiliates. In
addition, the indenture governing the notes does not require us
to achieve or maintain any minimum financial results relating to
our financial position or results of operations. Our ability to
recapitalize, incur additional debt and
17
take other actions that are not limited by the notes could have
the effect of diminishing our ability to make payments on the
notes when due.
We may issue
additional shares of our common stock or other equity and
thereby adversely affect the market price of our common stock
and the trading price of the notes.
Except as described under Plan of Distribution, we
are not restricted from issuing additional shares of our common
stock, or securities convertible into or exchangeable for our
common stock, during the life of the notes and have no
obligation to consider your interests for any reason. If we
issue additional shares of our common stock or such convertible
or exchangeable securities, it may adversely affect the market
price of our common stock and, in turn, the trading price of the
notes. In addition, it may impair our ability to raise capital
through the sale of additional equity securities.
The trading price
of the notes could be adversely affected by the market price of
our common stock, which has historically experienced significant
volatility.
Because the notes are convertible based on our common stock, we
expect that in general the trading price of the notes will be
significantly affected by the market price of our common stock.
The market price of our common stock has historically
experienced significant fluctuations. The market price of our
common stock is likely to continue to be volatile and subject to
significant price and volume fluctuations in response to market
and other factors, including the other risk factors discussed
elsewhere in Risk factors and Forward-looking
statements. Volatility or depressed market prices of our
common stock could result in volatility or depressed trading
prices of the notes, could limit the amount of cash and shares
of our common stock, if any, deliverable upon conversion of the
notes, and could make it difficult for you to resell the notes
(or shares of common stock, if any, issued upon conversion) when
you want or at attractive prices.
The adjustments
to the conversion rate do not cover all dilutive events that may
adversely affect the trading price of the notes.
The conversion rate is subject to adjustment for certain events,
including, but not limited to, the issuance of stock dividends
on our common stock, the issuance of certain rights or warrants,
subdivisions, combinations, distributions of capital stock,
indebtedness, or assets, cash dividends and certain issuer
tender or exchange offers as described under Description
of notes Conversion rightsConversion rate
adjustments. However, the conversion rate will not be
adjusted for certain other events, such as an issuance of common
stock for cash or in connection with acquisition, that may
adversely affect the market price of our common stock. If any of
these other events adversely affects the market price of our
common stock, it may also adversely affect the trading price of
the notes.
Because your
right to require purchase of the notes upon a fundamental change
is limited, the trading price of the notes may decline if we
enter into a transaction that does not constitute a fundamental
change under the indenture.
Upon the occurrence of a fundamental change (as defined under
Description of notesFundamental change permits
holders to require us to purchase notes), you have the
right to require us to purchase your notes. However, the
fundamental change provisions will not afford protection to
holders of notes in the event of certain transactions. For
example, transactions
18
such as leveraged recapitalizations, refinancings,
restructurings, or acquisitions initiated by us may not
constitute a fundamental change requiring us to purchase the
notes. In the event of any such transaction, the holders would
not have the right to require us to purchase the notes, even
though each of these transactions could increase the amount of
our indebtedness, or otherwise adversely affect our capital
structure or any credit ratings, thereby adversely affecting the
trading price of the notes.
The adjustment to
the conversion rate for notes converted in connection with a
specified corporate transaction may not adequately compensate
you.
If a specified corporate transaction that constitutes certain
fundamental changes occurs prior to August 15, 2011 with
respect to notes converted in connection with such transaction,
we will increase the conversion rate by a number of additional
shares of our common stock unless the price paid per share of
our common stock in such transaction is less than $4.25 per
share (subject to adjustment) or above $17.25 (subject to
adjustment). A description of how the increase in the conversion
rate will be determined is set forth under Description of
notesConversion RightsAdjustments to shares
delivered upon conversion upon certain fundamental changes.
Although the increase in the conversion rate is designed to
compensate you for the lost value of your notes as a result of
such transaction, it may not adequately compensate you for such
loss. Furthermore, our obligation to increase the conversion
rate in connection with any such specified corporate transaction
could be considered a penalty, in which case the enforceability
thereof would be subject to general principles of reasonableness
of economic remedies.
There is
currently no public market for the notes, and an active trading
market may not develop for the notes. The failure of a market to
develop for the notes could adversely affect the liquidity and
value of your notes.
We originally sold the notes to a limited number of investors in
a private offering in reliance on an exemption from registration
under U.S. federal and applicable state securities laws, and we
are now registering the notes, the related guarantees and the
common stock issuable upon conversion of the notes for resale by
the selling securityholders. There is no public market for the
notes. We do not intend to apply for listing of the notes on any
securities exchange or for quotation of the notes on any
automated dealer quotation system. Although the notes originally
issued in the private offering are eligible for trading in The
PORTALsm
Market, the notes sold pursuant to this prospectus will no
longer be eligible for trading in The
PORTALsm
Market. Despite our registering the notes for resale under the
Securities Act, a market may not develop for the notes, and
there can be no assurance as to the liquidity of any market that
may develop for the notes once the securityholders are able to
freely resell the notes. If an active, liquid market does not
develop for the notes, the market price and liquidity of the
notes may be adversely affected. If any of the notes are traded,
they may trade at a discount from their initial offering price.
The liquidity of the trading market, if any, and future trading
prices of the notes will depend on many factors, including,
among other things, the market price of our common stock,
prevailing interest rates, our operating results, financial
performance and prospects, the market for similar securities and
the overall securities market, and may be adversely affected by
unfavorable changes in these factors. Historically, the market
for convertible debt securities has been subject to disruptions
that have caused volatility in prices. It is possible that the
market for the notes
19
will be subject to disruptions which may have a negative effect
on the holders of the notes, regardless of our operating
results, financial performance or prospects.
If we pay a cash
dividend on our common stock, you may be deemed to have received
a taxable dividend without the receipt of any cash.
If we pay a cash dividend on our common stock, an adjustment to
the conversion rate may result, and you may be deemed to have
received a taxable dividend subject to United States federal
income tax without the receipt of any cash. If you are a
non-U.S. holder
(as defined in Material U.S. federal income and
estate tax consequences), such deemed dividend may be
subject to U.S. federal withholding tax at a 30% rate or
such lower rate as may be specified by an applicable treaty. See
Material U.S. federal income and estate tax
consequences.
If you hold
notes, you will not be entitled to any rights with respect to
our common stock, but you will be subject to all changes made
with respect to our common stock.
If you hold notes, you will not be entitled to any rights with
respect to our common stock (including, without limitation,
voting rights and rights to receive any dividends or other
distributions on our common stock), but you will be subject to
all changes affecting our common stock. You will only have
rights with respect to our common stock if and when we deliver
shares of our common stock to you upon conversion of your notes,
and, to a limited extent, under the conversion rate adjustments
applicable to the notes. For example, in the event that an
amendment is proposed to our certificate of incorporation or
bylaws requiring stockholder approval and the record date for
determining the stockholders of record entitled to vote on the
amendment occurs prior to delivery of common stock to you, you
will not be entitled to vote on the amendment, although you will
nevertheless be subject to any changes in the powers or rights
of our common stock.
The fundamental
change provisions may delay or prevent an otherwise beneficial
takeover attempt of our company.
The fundamental change provisions, including the fundamental
change purchase right and the provisions requiring an increase
in the conversion rate for conversions in connection with
certain fundamental changes, may in certain circumstances delay
or prevent a takeover of our company and the removal of
incumbent management that might otherwise be beneficial to
investors.
Our stockholder
rights plan and our certificate of incorporation and bylaws and
Delaware law contain provisions that may delay or prevent an
otherwise beneficial takeover attempt of our company.
Our stockholder rights plan and certain provisions of our
certificate of incorporation and bylaws and Delaware law could
make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders. These include
provisions:
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providing for a board of directors with staggered, three-year
terms;
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requiring super-majority voting to affect certain amendments to
our certificate of incorporation and bylaws;
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limiting the persons who may call special stockholders
meetings;
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limiting stockholder action by written consent;
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establishing advance notice requirements for nominations for
election to the board of directors or for proposing matters that
can be acted upon at stockholders meetings; and
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allowing our board of directors to issue shares of preferred
stock without stockholder approval.
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These provisions, along or in combination with each other, may
discourage transactions involving actual or potential changes of
control, including transactions that otherwise could involve
payment of a premium over prevailing market prices to holders of
our common stock, or could limit the ability of our stockholders
to approve transactions that they may deem to be in their best
interests.
An adverse rating
of the notes may adversely affect the trading price of the
notes.
We do not intend to seek a rating on the notes. However, if the
notes are rated in the future and one or more rating agencies
assigns the notes a rating lower than the rating expected by
investors, or reduces their rating in the future, the trading
price of the notes and our common stock could be adversely
affected.
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Forward-looking
statements
This prospectus includes or incorporates by reference certain
forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act of 1934, as amended (the
Exchange Act). These statements include statements
regarding our plans, goals or current expectations with respect
to, among other things:
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our future operating performance;
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operating cash flows and availability of capital;
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the completion of future acquisitions;
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capital expenditures;
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business trends in our industry, including customer demand,
interest rates and changes in industry-wide inventory
levels; and
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availability of financing for inventory and working capital.
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Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results
may differ materially from anticipated results in the
forward-looking statements for a number of reasons, including:
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the future worldwide economic environment, including interest
rates and the prices of natural gas and coal, may affect the
demand for our product and services;
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adverse international developments such as war, terrorism,
political conflicts or other hostilities may adversely affect
the demand for our products and services;
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the future regulatory environment, unexpected litigation or
adverse legislation, including changes in worldwide
environmental and drinking water regulations, may impose
additional costs on us or otherwise adversely affect us;
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our operations may not perform at expected levels or achieve
expected improvements;
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we may fail to achieve expected future cost savings, or future
costs may be higher than we expect;
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available capital resources and various debt agreements may
limit our ability to complete acquisitions or complete capital
expenditure projects;
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our cost of financing could increase significantly;
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new accounting standards could materially impact our reported
financial results;
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we may be unable to complete acquisitions in the future;
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we may not be able to adjust our cost structure to offset any
reduction in the demand for our products and services;
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we may lose key personnel and not be able to replace them in a
timely fashion, or at all;
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competitors may gain market share; and
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insurance costs could increase significantly and all of our
losses may not be covered by insurance.
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The information contained in this prospectus, including the
information set forth under the heading Risk
factors, identifies factors that could affect our
operating results and performance. We urge you to carefully
consider those factors and other factors described from time to
time in our public reports, which are available as described
under the heading Available Information.
All forward-looking statements attributable to us are qualified
in their entirety by this cautionary statement. We undertake no
responsibility to update our forward-looking statements.
Use of
proceeds
We will not receive any proceeds from any sale by any selling
securityholder of the notes, including the related guarantees,
or the shares of common stock issuable upon conversion of the
notes that are covered by this prospectus.
Description of
certain indebtedness
Revolving credit
facility
General
Concurrently with the issuance of the notes, we and certain of
our subsidiaries entered into a new senior secured revolving
credit facility with a five-year term. This revolving credit
facility, the material terms of which are described below,
initially was a $50 million facility and includes a
separate U.K. sub-facility and a separate Belgian sub-facility.
In February 2007, the total revolving credit commitment was
increased to $55 million. Our prior revolving credit
facility was repaid concurrently with the issuance of the notes
and the closing of the new revolving credit facility.
We filed the credit agreement evidencing the new revolving
credit facility and an amendment to the credit agreement with
the SEC after they were executed in accordance with applicable
SEC rules. You should refer to that credit agreement and that
amendment for the definitive terms of the revolving credit
facility. To the extent that the terms contained in that credit
agreement and that amendment are inconsistent with the terms of
the revolving credit facility described in this prospectus, the
terms set forth in the credit agreement and the amendment as
filed with the SEC will govern the revolving credit facility.
You may obtain a copy of this credit agreement and this
amendment by the means described under Available
information.
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Co-borrower
Calgon Carbon Investments, Inc., one of our domestic
subsidiaries, is a co-borrower under the revolving credit
facility with respect to domestic borrowings.
Guarantors
Certain of our domestic subsidiaries unconditionally guarantee
all indebtedness and obligations related to domestic borrowings
under the revolving credit facility and borrowings under the
Belgian sub-facility. Calgon Carbon Corporation and certain of
our domestic subsidiaries also unconditionally guarantee all
indebtedness and obligations under the U.K. sub-facility.
U.K.
sub-facility
Chemviron Carbon Ltd., Waterlink UK Holdings Ltd., Sutcliffe
Speakman Ltd., Lakeland Processing Ltd. and Charcoal Cloth
International Ltd., five of our U.K. subsidiaries, are borrowers
under the U.K. sub-facility and unconditionally guarantee all
indebtedness and obligations under the U.K. sub-facility.
Collateral
Domestic borrowings, as well as the obligations of Calgon Carbon
Corporation and certain of our domestic subsidiaries as
guarantors, are secured by a first perfected security interest
in substantially all of our assets, with limitations in certain
circumstances in the case of capital stock of foreign
subsidiaries and certain real property. Borrowings under the
U.K. sub-facility are secured by a first perfected security
interest in substantially all of our U.K. assets.
Borrowing
availability
Availability for domestic borrowings under the revolving credit
facility is based upon the value of eligible accounts
receivable, eligible inventory and eligible equipment. Domestic
borrowings initially were subject to a $50 million
borrowing limit, which was increased to $55 million. The
U.K. sub-facility is subject to a $12 million sub-limit,
with availability based on the value of eligible U.K. accounts
receivable and eligible U.K. inventory. The borrowing base for
the Belgian sub-facility is subject to a $6 million
sub-limit, with availability based on the value of eligible
Belgian accounts receivable. In each case, the borrowing base
may be reduced by the amount of reserves established by the
administrative agent or J.P. Morgan Europe Limited, the
European administrative agent under the revolving credit
facility, as applicable, in its discretion. Availability under
the revolving credit facility is conditioned upon the
satisfaction of various customary conditions precedent.
Letters of
credit
We are able to issue up to $20 million of letters of credit
under the revolving credit facility.
Sub-limits
for letters of credit under the U.K. sub-facility and the
Belgian sub-facility are $2.0 million and
$6.0 million, respectively.
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Interest
rates
Domestic borrowings under the revolving credit facility bear
interest, at our option, at an annual rate equal to (i) the
greater of (A) the prime rate or (B) the federal funds
rate plus 0.50%, in either case plus a margin of 0.50% if the
average monthly domestic borrowing availability is less than
$15.0 million, or (ii) at rate based on LIBOR, plus a
margin ranging from 1.25% to 2.25%, based on the average monthly
domestic borrowing availability.
Non-U.S. borrowings
bear interest at a rate based on LIBOR or EURIBOR, plus a margin
ranging from 1.25% to 2.25%, based on the average monthly
domestic borrowing availability.
Voluntary
prepayments
We are permitted to voluntarily prepay amounts outstanding under
the new revolving credit facility, in whole or in part, without
premium or penalty, upon prior written notice.
Covenants
The revolving credit facility contains customary affirmative and
negative covenants for credit facilities of this type, including
limitations on our ability to, among other things:
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incur additional indebtedness, subject to certain exceptions,
such as indebtedness in an aggregate principal amount not
exceeding $5 million to finance capital expenditures,
unsecured indebtedness in an aggregate principal amount not
exceeding $5 million at any given time and indebtedness in
respect of the notes;
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incur additional liens, subject to certain exceptions, such as
liens on fixed or capital assets under certain circumstances;
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engage in mergers or consolidations where we are not the
surviving entity, or to liquidate or dissolve;
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engage in new businesses;
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make additional investments, loans, advances, or guarantees,
subject to certain exceptions and amount limitations;
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sell, transfer, lease or dispose of any assets, subject to
certain exceptions, such certain sales in the ordinary course of
business and certain dispositions;
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engage in sale and leaseback transactions;
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enter into swap agreements, subject to certain exceptions;
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declare or pay cash dividends or make other restricted payments,
subject to certain exceptions, such as dividends declared and
paid by our subsidiaries, cash dividends paid by us in an amount
not to exceed $6.0 million in the aggregate during any
fiscal year if certain conditions are met and restricted
payments pursuant to stock compensation or other benefit plans;
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enter into transactions with our affiliates, subject to certain
exceptions, such as transactions in the ordinary course of
business on arms-length terms; and
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amend or waive rights under our certificate of incorporation or
by-laws, the documentation governing any material indebtedness
or the indenture governing the
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notes if any such amendment or waiver would be adverse to the
lenders under the revolving credit facility.
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The revolving credit facility also contains a minimum fixed
charge coverage ratio requirement that requires that our fixed
charge coverage ratio be not less than 1.10 to 1.00, on a
rolling four-quarters basis, commencing with the last day of the
fiscal quarter during which availability for domestic borrowing
under the revolving credit facility for the first time is less
than $11.0 million.
Events of
default
The revolving credit facility provides for customary events of
default in credit facilities of this type, including:
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failure to pay any amount under the new revolving credit
facility when such amount becomes due and payable;
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material breach of the representations or warranties made in
connection with the credit agreement evidencing the revolving
credit facility;
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failure to observe or perform any covenant contained in the
credit agreement evidencing the revolving credit facility;
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failure to make any payment in respect of any material
indebtedness when such amount becomes due and payable;
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the occurrence of an event enabling or permitting the
acceleration of the scheduled maturity of any material
indebtedness; provided that we may pay up to an aggregate of $10
million in cash to (i) repurchase, redeem, retire or
otherwise acquire shares of our common stock or (ii) settle
the conversion of notes under certain circumstances without such
payments constituting an event of default under our revolving
credit facility.
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events of bankruptcy, whether voluntary or involuntary;
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entry of one or more judgments against us for the payment of
money in an aggregate amount in excess of $2.5 million
where the one or more judgments remain undischarged for a period
of 30 consecutive days during which execution is not
effectively stayed;
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a change of control, as defined in the credit agreement
evidencing the revolving credit facility;
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any guaranty under the revolving credit facility fails to remain
in full force or effect or any action is taken to discontinue or
assert the invalidity or unenforceability of any such guaranty;
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any collateral document related to the revolving credit facility
fails to create a valid and perfected first priority security
interest in any collateral purported to be covered by such
collateral document;
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any event or condition occurs which, in the reasonable judgment
of the administrative agent, would reasonably be expected to
have a material adverse effect on us; and
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the occurrence of any fundamental change described
in this prospectus under Description of
notesFundamental change permits holders to require us to
purchase notes.
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Fees
We pay a monthly commitment fee equal to 0.375% per annum
on the average daily unused portion of the maximum commitment
amount under the revolving credit facility. We also pay a
participation fee of a percentage of the face amount of each
letter of credit issued, with the percentage ranging from 1.25%
to 2.25% based on the average monthly domestic borrowing
availability, and a fronting fee equal to 0.125% of the face
amount of each letter of credit issued.
Industrial
revenue bonds
We owed $2.9 million at March 31, 2007 under
Mississippi Industrial Revenue Bonds, which bear interest at a
variable rate and mature in May 2009. The interest rate under
these bonds as of March 31, 2007 was 3.77%. These bonds
were issued to finance certain equipment acquisitions at our
Pearl River, Mississippi plant. We were in compliance with all
relevant covenants contained in our debt agreements relating to
these bonds as of March 31, 2007.
Belgian credit
facility
We maintain a Belgian credit facility totaling 4.0 million
Euros which is secured by a U.S. letter of credit provided under
our revolving credit facility. There are no financial covenants,
and we had no outstanding borrowings under the Belgian credit
facility as of March 31, 2007. Bank guarantees of
2.8 million Euros were issued as of March 31, 2007.
The maturity date of this facility is December 15, 2007.
Availability under this facility was 1.2 million Euros at
March 31, 2007.
U.K. credit
facilities
We maintain a U.K. unsecured overdraft facility totaling 200,000
British Pounds Sterling. There are no financial covenants, and
we had no outstanding borrowings under this overdraft facility
at March 31, 2007. This facility is reviewed annually. The
bank, in its sole discretion, may cancel at any time its
commitment to provide this facility. We also maintain a U.K.
unsecured bonds, guarantees and indemnities facility totaling
662,000 British Pounds Sterling. The bank, in its sole
discretion, may cancel at any time its commitment to provide
this facility. This facility was fully utilized at
March 31, 2007.
China credit
facility
We maintain a Chinese credit facility totaling 11.0 million
RMB which is secured by a U.S. letter of credit provided under
our revolving credit facility. There are no financial covenants,
and we had 7.0 million RMB, or $0.9 million, of
outstanding borrowings under this credit facility as of
March 31, 2007. Availability under this facility was
4.0 million RMB at March 31, 2007. The maturity date
of this facility is December 31, 2007.
27
Description of
notes
On August 18, 2006, we issued $75.0 million aggregate
principal amount of notes in a private offering. As of the date
of this prospectus, the aggregate principal amount of notes
outstanding is $75.0 million. We issued the notes under an
indenture dated as of August 18, 2006 (the
indenture) between us and The Bank of New York, as
trustee (the trustee). The terms of the notes
include those expressly set forth in the indenture and those
made part of the indenture by reference to the
Trust Indenture Act of 1939, as amended (the Trust
Indenture Act).
You may request a copy of the indenture from us by the means
described under Available information.
The following description is a summary of the material
provisions of the notes, the subsidiary guarantees and the
indenture and does not purport to be complete. This summary is
subject to and is qualified by reference to all the provisions
of the notes and the indenture, including the definitions of
certain terms used in the indenture. We urge you to read the
indenture because it, and not this description, defines your
rights as a holder of the notes.
For purposes of this description, references to we,
our and us refer only to Calgon Carbon
Corporation and not to its subsidiaries.
Certain of our domestic subsidiaries guarantee the notes and
therefore are subject to many of the provisions contained in
this Description of notes. We refer to these
subsidiaries as the subsidiary guarantors.
General
The notes
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are limited to an aggregate principal amount of $75,000,000;
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bear interest at a rate of 5.00% per year, payable
semi-annually in arrears, on February 15 and August 15 of each
year, commencing on February 15, 2007;
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are subject to redemption by us, at our option, on and after
August 20, 2011, at a redemption price, payable in cash,
equal to 100% of the principal amount of the notes, plus accrued
and unpaid interest and additional interest, if any, to, but not
including, the redemption date;
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are subject to purchase by us, at your option, if a fundamental
change (as defined under Fundamental change permits
holders to require us to purchase notes) occurs, or on
each of August 15, 2011, August 15, 2016 and
August 15, 2026, in each case at a purchase price, payable
in cash, equal to 100% of the principal amount of the notes,
plus accrued and unpaid interest and additional interest, if
any, to, but not including, the purchase date;
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mature on August 15, 2036 unless earlier converted,
redeemed or repurchased;
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are our direct, unsecured and senior obligations and rank
equally in right of payment with all of our existing and future
senior indebtedness and senior in right of payment to all of our
existing and future subordinated indebtedness;
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are unconditionally guaranteed by certain of our domestic
subsidiaries on a senior unsecured basis; and
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are issued in denominations of $1,000 and multiples of $1,000
and are represented by one or more registered notes in global
form, but in certain limited circumstances may be represented by
notes in definitive form.
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Prior to June 15, 2011, subject to fulfillment of certain
conditions and during the periods described below, and on or
after June 15, 2011, at any time prior to 5:00 p.m.,
New York City time, on the business day immediately preceding
the maturity date, the notes may be converted at an initial
conversion rate of 196.0784 shares of common stock per
$1,000 principal amount of notes (equivalent to an initial
conversion price of approximately $5.10 per share of common
stock). The conversion rate is subject to adjustment if certain
events occur. Upon conversion of a note, we will pay cash and
shares of common stock, if any, based upon a daily conversion
value calculated on a proportionate basis for each trading day
in the 25 trading-day observation period as described below
under Conversion rightsSettlement upon
conversion. You will not receive any separate cash payment
for interest or additional interest, if any, accrued and unpaid
to the conversion date except under the limited circumstances
described below.
The indenture does not limit the amount of debt which may be
issued by us or our subsidiaries under the indenture or
otherwise. In addition, the indenture does not limit us or any
of our subsidiaries from paying dividends or issuing or
repurchasing our securities, as such activities result in an
adjustment to the conversion ratio. Other than restrictions
described under Fundamental change permits holders to
require us to purchase notes and Consolidation,
merger and sale of assets below and except for the
provisions set forth under Conversion
rightsConversion rate adjustmentsAdjustment to
shares delivered upon conversion upon certain fundamental
changes, the indenture does not contain any covenants or
other provisions designed to afford holders of the notes
protection in the event of a highly leveraged transaction
involving us or in the event of a decline in any credit rating
that may have been assigned to the notes as the result of a
takeover, recapitalization, highly leveraged transaction or
similar restructuring involving us that could adversely affect
such holders.
We may from time to time repurchase notes in open market
purchases or negotiated transactions without prior notice to
holders.
We do not intend to list the notes on a national securities
exchange or interdealer quotation system.
Payments on the
notes; paying agent and registrar; transfer and
exchange
We will pay principal of and interest and additional interest,
if any, on notes in global form registered in the name of or
held by The Depository Trust Company (DTC) or its
nominee in immediately available funds to DTC or its nominee, as
the case may be, as the registered holder of such global note.
We will pay principal of certificated notes at the office or
agency designated by us for that purpose in New York City. We
have initially designated The Bank of New York as our paying
agent and registrar and its agency in New York City as a place
where notes may be presented for payment or for registration of
transfer. We may, however, change the paying agent or registrar
without prior notice to the holders of the notes, and we may act
as paying agent or registrar. Interest and additional interest,
if any, on certificated notes will be payable to holders having
an aggregate principal amount of:
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$5,000,000 or less, by check mailed to the holders of these
notes; and
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more than $5,000,000, either by check mailed to each holder or,
upon application by a holder to the registrar not later than the
relevant record date, by wire transfer in immediately available
funds to that holders account within the United States,
which application shall remain in effect until the holder
notifies, in writing, the registrar to the contrary.
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A holder of notes may transfer or exchange notes at the office
of the registrar in accordance with the indenture. The registrar
and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents. No
service charge will be imposed by us, the trustee or the
registrar for any registration of transfer or exchange of notes,
but we may require a holder to pay a sum sufficient to cover any
transfer tax or other similar governmental charge required by
law or permitted by the indenture. We are not required to
transfer or exchange any note selected for redemption or
surrendered for conversion. Also, we are not required to
register any transfer or exchange of any note for a period of 15
calendar days before the mailing of a notice of redemption.
The registered holder of a note will be treated as the owner of
it for all purposes.
Interest
The notes bear interest at a rate of 5.00% per year.
Interest on the notes accrues from August 18, 2006.
Interest is payable semiannually in arrears on February 15 and
August 15 of each year, beginning February 15, 2007.
Interest is paid to the person in whose name a note is
registered at 5:00 p.m., New York City time, on February 1
or August 1, as the case may be, immediately preceding the
relevant interest payment date; provided, however, that interest
will be paid on the maturity date only to the person to whom we
pay the principal amount. If a payment date is not a business
day, payment will be made on the next succeeding business day
and no additional interest will accrue thereon.
Business day means each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which the banking
institutions in New York City are authorized or obligated by law
or executive order to close or be closed.
Interest on the notes is computed on the basis of a
360-day year
composed of twelve
30-day
months and for any period other than a full interest period is
computed on the basis of the actual number of days elapsed
during the period and a
365-day year.
To the extent lawful, payments of principal or interest
(including additional interest, if any) on the notes that are
not made when due will accrue interest at the annual rate of 1%
above the then applicable interest rate from the required
payment date.
Ranking
The notes are our general, unsecured obligations that rank
equally in right of payment with all of our existing and future
senior indebtedness and senior in right of payment to all of our
existing and future subordinated indebtedness. The notes are
effectively junior to all of our existing and future secured
indebtedness to the extent of the value of the assets securing
such indebtedness.
The notes are guaranteed by the subsidiary guarantors on a
senior unsecured basis. The subsidiary guarantees are general
unsecured senior obligations of the subsidiary guarantors and
rank equally in right of payment with any existing or future
senior indebtedness of the
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subsidiary guarantors. The subsidiary guarantees are effectively
junior to any of the subsidiary guarantors existing and
future secured indebtedness to the extent of the value of the
assets securing such indebtedness. The notes are effectively
subordinated to any indebtedness and other liabilities of our
non-guarantor subsidiaries.
As of March 31, 2007, we had outstanding on a consolidated
basis approximately $3 million of indebtedness secured by
assets. Such indebtedness ranks senior to the notes in right of
payment to the extent of the value of the assets securing the
indebtedness. As of March 31, 2007, our non-guarantor
subsidiaries had approximately $31 million of liabilities.
The indenture does not limit the amount of indebtedness we or
our subsidiaries may incur.
Subsidiary
guarantees
Our subsidiary guarantors (as defined below), jointly and
severally, fully and unconditionally guarantee on a senior
unsecured basis the performance and full and punctual payment
when due, whether at stated maturity, by acceleration, by
redemption, by repurchase or otherwise, all of our obligations
under the indenture (including obligations to the trustee) and
the notes, whether for payment of principal of or interest on or
additional interest, if any, in respect of the notes, expenses,
indemnification or otherwise (all such guaranteed obligations
are referred to as guaranteed obligations). The
subsidiary guarantors have agreed to pay, in addition to the
amount stated above, any and all costs and expenses (including
reasonable counsel fees and expenses) incurred by the trustee or
you in enforcing any right under the subsidiary guarantees. The
subsidiary guarantees with respect to a note will automatically
terminate immediately prior to the conversion of such note.
Under the terms of the full and unconditional guarantees,
holders of the notes are not required to exercise their remedies
against us before they proceed directly against the subsidiary
guarantors. In certain cases, the subsidiary guarantees may be
voidable under applicable law relating to fraudulent conveyance
or fraudulent transfer or similar laws affecting the rights of
creditors generally. See Risk factorsRisks related
to the notes and our common stockFederal or state laws
allow courts, under specific circumstances, to void debts,
including subsidiary guarantees, and could require holders of
notes to return payments received from us and the subsidiary
guarantors.
Subsidiary guarantors mean all of our existing and
future domestic subsidiaries that are currently a party to or
become a party to our revolving credit facility (as defined
below), whether as a borrower, co-borrower or guarantor.
Revolving credit facility means (i) the Credit
Agreement, dated as of August 18, 2006, among the Company,
Calgon Carbon Investments, Inc., as co-borrower, certain other
borrowers, the guarantors named therein, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the lenders named therein,
and (ii) any amendment, modification, renewal, extension or
refinancing thereof.
A subsidiary guarantee of any subsidiary guarantor will be
released and relieved from all of its obligations under the
subsidiary guarantee in the following circumstances:
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upon the sale or other disposition (including by way of
consolidation or merger), in one transaction or a series of
related transactions, of a majority of the total voting power of
the capital stock or other interests of such subsidiary
guarantor (other than to us or any affiliate); or
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upon the sale or disposition of all or substantially all the
assets of such subsidiary guarantor (other than to us or any
affiliate).
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Optional
redemption
Prior to August 20, 2011, the notes are not redeemable. On
or after August 20, 2011, we may redeem for cash all or a
portion of the notes, upon not less than 45 nor more than 60
calendar days notice before the redemption date to the
trustee, the paying agent and each holder of notes, at 100% of
the principal amount of the notes to be redeemed, plus accrued
and unpaid interest, including any additional interest, to, but
excluding, the redemption date (unless the redemption date is
between a regular record date and the interest payment date to
which it relates, in which case we will pay any accrued and
unpaid interest and any additional interest to the holder of
record on such regular record date).
If we decide to redeem fewer than all of the outstanding notes,
the trustee will select the notes to be redeemed (in principal
amounts of $1,000 or multiples thereof) by lot, or on a pro rata
basis or by another method the trustee considers fair and
appropriate.
If the trustee selects a portion of your note for partial
redemption and you convert a portion of the same note, the
converted portion will be deemed to be from the portion selected
for redemption.
In the event of any redemption in part, we will not be required
to
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issue, register the transfer of or exchange any note during a
period of 15 calendar days before the mailing of the redemption
notice; or
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register the transfer of or exchange any note so selected for
redemption, in whole or in part, except the unredeemed portion
of any note being redeemed in part.
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No sinking fund is provided for the notes.
Conversion
rights
General
Prior to June 15, 2011, holders may convert their notes
only upon satisfaction of one or more of the conditions
described under the headings Conversion upon
satisfaction of sale price condition,
Conversion upon satisfaction of trading price
condition and Conversion upon specified
corporate transactions. On or after June 15, 2011,
holders may convert their notes, without regard to such
conditions, at any time prior to 5:00 p.m., New York City
time, on the business day immediately preceding the maturity
date.
Subject to the preceding paragraph, holders may convert each of
their notes based on an initial conversion rate of
196.0784 shares of common stock per $1,000 principal amount
of notes (equivalent to an initial conversion price of
approximately $5.10 per share of common stock).
Upon conversion of a note, we will pay cash and deliver shares
of our common stock, if any, based on a daily conversion
value (as defined under Conversion
proceduresSettlement upon conversion) calculated on
a proportionate basis for each trading day of the 25 trading-day
observation period (as defined under
Conversion proceduresSettlement upon
conversion). The trustee will initially act as the
conversion agent.
The conversion rate and the equivalent conversion price in
effect at any given time are referred to as the applicable
conversion rate and the applicable conversion
price, respectively, and are subject to adjustment as
described below. The conversion price at any given time is
computed by dividing $1,000 by the applicable conversion rate at
such time. A holder may
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convert fewer than all of such holders notes so long as
the notes converted are a multiple of $1,000 principal amount.
If we call notes for redemption, a holder may convert notes only
until 5:00 p.m., New York City time, on the third scheduled
trading day prior to the redemption date unless we fail to pay
the redemption price. If a holder of notes has submitted notes
for purchase upon a fundamental change, the holder may convert
those notes only if that holder withdraws the fundamental change
purchase notice submitted by that holder in accordance with the
terms of the indenture. Similarly, if a holder of notes
exercises the option to require us to purchase those notes other
than upon a fundamental change, those notes may be converted
only if that holder withdraws the purchase notice submitted by
that holder in accordance with the terms of the indenture.
Scheduled trading day means a day that is scheduled
to be a trading day on the primary U.S. national securities
exchange or market on which our common stock is listed or
admitted for trading.
Upon conversion, you will not receive any separate cash payment
for accrued and unpaid interest and additional interest, if any,
unless such conversion occurs between a regular record date and
the interest payment date to which it relates. We will not issue
fractional shares of our common stock upon conversion of notes.
Instead, we will pay cash in lieu of fractional shares based on
the daily VWAP (as defined under
Conversion proceduresSettlement upon
conversion) of the common stock on the last day of the
observation period. Our delivery to you of cash or a combination
of cash and the full number of shares of our common stock, if
applicable, together with any cash payment for any fractional
share, into which a note is convertible, will be deemed to
satisfy in full our obligation to pay
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the principal amount of the note; and
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accrued and unpaid interest and additional interest, if any, to,
but not including, the conversion date.
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As a result, accrued and unpaid interest and additional
interest, if any, to, but not including, the conversion date
will be deemed to be paid in full rather than cancelled,
extinguished or forfeited.
Notwithstanding the preceding paragraph, if notes are converted
after 5:00 p.m., New York City time, on a regular record
date for the payment of interest, holders of such notes at
5:00 p.m., New York City time, on such record date will
receive the interest and additional interest, if any, payable on
such notes on the corresponding interest payment date
notwithstanding the conversion. Notes, upon surrender for
conversion during the period from 5:00 p.m., New York City
time, on any regular record date to 9:00 a.m., New York
City time, on the immediately following interest payment date,
must be accompanied by funds equal to the amount of interest and
additional interest, if any, payable on the notes so converted;
provided that no such payment need be made:
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if we have specified a redemption date that is after a record
date and on or prior to the third trading day after the
corresponding interest payment date;
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if we have specified a fundamental change purchase date that is
after a record date and on or prior to the third trading day
after the corresponding interest payment date; or
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to the extent of any overdue interest, if any overdue interest
exists at the time of conversion with respect to such note.
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If a holder converts notes, we will pay any documentary, stamp
or similar issue or transfer tax due on the issue of any shares
of our common stock upon the conversion, unless the tax is due
because the holder requests any shares to be issued in a name
other than the holders name, in which case the holder will
pay that tax.
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Prior to June 15, 2011, holders may surrender their notes
for conversion only under the circumstances described below.
For purposes of determining whether the conversion contingencies
have been triggered, trading day means a day during
which:
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trading in our common stock generally occurs on the primary
U.S. national securities exchange or market on which our
common stock is listed or admitted for trading;
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there is no market disruption event; and
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a last reported sale price is available on the primary
U.S. national securities exchange or market on which our
common stock is listed or admitted for trading.
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For purposes of determining whether the conversion contingencies
have been triggered, market disruption event means,
if our common stock is listed on the NYSE or another
U.S. national or regional securities exchange, or is quoted
on the Nasdaq Global Select Market or the Nasdaq Global Market,
the occurrence or existence during the one-half hour period
ending on the scheduled close of trading on any trading day of
any material suspension or limitation imposed on trading (by
reason of movements in price exceeding limits permitted by the
stock exchange or otherwise) in our common stock or in any
options, contracts or future contracts relating to our common
stock.
Conversion
upon satisfaction of sale price condition
A holder may surrender all or a portion of its notes for
conversion during any calendar quarter (and only during such
calendar quarter) commencing after September 30, 2006 if
the last reported sale price of the common stock for at least 20
trading days during the period of 30 consecutive trading
days ending on the last trading day of the preceding calendar
quarter is greater than or equal to 120% of the applicable
conversion price on such last trading day.
The last reported sale price of our common stock on
any date means:
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the closing sale price per share (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than
one in either case, the average of the average bid and the
average asked prices) on the NYSE on that date (or, if no
closing sale price is reported, the last reported sale price);
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if our common stock is not listed for trading on the NYSE, the
closing sale price (or, if no closing sale price is reported,
the last reported sale price) as reported on that date in
composite transactions for the principal U.S. national or
regional securities exchange on which our common stock is listed;
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if our common stock is not so listed on a U.S. national or
regional securities exchange, the last sale price of our common
stock on that date as reported by the Nasdaq Global Select
Market or the Nasdaq Global Market (to the extent that the
Nasdaq Global Select Market or the Nasdaq Global Market is not
at such time a U.S. national or regional securities
exchange);
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if our common stock is not so reported by the Nasdaq Global
Select Market or the Nasdaq Global Market (to the extent that
the Nasdaq Global Select Market or the Nasdaq Global Market is
not at such time a U.S. national or regional securities
exchange), the last quoted bid price for our common stock on
that date in the
over-the-counter
market as reported by Pink Sheets LLC or similar
organization; or
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if our common stock is not so quoted by Pink Sheets LLC or
similar organization, the average of the mid-point of the last
bid and ask prices for our common stock on that date from a
nationally recognized independent investment banking firm
selected by us for this purpose.
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Conversion
upon satisfaction of trading price condition
A holder of notes may surrender all or a portion of its notes
for conversion during the five business day period after any 10
consecutive trading day period (the measurement
period) in which the trading price (as defined
below) of a note, as determined following a request by a holder
of notes in accordance with the procedures described below, for
each day in the measurement period was less than 103% of the
product of the last reported sale price of our common stock and
the applicable conversion rate.
The trading price of a note on any date of
determination means the average of the secondary market bid
quotations obtained by the bid solicitation agent for $5,000,000
aggregate principal amount of the notes at approximately
3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers
we select; provided that, if only two such bids can
reasonably be obtained, then the average of the two bids shall
be used, and if only one such bid can reasonably be obtained,
that one bid shall be used. If the bid solicitation agent cannot
reasonably obtain at least one bid for $5,000,000 aggregate
principal amount of the notes, then, for purposes of the trading
price condition only, the trading price per $1,000 principal
amount of notes will be deemed to be less than 103% of the
product of the last reported sale price of our common stock and
the applicable conversion rate.
In connection with any conversion upon satisfaction of the above
trading price condition, the bid solicitation agent shall have
no obligation to determine the trading price of the notes unless
we have requested such determination; and we shall have no
obligation to make such request unless a holder of a note
provides us with reasonable evidence that the trading price per
$1,000 principal amount of notes would be less than 103% of the
product of the last reported sale price of our common stock and
the applicable conversion rate. At such time, we shall instruct
the bid solicitation agent to determine the trading price of the
notes beginning on the next trading day and on each successive
trading day until the trading price per $1,000 principal amount
of notes is greater than or equal to 103% of the product of the
last reported sale price of our common stock and applicable
conversion rate. The trustee will initially act as the bid
solicitation agent.
Conversion
upon specified corporate transactions
Certain
distributions
If we elect to
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distribute to all or substantially all holders of our common
stock certain rights entitling them to purchase, for a period
expiring within 60 calendar days after the date of the
distribution, shares of our common stock at less than the
average of the last reported sale
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prices of a share of our common stock for the 10 consecutive
trading-day period ending on the business day preceding the
announcement of such issuance; or
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distribute to all or substantially all holders of our common
stock our assets, debt securities or certain rights to purchase
our securities, which distribution has a per share fair market
value, as reasonably determined by our board of directors,
exceeding 10% of the last reported sale price of our common
stock on the day preceding the declaration date for such
distribution,
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we must notify the trustee, the conversion agent and the holders
of the notes at least 35 scheduled trading days prior to the
ex-dividend date for such distribution. Once we have given such
notice, holders may surrender all or a portion of their notes
for conversion at any time until the earlier of 5:00 p.m.,
New York City time, on the business day immediately prior to the
ex-dividend date or our announcement that such distribution will
not take place. The ex-dividend date is the first
date upon which a sale of the common stock does not
automatically transfer the right to receive the relevant
distribution from the seller of the common stock to its buyer.
Certain corporate
events
If we are party to a transaction described in clause (2) of
the definition of fundamental change (without giving effect to
the paragraph following that definition), we must notify the
trustee, the conversion agent and holders of the notes at least
35 scheduled trading days prior to the anticipated effective
date for such transaction. Once we have given such notice,
holders may surrender all or a portion of their notes for
conversion at any time until 35 calendar days after the actual
effective date of such transaction (or if such transaction also
constitutes a fundamental change, the related fundamental change
purchase date).
In addition, holders may surrender all or a portion of their
notes for conversion if a fundamental change of the type
described in clauses (1) and (5) of the definition of
fundamental change occurs. In such event, we will provide a
notice to the trustee, the conversion agent and the holders of
notes on or before the 20th calendar day after the
occurrence of such fundamental change. Once we have given such
notice, holders may surrender all or a portion of their notes
for conversion at any time beginning on the actual effective
date of such fundamental change until and including the later of
(i) the date which is 30 calendar days after the actual
effective date of such transaction and (ii) the fundamental
change purchase date.
Conversion
procedures
Once a conversion condition has been satisfied, we will provide
a notice to the trustee, the conversion agent and the holders of
notes promptly, unless otherwise provided. Simultaneously with
providing such notice, we will publish a notice containing this
information on our website or through such other public medium
as we may use at that time.
If you hold a beneficial interest in a global note, to convert
you must comply with DTCs procedures for converting a
beneficial interest in a global note and, if required, pay funds
equal to interest payable on the next interest payment date and,
if required, pay all taxes or duties, if any.
If you hold a certificated note, to convert you must
36
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complete and manually sign the conversion notice on the back of
the note, or a facsimile of the conversion notice;
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deliver the conversion notice, which is irrevocable, and the
note to the conversion agent;
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if required, furnish appropriate endorsements and transfer
documents;
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if required, pay all transfer or similar taxes; and
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if required, pay funds equal to interest payable on the next
interest payment date.
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The date you comply with these requirements is the
conversion date under the indenture.
If we call notes for redemption, a holder may convert notes only
until 5:00 p.m., New York City time, on the third scheduled
trading day prior to the redemption date unless we fail to pay
the redemption price. If a holder has already delivered a
purchase notice as described under Purchase of notes
by us at the option of the holder or a fundamental change
purchase notice as described under Fundamental
change permits holders to require us to purchase notes
with respect to a note, the holder may not surrender that note
for conversion until the holder has withdrawn the notice in
accordance with the terms of the indenture.
Settlement
upon conversion
Upon conversion, we will deliver to holders in respect of each
$1,000 principal amount of notes being converted, a
settlement amount of cash and shares of our common
stock, if any, equal to the sum of the daily settlement amounts
for each of the 25 trading days during the observation period.
Daily settlement amount, for each of the 25 trading
days during the observation period, shall consist of:
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cash equal to the lesser of $40 and the daily conversion value
relating to such day; and
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to the extent the daily conversion value exceeds $40, a number
of shares equal to, (A) the difference between the daily
conversion value and $40, divided by (B) the daily VWAP of
our common stock (or the consideration into which our common
stock has been exchanged in connection with certain corporate
transactions) on such day.
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Daily conversion value means, for each of the 25
consecutive trading days during the observation period,
one-twenty-fifth (1/25) of the product of (1) the
applicable conversion rate and (2) the daily VWAP of our
common stock on such day.
Daily VWAP of our common stock means, for each of
the 25 consecutive trading days during the observation period,
the per share volume-weighted average price as displayed under
the heading Bloomberg VWAP on Bloomberg Financial
Markets page CCC.N <equity> AQR (or its
equivalent successor if such page is not available) in respect
of the period from 9:30 a.m. to 4:00 p.m., New York
City time, on such trading day (or if such volume-weighted
average price is unavailable, the market value of one share of
our common stock on such trading day determined, using a
volume-weighted average method, by a nationally recognized
independent investment banking firm selected by us for this
purpose).
Observation period with respect to any note means
the 25 consecutive trading-day period beginning on and including
the second trading day after the related conversion date, except
that with respect to any related conversion date occurring after
the date of issuance of a notice of redemption as described
under Optional redemption, the
observation period means
37
the 25 consecutive trading-day period beginning on and including
the 28th scheduled trading day prior to the applicable
redemption date.
For the purposes of determining settlement upon conversion,
trading day means a day during which:
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trading in our common stock generally occurs on the primary
U.S. national securities exchange or market on which our
common stock is listed or admitted for trading; and
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there is no market disruption event.
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For the purposes of determining settlement upon conversion,
market disruption event means:
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a failure by the primary U.S. national securities exchange
or market on which our common stock is listed or admitted to
trading to open for trading during its regular trading
session; or
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the occurrence or existence prior to 1:00 p.m. on any
trading day for our common stock for an aggregate one half hour
period of any suspension or limitation imposed on trading (by
reason of movements in price exceeding limits permitted by the
stock exchange or otherwise) in our common stock or in any
options, contracts or future contracts relating to our common
stock.
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We will generally deliver the settlement amount to converting
holders on the third business day immediately following the last
day of the observation period.
We will deliver cash in lieu of any fractional share of common
stock issuable in connection with settlement of a conversion of
notes based on the daily VWAP on our common stock on the last
day of the observation period.
Conversion
rate adjustments
The conversion rate will be adjusted as described below, except
that we will not make any adjustments to the conversion rate if
holders of the notes participate, as a result of holding the
notes, in any of the transactions described below without having
to convert their notes.
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(1)
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If we issue shares of our common stock as a dividend or
distribution on shares of our common stock, or if we effect a
share split or share combination, the conversion rate will be
adjusted based on the following formula:
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where,
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CR0 =
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the conversion rate in effect immediately prior to such event
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CR =
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the conversion rate in effect immediately after such event
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OS0 =
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the number of shares of our common stock outstanding immediately
prior to such event
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OS =
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the number of shares of our common stock outstanding immediately
after such event
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(2)
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If we issue to all or substantially all holders of our common
stock any rights or warrants entitling them for a period of not
more than 60 calendar days to subscribe for or purchase shares
of our common stock, at a price per share less than the average
of the
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last reported sale prices of our common stock for the 10
consecutive trading-day period ending on the business day
immediately preceding the date of announcement of the issuance
of such rights, the conversion rate will be adjusted based on
the following formula (provided that the conversion rate will be
readjusted to the extent that such rights or warrants are not
exercised prior to their expiration):
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CR =
CR0
×
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OS0
+ X
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OS0
+ Y
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where,
CR0 = the
conversion rate in effect immediately prior to such event
CR = the conversion rate in effect immediately
after such event
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OS0 =
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the number of shares of our common stock outstanding immediately
prior to such event
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X = the total number of shares of our common
stock issuable pursuant to such rights
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Y =
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the number of shares of our common stock equal to the aggregate
price payable to exercise such rights divided by the average of
the last reported sale prices of our common stock over the 10
consecutive trading-day period ending on the business day
immediately preceding the date of announcement of the issuance
of such rights
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(3)
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If we distribute shares of our capital stock, evidences of our
indebtedness or other assets or property of ours to all or
substantially all holders of our common stock, excluding:
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dividends or distributions and rights or warrants referred to in
clause (1) or (2) above; and
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dividends or distributions paid exclusively in cash; then the
conversion rate will be adjusted based on the following formula:
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CR =
CR0
×
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SP0
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SP0
FMV
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where,
CR0 = the
conversion rate in effect immediately prior to such distribution
CR = the conversion rate in effect immediately
after such distribution
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SP0 =
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the average of the last reported sale prices of our common stock
over the 10 consecutive trading-day period ending on the
business day immediately preceding the
ex-dividend
date for such distribution
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FMV =
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the fair market value (as determined by our board of directors)
of the shares of capital stock, evidences of indebtedness,
assets or property distributed with respect to each outstanding
share of our common stock on the record date for such
distribution With respect to an adjustment pursuant to this
clause (3) where there has been a payment of a dividend or
other distribution on our common stock or shares of capital
stock of any class or series, or similar equity interest, of or
relating to a subsidiary or other business unit, which we refer
to as a spin-off, the conversion rate in effect
immediately before 5:00 p.m., New York City time, on the
tenth trading day immediately following, and including,
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the effective date of the spin-off will be increased based on
the following formula:
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CR =
CR0
×
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FMV0
+
MP0
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MP0
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where,
CR0 = the
conversion rate in effect immediately prior to such distribution
CR = the
conversion rate in effect immediately after such distribution
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FMV0 =
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the average of the last reported sale prices of the capital
stock or similar equity interest distributed to holders of our
common stock applicable to one share of our common stock over
the first 10 consecutive trading-day period after the effective
date of the spin-off
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MP0 =
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the average of the last reported sale prices of our common stock
over the first 10 consecutive trading-day period after the
effective date of the spin-off
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The adjustment to the conversion rate under the preceding
paragraph will occur on the tenth trading day from, and
including, the effective date of the spin-off.
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(4)
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If we pay any cash dividend or distribution to all or
substantially all holders of our common stock, the conversion
rate will be adjusted based on the following formula:
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where,
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CR0 =
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the conversion rate in effect immediately prior to the record
date for such distribution
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CR =
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the conversion rate in effect immediately after the record date
for such distribution
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SP0 =
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the last reported sale price of our common stock on the trading
day immediately preceding the ex-dividend date for such
distribution;
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C = the amount in cash per share we distribute
to holders of our common stock.
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(5)
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If we or any of our subsidiaries make a payment in respect of a
tender offer or exchange offer for our common stock, to the
extent that the cash and value of any other consideration
included in the payment per share of our common stock exceeds
the last reported sale price of our common stock on the trading
day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender offer or exchange offer, the
conversion rate will be increased based on the following formula:
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CR =
CR0
×
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AC + (SP x OS)
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OS0
x SP
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where,
40
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CR0 =
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the conversion rate in effect on the date such tender offer or
exchange offer expires
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CR =
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the conversion rate in effect on the day next succeeding the
date such tender offer or exchange offer expires
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AC =
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the aggregate value of all cash and any other consideration (as
determined by our board of directors) paid or payable for shares
purchased in such tender offer or exchange offer
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OS0 =
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the number of shares of our common stock outstanding immediately
prior to the date such tender offer or exchange offer expires
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OS =
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the number of shares of our common stock outstanding immediately
after the date such tender offer or exchange offer expires
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SP =
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the average of the last reported sale prices of our common stock
over the 10 consecutive trading-day period commencing on the
trading day next succeeding the date such tender offer or
exchange offer expires
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Except as stated herein, we will not adjust the conversion rate
for the issuance of shares of our common stock or any securities
convertible into or exchangeable for shares of our common stock
or the right to purchase shares of our common stock or such
convertible or exchangeable securities.
We are permitted to increase the conversion rate of the notes by
any amount for a period of at least 20 business days if our
board of directors determines that such increase would be in our
best interest. We may also (but are not required to) increase
the conversion rate to avoid or diminish income tax to holders
of our common stock or rights to purchase shares of our common
stock in connection with a dividend or distribution of shares
(or rights to acquire shares) or similar event.
A holder may, in some circumstances, including the distribution
of cash dividends to holders of our shares of common stock, be
deemed to have received a distribution or dividend subject to
U.S. federal income tax as a result of an adjustment or the
nonoccurrence of an adjustment to the conversion rate. For a
discussion of the U.S. federal income tax treatment of an
adjustment to the conversion rate, see Material
U.S. federal income and estate tax consequences.
To the extent that we have a rights plan in effect upon
conversion of the notes into common stock, holders will receive,
in addition to the common stock, the rights under the rights
plan, unless prior to any conversion, the rights have separated
from the common stock, in which case the conversion rate will be
adjusted at the time of separation as if we distributed to all
or substantially all holders of our common stock, shares of our
capital stock, evidences of indebtedness or other assets or
property of ours as described in clause (3) above, subject
to readjustment in the event of the expiration, termination or
redemption of such rights.
Notwithstanding any of the foregoing, the applicable conversion
rate will not be adjusted
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upon the issuance of any shares of our common stock pursuant to
any present or future plan providing for the reinvestment of
dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
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upon the issuance of any shares of our common stock or options
or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or program
of or assumed by us or any of our subsidiaries;
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upon the issuance of any shares of our common stock pursuant to
any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet and
outstanding as of the date the notes were first issued;
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for a change in the par value of the common stock; or
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for accrued and unpaid interest and additional interest, if any.
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Adjustments to the applicable conversion rate will be calculated
to the nearest 1/10,000th of a share. Except as described
above in this section, we will not adjust the conversion rate.
Recapitalizations,
reclassifications and changes of our common stock
In the case of
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any recapitalization, reclassification or change of our common
stock (other than changes resulting from a subdivision or
combination);
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a consolidation, merger or combination involving us;
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a conveyance, transfer, sale, lease or other disposition to a
third party of all or substantially all of the property and
assets of ours and our subsidiaries; or
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any statutory share exchange,
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in which holders of our common stock received cash, securities
or other property in exchange for their shares of our common
stock, the notes will become convertible into the kind and
amount of consideration that holders of our common stock
received in such transaction (the reference
property) upon such transaction. If the transaction causes
our common stock to be converted into the right to receive more
than a single type of consideration (determined based in part
upon any form of stockholder election), the reference property
into which the notes will be convertible will be deemed to be
the weighted average of the kind and amount of consideration
received by the holders of our common stock that affirmatively
make such an election. In all cases, the provisions above under
Settlement upon conversion relating to the
satisfaction of the conversion obligation shall continue to
apply with respect to the calculation of the settlement amount.
We will agree in the indenture not to become a party to any such
transaction unless its terms are consistent with the foregoing.
Adjustments of
average prices
Whenever any provision of the indenture requires us to calculate
an average of last reported prices or daily VWAP over multiple
days, we will make appropriate adjustments to account for any
adjustment to the conversion rate that becomes effective, or any
event requiring an adjustment to the conversion rate where the
ex-dividend date of the event occurs, at any time during the
period from which the average is to be calculated.
Adjustment to
shares delivered upon conversion upon certain fundamental
changes
If you elect to convert your notes as described above under
Conversion upon specified corporate
transactionsCertain corporate events, and such
fundamental change pursuant to clause (1), (2) or
(5) of the definition of fundamental change
occurs on or prior to August 15,
42
2011, in certain circumstances described below, the conversion
rate will be increased by an additional number of shares of
common stock (the additional shares) as described
below. Any conversion will be deemed to have occurred in
connection with such fundamental change only if such notes are
surrendered for conversion at a time when the notes would be
convertible in light of the expected or actual occurrence of a
fundamental change and notwithstanding the fact that a note may
then be convertible because another condition to conversion has
been satisfied or no condition to conversion exists.
The number of additional shares by which the conversion rate
will be increased will be determined by reference to the table
below, based on the date on which the fundamental change occurs
or becomes effective (the effective date) and the
price (the stock price) paid per share of our common
stock in the fundamental change. If the fundamental change is a
transaction described in clause (2) of the definition
thereof and holders of our common stock receive only cash in
that fundamental change, the stock price shall be the cash
amount paid per share. Otherwise, the stock price shall be the
average of the last reported sale prices of our common stock
over the five trading-day period ending on the trading day
preceding the effective date of the fundamental change.
The stock prices set forth in the first row of the table below
(i.e., column headers) will be adjusted as of any date on which
the conversion rate of the notes is otherwise adjusted. The
adjusted stock prices will equal the stock prices applicable
immediately prior to such adjustment, multiplied by a fraction,
the numerator of which is the conversion rate immediately prior
to the adjustment giving rise to the stock price adjustment and
the denominator of which is the conversion rate as so adjusted.
The number of additional shares will be adjusted in the same
manner as the conversion rate as set forth under
Conversion rate adjustments.
The following table sets forth the hypothetical stock price and
the number of shares by which the conversion rate will be
increased per $1,000 principal amount of notes:
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Stock
Price
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Effective
Date
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$4.25
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$5.25
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$6.25
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$7.25
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$8.25
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$9.25
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$10.25
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$11.25
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$12.25
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$13.25
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$14.25
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$15.25
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$16.25
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$17.25
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August 18, 2006
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39.2157
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31.6481
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22.8662
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17.2623
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13.4283
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10.6597
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8.5806
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6.9704
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5.6942
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4.6646
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3.8228
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3.1278
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2.5492
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2.0655
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August 15, 2007
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39.2157
|
|
|
|
29.6073
|
|
|
|
20.8726
|
|
|
|
15.5139
|
|
|
|
11.9576
|
|
|
|
9.4472
|
|
|
|
7.5876
|
|
|
|
6.1590
|
|
|
|
5.0314
|
|
|
|
4.1221
|
|
|
|
3.3780
|
|
|
|
2.7624
|
|
|
|
2.2492
|
|
|
|
1.8182
|
|
August 15, 2008
|
|
|
39.2157
|
|
|
|
26.8382
|
|
|
|
18.1392
|
|
|
|
13.1267
|
|
|
|
9.9679
|
|
|
|
7.8204
|
|
|
|
6.2667
|
|
|
|
5.0879
|
|
|
|
4.1619
|
|
|
|
3.4145
|
|
|
|
2.8012
|
|
|
|
2.2912
|
|
|
|
1.8630
|
|
|
|
1.5027
|
|
August 15, 2009
|
|
|
39.2157
|
|
|
|
22.9568
|
|
|
|
14.3091
|
|
|
|
9.8507
|
|
|
|
7.3024
|
|
|
|
5.6859
|
|
|
|
4.5633
|
|
|
|
3.7259
|
|
|
|
3.0689
|
|
|
|
2.5356
|
|
|
|
2.0931
|
|
|
|
1.7204
|
|
|
|
1.4041
|
|
|
|
1.1343
|
|
August 15, 2010
|
|
|
39.2157
|
|
|
|
16.9913
|
|
|
|
8.6349
|
|
|
|
5.3064
|
|
|
|
3.8035
|
|
|
|
2.9780
|
|
|
|
2.4316
|
|
|
|
2.0210
|
|
|
|
1.6901
|
|
|
|
1.4136
|
|
|
|
1.1777
|
|
|
|
0.9741
|
|
|
|
0.7971
|
|
|
|
0.6426
|
|
August 15, 2011
|
|
|
39.2157
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
The exact stock prices and effective dates may not be set forth
in the table above, in which case:
|
|
|
|
|
If the stock price is between two stock price amounts in the
table or the effective date is between two effective dates in
the table, the number of additional shares will be determined by
a straight-line interpolation between the number of additional
shares set forth for the higher and lower stock price amounts
and the two dates, as applicable, based on a
365-day year.
|
|
|
|
If the stock price is greater than $17.25 per share
(subject to adjustment), no additional shares will be issued
upon conversion.
|
|
|
|
If the stock price is less than $4.25 per share (subject to
adjustment), no additional shares will be issued upon conversion.
|
43
|
|
|
Notwithstanding the foregoing, in no event will the total number
of shares of common stock issuable upon conversion exceed
235.2941 per $1,000 principal amount of notes (which number
shall equal the quotient obtained by dividing the principal
amount per note by $4.25), subject to adjustments in the same
manner as the conversion rate as set forth under
Conversion rate adjustments.
|
Settlement of conversions related to a fundamental change
pursuant to clause (2) as to which the conversion rate will
be increased by additional shares
As described above, in the case of a transaction that is a
fundamental change pursuant to clause (2) in the definition
thereof, upon effectiveness of such fundamental change, the
notes will be convertible into the consideration the holders of
our common stock received in such transaction. If, as described
above, we are required to increase the conversion rate as a
result of such fundamental change, notes surrendered for
conversion that would otherwise be settled in cash and shares of
our common stock, if any, as described above under
Settlement upon conversion, will be settled as
follows:
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|
|
|
|
If the last day of the observation period related to notes
surrendered for conversion is on or prior to the fourth trading
day immediately preceding the effective date of such fundamental
change, we will settle such conversion as described under
Settlement upon conversion above by delivering
the settlement amount (based on the conversion rate without
regard to the number of additional shares to be added to the
conversion rate as described above) on the third business day
immediately following the last day of the observation period. As
soon as practicable following the effective date of such
fundamental change, we will deliver the increase in the
settlement amount as if the conversion rate had been increased
by such number of additional shares during the observation
period (and based upon the daily VWAP prices during such
observation period).
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|
|
|
If the last day of the observation period related to notes
surrendered for conversion is after the fourth trading day
immediately preceding the effective date of such fundamental
change, we will settle such conversion as described under
Settlement upon conversion above by delivering
the settlement amount (based on the increased conversion rate)
on the later to occur of (x) the business day following the
effective date and (y) the third business day immediately
following the last day of the observation period.
|
Purchase of notes
by us at the option of the holder
Holders have the right to require us to purchase all or a
portion of their notes on August 15, 2011, August 15,
2016 and August 15, 2026 (each, a purchase
date). We will be required to purchase any outstanding
notes for which a holder delivers a written purchase notice to
the paying agent. This notice must be delivered during the
period beginning at any time from 9:00 a.m., New York City
time, on the date that is 20 business days prior to the relevant
purchase date until 5:00 p.m., New York City time, on the
business day immediately preceding the purchase date. If the
purchase notice is given and withdrawn during such period, we
will not be obligated to purchase the related notes. Also, our
ability to satisfy our purchase obligations may be affected by
the factors described in Risk factors under the
caption We may not have sufficient funds necessary to
settle conversion of the notes or to purchase the notes upon a
fundamental change or other purchase date, and our future debt
may contain limitations on our ability to pay cash upon
conversion or purchase of the notes.
44
The purchase price payable will be equal to 100% of the
principal amount of the notes to be purchased plus any accrued
and unpaid interest, including any additional interest, to, but
not including, such purchase date. The accrued and unpaid
interest, including any additional interest, will be paid to the
holder of record on such regular record date. Any notes
purchased by us will be paid for in cash.
On or before the 20th business day prior to each purchase
date, we will provide to the trustee, the paying agent and to
all holders of the notes at their addresses shown in the
register of the registrar, and to beneficial owners as required
by applicable law, a notice stating, among other things
|
|
|
|
|
the last date on which a holder may exercise the purchase right;
|
|
|
|
the purchase price;
|
|
|
|
the purchase date;
|
|
|
|
the name and address of the paying agent; and
|
|
|
|
the procedures that holders must follow to require us to
purchase their notes.
|
Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general
circulation in New York City or publish a notice containing this
information on our website or through such other public medium
as we may use at that time.
To exercise the purchase right, you must deliver by
5:00 p.m., New York City time, on the business day
immediately preceding the purchase date, the notes to be
purchased, duly endorsed for transfer, together with a written
purchase notice entitled Form of Purchase Notice on
the reverse side of the notes duly completed, to the paying
agent. A purchase notice must state
|
|
|
|
|
if certificated notes have been issued, the certificate numbers
of the notes to be delivered for purchase, or if certificated
notes have not been issued, your notice must comply with
appropriate DTC procedures;
|
|
|
|
the portion of the principal amount of notes to be purchased,
which must be $1,000 or a multiple thereof; and
|
|
|
|
that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
|
You may withdraw any purchase notice in whole or in part by a
written notice of withdrawal delivered to the paying agent prior
to 5:00 p.m., New York City time, on the business day
immediately preceding the purchase date. The notice of
withdrawal must state
|
|
|
|
|
the principal amount of the withdrawn notes;
|
|
|
|
if certificated notes have been issued, the certificate numbers
of the withdrawn notes, or if certificated notes have not been
issued, your notice must comply with appropriate DTC
procedures; and
|
|
|
|
the principal amount, if any, which remains subject to the
purchase notice.
|
We will be required to purchase the notes tendered for purchase
on each purchase date. You will receive payment of the purchase
price promptly following the later of the purchase date or the
time of book-entry transfer or the delivery of the notes. If the
paying agent holds money
45
sufficient to pay the purchase price of the notes on the
business day following the purchase date, then
|
|
|
|
|
the notes will cease to be outstanding and interest, including
any additional interest, will cease to accrue (whether or not
book-entry transfer of the notes is made or whether or not the
note is delivered to the paying agent); and
|
|
|
|
all other rights of the holder will terminate (other than the
right to receive the purchase price and previously accrued and
unpaid interest, and additional interest, upon delivery or
transfer of the notes).
|
We will comply with the provisions of
Rule 13e-4
and any other rules under the Exchange Act that may be
applicable.
No notes may be purchased at the option of holders if there has
occurred and is continuing an event of default other than an
event of default that is cured by the payment of the purchase
price of the notes.
Fundamental
change permits holders to require us to purchase notes
If a fundamental change (as defined below in this section)
occurs at any time, holders will have the right to require us to
purchase all or a portion of their notes. The fundamental change
purchase price payable will be equal to 100% of the principal
amount of the notes to be purchased plus any accrued and unpaid
interest, including any additional interest, to, but not
including, the fundamental change purchase date (unless the
fundamental change purchase date is between a regular record
date and the interest payment date to which it relates, in which
case we will pay any accrued and unpaid interest and any
additional interest to the holder of record on such regular
record date). The fundamental change purchase date will be a
date specified by us no later than the 35th calendar day
following the date of our fundamental change notice as described
below. Any notes purchased by us will be paid for in cash.
A fundamental change will be deemed to have occurred
at the time after the notes are originally issued that any of
the following occurs
|
|
|
|
(1)
|
a person or group within the meaning of
Section 13(d) of the Exchange Act other than us, our
subsidiaries or our or their employee benefit plans, files a
Schedule TO or any schedule, form or report under the
Exchange Act disclosing that such person or group has become the
beneficial owner, as defined in
Rule 13d-3
under the Exchange Act, of our common equity representing more
than 50% of the ordinary voting power of our common equity;
|
|
|
(2)
|
consummation of any share exchange, consolidation or merger of
us pursuant to which our common stock will be converted into
cash, securities or other property or any conveyance, transfer,
sale, lease or disposition in one transaction or a series of
transactions of all or substantially all of the consolidated
assets of us and our subsidiaries, taken as a whole, to any
person other than one of our subsidiaries; provided,
however, that a transaction where the holders of more than
50% of all classes of our common equity immediately prior to
such transaction own, directly or indirectly, more than 50% of
all classes of common equity of the continuing or surviving
corporation or transferee or the parent thereof immediately
after such event shall not be a fundamental change;
|
|
|
(3)
|
continuing directors cease to constitute at least a majority of
our board of directors;
|
46
|
|
|
|
(4)
|
our stockholders approve any plan or proposal for the
liquidation or dissolution of us; or
|
|
|
(5)
|
our common stock (or other common stock into which the notes are
then convertible) ceases to be listed on a national securities
exchange or quoted on the Nasdaq Global Select Market or the
Nasdaq Global Market (to the extent that the Nasdaq Global
Select Market or the Nasdaq Global Market is not at such time a
U.S. national securities exchange) or another established
automated
over-the-counter
trading market in the United States.
|
A fundamental change will not be deemed to have occurred,
however if at least 90% of the consideration received or to be
received by our common stockholders, excluding cash payments for
fractional shares, in connection with the transaction or
transactions constituting the fundamental change consists of
shares of common stock traded on a U.S. national securities
exchange or quoted on the Nasdaq Global Select Market or the
Nasdaq Global Market (to the extent that the Nasdaq Global
Select Market or the Nasdaq Global Market is not at such time a
U.S. national securities exchange) or which will be so
traded or quoted when issued or exchanged in connection with a
fundamental change (these securities being referred to as
publicly traded securities) and as a result of this
transaction or transactions the notes become convertible into
such publicly traded securities.
Continuing director means a director who either was
a member of our board of directors on August 14, 2006 or
who becomes a member of our board of directors subsequent to
that date and whose election, appointment or nomination for
election by our stockholders, is duly approved by a majority of
the continuing directors on our board of directors at the time
of such approval, either by a specific vote or by approval of
the proxy statement issued by us on behalf of our entire board
of directors in which such individual is named as nominee for
director.
On or before the 20th calendar day after the occurrence of
a fundamental change, we will provide to all holders of the
notes and the trustee and paying agent a notice of the
occurrence of the fundamental change and of the resulting
fundamental change purchase right. Such notice shall state,
among other things
|
|
|
|
|
the events causing a fundamental change;
|
|
|
|
the date of the fundamental change;
|
|
|
|
the last date on which a holder may exercise the purchase right;
|
|
|
|
the fundamental change purchase price;
|
|
|
|
the fundamental change purchase date;
|
|
|
|
the name and address of the paying agent and the conversion
agent, if applicable;
|
|
|
|
if applicable, the conversion rights of the holders with respect
to the notes and the applicable conversion rate and any
adjustments to the applicable conversion rate;
|
|
|
|
if applicable, that the notes with respect to which a
fundamental change purchase notice has been delivered by a
holder may be converted only if the holder withdraws the
fundamental change purchase notice in accordance with the terms
of the indenture; and
|
|
|
|
the procedures that holders must follow to require us to
purchase their notes.
|
Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general
circulation in New York City or publish a notice containing this
information on our website or through such other public medium
as we may use at that time.
47
To exercise the purchase right, you must deliver, by
5:00 p.m., New York City time, on the business day
immediately preceding the fundamental change purchase date, the
notes to be purchased, duly endorsed for transfer, together with
a written purchase notice entitled Form of Fundamental
Change Purchase Notice on the reverse side of the notes
duly completed, to the paying agent. A fundamental change
purchase notice must state
|
|
|
|
|
if certificated notes have been issued, the certificate numbers
of the notes to be delivered for purchase, or if certificated
notes have not been issued, your notice must comply with
appropriate DTC procedures;
|
|
|
|
the portion of the principal amount of notes to be purchased,
which must be $1,000 or a multiple thereof; and
|
|
|
|
that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture.
|
You may withdraw any fundamental change purchase notice in whole
or in part by a written notice of withdrawal delivered to the
paying agent prior to 5:00 p.m., New York City time, on the
business day immediately preceding the fundamental change
purchase date. The notice of withdrawal must state
|
|
|
|
|
the principal amount of the withdrawn notes;
|
|
|
|
if certificated notes have been issued, the certificate numbers
of the withdrawn notes, or if certificated notes have not been
issued, your notice must comply with appropriate DTC
procedures; and
|
|
|
|
the principal amount, if any, which remains subject to the
fundamental change purchase notice.
|
We will be required to purchase the notes tendered for purchase
on the fundamental change purchase date. You will receive
payment of the fundamental change purchase price promptly
following the later of the fundamental change purchase date or
the time of book-entry transfer or the delivery of the notes. If
the paying agent holds money sufficient to pay the fundamental
change purchase price of the notes on the business day following
the fundamental change purchase date, then
|
|
|
|
|
the notes will cease to be outstanding and interest, including
any additional interest, if any, will cease to accrue (whether
or not book-entry transfer of the notes is made or whether or
not the note is delivered to the paying agent); and
|
|
|
|
all other rights of the holder will terminate (other than the
right to receive the fundamental change purchase price and
previously accrued and unpaid interest, and additional interest,
upon delivery or transfer of the notes).
|
The purchase rights of the holders could discourage a potential
acquirer of us. The fundamental change purchase feature is,
however, not the result of managements knowledge of any
specific effort to obtain control of us by any means or part of
a plan by management to adopt a series of anti-takeover
provisions.
The term fundamental change is limited to specified transactions
and may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer
to purchase the notes upon a fundamental change may not protect
holders in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
48
The definition of fundamental change includes a phrase relating
to the conveyance, transfer, sale, lease or disposition of
all or substantially all of the consolidated assets
of us and our subsidiaries, taken as a whole. There is no
precise, established definition of the phrase
substantially all under applicable law. Accordingly,
the ability of a holder of the notes to require us to purchase
its notes as a result of the conveyance, transfer, sale, lease
or disposition of less than all of our assets may be uncertain.
If a fundamental change were to occur, we may not have enough
funds to pay the fundamental change purchase price. See
Risk factors under the caption We may not have
sufficient funds necessary to settle conversion of the notes or
to purchase the notes upon a fundamental change or other
purchase date, and our future debt may contain limitations on
our ability to pay cash upon conversion or repurchase of the
notes. If we fail to purchase the notes when required
following a fundamental change, we will be in default under the
indenture. In addition, we have, and may in the future incur,
other indebtedness with similar change in control provisions
permitting our holders to accelerate or to require us to
purchase our indebtedness upon the occurrence of similar events
or on some specific dates.
We will comply with the provisions of
Rule 13e-4
and any other rules under the Exchange Act that may be
applicable.
No notes may be purchased at the option of holders upon a
fundamental change if there has occurred and is continuing an
event of default other than an event of default that is cured by
the payment of the fundamental change purchase price of the
notes.
Consolidation,
merger and sale of assets
The indenture provides that we shall not consolidate with or
merge with or into, or convey, transfer, sell, lease or dispose
of all or substantially all of our properties and assets to,
another person (if we are not the resulting, surviving or
transferee person), unless:
|
|
|
|
|
the resulting, surviving or transferee person is a corporation
or limited liability company organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia, and such entity expressly assumes by
supplemental indenture all of our obligations under the notes
and the indenture and, to the extent then still operative, by
supplemental agreement all of our obligations under the
registration rights agreement;
|
|
|
|
immediately after giving effect to such transaction, no default
or event of default has occurred and is continuing under the
indenture; and
|
|
|
|
we have delivered to the trustee an officers certificate
and an opinion of counsel stating that such consolidation,
merger, conveyance, transfer, sale, lease or disposition
complies with these requirements.
|
Upon any such consolidation, merger, conveyance, transfer, sale,
lease or disposition, the resulting, surviving or transferee
person (if not us) shall succeed to, and may exercise every
right and power of, ours under the indenture.
Although these types of transactions are permitted under the
indenture, certain of the foregoing transactions could
constitute a fundamental change (as defined under
Fundamental change permits holders to require us to
purchase notes) permitting each holder to require us to
purchase the notes of such holder as described above.
49
The indenture also provides that any of the subsidiary
guarantors may consolidate with or merge with or into, or
convey, transfer, sell, lease or dispose of all or substantially
all of its properties and assets to, another person (if such
subsidiary guarantor is not the resulting, surviving or
transferee person), provided that:
|
|
|
|
|
the resulting, surviving or transferee person is a corporation
or limited liability company organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia and expressly assumes by supplemental
indenture all of the obligations of such subsidiary guarantor
under the subsidiary guarantee and the indenture and, to the
extent then still operative, by supplemental agreement all of
the obligations of such subsidiary guarantor under the
registration rights agreement;
|
|
|
|
immediately after giving effect to such transaction, no default
or event of default has occurred and is continuing under the
indenture; and
|
|
|
|
the subsidiary guarantor has delivered to the trustee an
officers certificate and an opinion of counsel each
stating that such consolidation, merger, conveyance, transfer,
sale, lease or disposition complies with these requirements.
|
A subsidiary guarantor will be released and relieved from all of
its obligations under the subsidiary guarantee in the following
circumstances:
|
|
|
|
|
upon the sale or other disposition (including by way of
consolidation or merger), in one transaction or a series of
related transactions, of a majority of the total voting power of
the capital stock or other interests of such subsidiary
guarantor (other than to us or any affiliate); or
|
|
|
|
upon the sale or disposition of all or substantially all the
assets of such subsidiary guarantor (other than to us or any
affiliate).
|
Events of
default
Each of the following is an event of default:
|
|
|
|
(1)
|
default in any payment of interest, including any additional
interest (as required by the registration rights agreement
described in Registration rights) on any note when
due and payable and the default continues for a period of 30
calendar days;
|
|
|
(2)
|
default in the payment of principal of any note when due and
payable at its stated maturity, upon optional redemption, upon
required purchase, upon declaration or otherwise;
|
|
|
(3)
|
our failure to comply with our obligation to convert the notes
in accordance with the indenture upon exercise of a
holders conversion right and such failure continues for a
period of five calendar days;
|
|
|
(4)
|
our failure to give a fundamental change notice or notice of a
specified corporate transaction as described under
Conversion upon specified corporate
transactions, in each case on a timely basis as required
under the indenture;
|
|
|
(5)
|
our failure to comply with our obligations under
Consolidation, merger and sale of assets;
|
|
|
(6)
|
our failure to comply for 60 calendar days after written notice
from the trustee or from the holders of at least 25% in
principal amount of the notes then outstanding with any of our
other agreements contained in the notes or the indenture;
|
50
|
|
|
|
(7)
|
the failure by us or any of our subsidiaries to pay any
indebtedness for borrowed money within any applicable grace
period after final maturity or the acceleration of any such
indebtedness by the holders thereof because of a default if the
total amount of such indebtedness unpaid or accelerated exceeds
$10,000,000 in the aggregate, and such failure continues for ten
calendar days after written notice from the trustee or from the
holders of at least 25% in principal amount of the notes then
outstanding;
|
|
|
(8)
|
a subsidiary guarantee shall be held in any judicial proceeding
to be unenforceable or invalid or a subsidiary guarantor denies
or disaffirms its obligations under its subsidiary guarantee;
|
|
|
(9)
|
a final judgment for the payment of $10,000,000 or more rendered
against us or any subsidiary, which judgment is not discharged
or stayed within 60 calendar days after (i) the date on
which the right to appeal thereof has expired if no such appeal
has commenced, or (ii) the date on which all rights to
appeal have been extinguished; or
|
|
|
|
|
(10)
|
certain events of bankruptcy, insolvency or reorganization
involving us or significant subsidiaries.
|
If an event of default occurs and is continuing, the trustee by
notice to us, or the holders of at least 25% in principal amount
of the outstanding notes by notice to us and the trustee, may,
and the trustee at the request of such holders shall, declare
100% of the principal of and accrued and unpaid interest,
including additional interest, if any, on the notes to be due
and payable. In case of certain events of bankruptcy, insolvency
or reorganization, involving us or a significant subsidiary,
100% of the principal of and accrued and unpaid interest,
including additional interest, if any, on the notes will
automatically become due and payable. Upon such a declaration,
such principal and accrued and unpaid interest, including any
additional interest, will be due and payable immediately.
The holders of a majority in principal amount of the outstanding
notes may waive all past defaults (except with respect to
nonpayment of principal or interest, including any additional
interest or with respect to a provision that cannot be amended
without the consent of each holder affected) and rescind any
such acceleration with respect to the notes and its consequences
if (1) rescission would not conflict with any judgment or
decree of a court of competent jurisdiction and (2) all
existing events of default, other than the nonpayment of the
principal of and interest, including additional interest, on the
notes that have become due solely by such declaration of
acceleration, have been cured or waived.
Subject to the provisions of the indenture relating to the
duties of the trustee, if an event of default occurs and is
continuing, the trustee will be under no obligation to exercise
any of the rights or powers under the indenture at the request
or direction of any of the holders unless such holders have
offered to the trustee indemnity or security reasonably
satisfactory to it against any loss, liability or expense.
Except to enforce the right to receive payment of principal or
interest, including any additional interest, when due, no holder
may pursue any remedy with respect to the indenture or the notes
unless:
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(1)
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such holder has previously given the trustee notice that an
event of default is continuing;
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(2)
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holders of at least 25% in principal amount of the outstanding
notes have requested the trustee to pursue the remedy;
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(3)
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such holders have offered the trustee security or indemnity
reasonably satisfactory to it against any loss, liability or
expense;
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(4)
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the trustee has not complied with such request within 60
calendar days after the receipt of the request and the offer of
security or indemnity; and
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(5)
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the holders of a majority in principal amount of the outstanding
notes have not given the trustee a direction that, in the
opinion of the trustee, is inconsistent with such request within
such 60-calendar-day period.
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Subject to certain restrictions, the holders of a majority in
principal amount of the outstanding notes are given the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or of exercising any
trust or power conferred on the trustee. The indenture provides
that in the event an event of default has occurred and is
continuing, the trustee will be required in the exercise of its
powers to use the degree of care that a prudent person would use
in the conduct of its own affairs. The trustee, however, may
refuse to follow any direction that conflicts with law or the
indenture or that the trustee determines is unduly prejudicial
to the rights of any other holder or that would involve the
trustee in personal liability. Prior to taking any action under
the indenture, the trustee will be entitled to indemnification
satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The indenture provides that if a default occurs and is
continuing and is known to the trustee, the trustee must mail to
each holder notice of the default within 90 calendar days after
it occurs. Except in the case of a default in the payment of
principal of or interest on any note, the trustee may withhold
notice if and so long as the trustees board of directors,
a committee of the trustees board of directors or a
committee of the trustees trust officers in good faith
determines that withholding notice is in the interests of the
holders. In addition, we are required to deliver to the trustee,
within 120 calendar days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any
default that occurred during the previous year. We also are
required to deliver to the trustee, within 30 calendar days
after the occurrence thereof, written notice of any events which
would constitute certain defaults, their status and what action
we are taking or proposes to take in respect thereof.
Modification and
amendment
Subject to certain exceptions, the indenture or the notes may be
amended with the consent of the holders of at least a majority
in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, notes) and,
subject to certain exceptions, any past default or compliance
with any provisions may be waived with the consent of the
holders of a majority in principal amount of the notes then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer
for, notes). However, without the consent of each holder of an
outstanding note affected (in addition to the majority in
principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, notes), no
amendment may, among other things:
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(1)
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reduce the amount of notes whose holders must consent to an
amendment of the indenture or to waive any past defaults;
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(2)
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reduce the rate of or extend the stated time for payment of
interest, including additional interest, on any note;
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(3)
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reduce the principal of or extend the stated maturity of any
note;
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(4)
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make any change that impairs or adversely affects the conversion
rights of any notes;
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(5)
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reduce the redemption price, the purchase price or fundamental
change purchase price of any note or amend or modify in any
manner adverse to the holders of notes our obligation to make
such payments, whether through an amendment or waiver of
provisions in the covenants, definitions or otherwise;
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(6)
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make any note payable in money other than that stated in the
note;
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(7)
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impair the right of any holder to receive payment of principal
and interest, including additional interest, on such
holders notes on or after the due dates therefore or to
institute suit for the enforcement of any payment on or with
respect to such holders notes;
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(8)
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make any change in the amendment provisions which require each
holders consent or in the waiver provisions; or
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(9)
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terminate any subsidiary guarantees with respect to the notes
(unless expressly permitted under the indenture).
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Without the consent of any holder, we, the subsidiary guarantors
and the trustee may amend the indenture to:
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(1)
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cure any ambiguity, omission, defect or inconsistency;
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(2)
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provide for the assumption by a successor corporation or limited
liability company of our or a subsidiary guarantors
obligations under the indenture;
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(3)
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provide for uncertificated notes in addition to or in place of
certificated notes (provided that the uncertificated notes are
issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated notes are
described in Section 163(f)(2)(B) of the Code);
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(4) add guarantees with respect to the notes;
(5) secure the notes;
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(6)
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add to our covenants for the benefit of the holders or surrender
any right or power conferred upon us;
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(7)
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make any change that does not materially adversely affect the
rights of any holder; or
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(8)
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comply with any requirement of the SEC in connection with the
qualification of the indenture under the Trust Indenture Act.
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The consent of the holders is not necessary under the indenture
to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the
proposed amendment. After an amendment under the indenture
becomes effective, we are required to mail to the holders a
notice briefly describing such amendment. However, the failure
to give such notice to all the holders, or any defect in the
notice, will not impair or affect the validity of the amendment.
Discharge
We may satisfy and discharge our obligations under the indenture
by delivering to the securities registrar for cancellation all
outstanding notes or by depositing with the trustee or
delivering to the holders, as applicable, after the notes have
become due and payable, whether at stated
53
maturity, or any redemption date, or any purchase date, or upon
conversion or otherwise, cash or shares of common stock
sufficient to pay all of the outstanding notes and paying all
other sums payable under the indenture by us. Such discharge is
subject to terms contained in the indenture.
Repurchase and
cancellation
We may, to the extent permitted by law, repurchase any notes in
the open market or by tender offer at any price or by private
agreement. Any notes repurchased by us may, at our option, be
surrendered to the trustee for cancellation, but may not be
reissued or resold by us.
Calculations in
respect of notes
Except as otherwise provided above, we are responsible for
making all calculations called for under the notes. These
calculations include, but are not limited to, determinations of
the last reported sale prices of our common stock, accrued
interest payable on the notes and the conversion rate of the
notes. We will make all these calculations in good faith and,
absent manifest error, our calculations are final and binding on
holders of notes. We will provide a schedule of our calculations
to each of the trustee and the conversion agent, and each of the
trustee and conversion agent is entitled to rely conclusively
upon the accuracy of our calculations without independent
verification. The trustee will forward our calculations to any
holder of notes upon the request of that holder.
Trustee
The Bank of New York is the trustee, security registrar, paying
agent, conversion agent and bid solicitation agent. The Bank of
New York, in each of its capacities, including without
limitation as trustee, security registrar, paying agent,
conversion agent and bid solicitation agent, assumes no
responsibility for the accuracy or completeness of the
information concerning us or our affiliates or any other party
contained in this document or the related documents or for any
failure by us or any other party to disclose events that may
have occurred and may affect the significance or accuracy of
such information.
Governing
law
The indenture provides that it, the notes and the subsidiary
guarantees are governed by, and construed in accordance with,
the laws of the State of New York.
54
Description of
capital stock
The following summary of certain provisions of our capital stock
is not complete and may not contain all the information you
should consider before investing in the notes. You should refer
to the applicable provisions of the following:
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the Delaware General Corporation Law, as it may be amended from
time to time;
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our Restated Certificate of Incorporation, as it may be amended
or restated from time to time; and
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our By-laws, as they may be amended and restated from time to
time.
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General
Our Certificate of Incorporation, as amended, authorizes the
issuance of a total of 100,000,000 shares of common stock,
having one vote per share, and Class A stock, having ten
votes per share (collectively, the Common Shares)
and 5,000,000 shares of Preferred Stock (Preferred
Stock). The Common Shares and Preferred Stock each have a
par value of $.01 per share. Subject to the maximum number
of authorized shares, the number of shares of authorized common
stock and Class A stock shall be as established from time
to time by our Board of Directors in its discretion. Without a
separate class vote of the holders of common stock approving the
same, we may not issue additional shares of Class A stock
if the number of shares of Class A stock which would be
outstanding immediately after such issuance would exceed 55% of
the number of shares of common stock which would be outstanding
immediately after such issuance.
Except as otherwise provided in this prospectus, all shares of
common stock and Class A stock are identical and the
holders thereof are entitled to the same rights and privileges.
As of the date of this prospectus, we have only common stock
outstanding.
Voting
rights
General
Each share of common stock is entitled to one vote on all
matters submitted to stockholders and each share of Class A
stock is entitled to ten votes on all such matters. Except as
otherwise provided by law, the holders of common stock and
Class A stock will vote as a single class on all matters
submitted to a vote of stockholders.
Directors
Our by-laws provide that our Board of Directors will be divided
into three classes, each comprising approximately one-third of
the members of the Board of Directors. The classes of directors
serve staggered three-year terms. There is no cumulative voting
for the election of directors.
Dividends and
other distributions
The holders of common stock and Class A stock are entitled
to receive such dividends as may be declared from time to time
by our Board of Directors out of funds legally available
therefor;
55
subject, however, to the rights of the holders of any preferred
stock. The holders of common stock, together with the holders of
Class A stock, will have equal rights in any assets
available for distribution to stockholders upon any liquidation
of the Company, after satisfaction of the liquidation preference
of any preferred stock then outstanding.
The common stock and the Class A stock are treated as a
single series for purposes of dividends, so that no dividend may
be paid on either class unless an equal dividend per share is
paid on the other. However, payment of dividends on Common
Shares (whether common stock or Class A stock) is subject
to certain restrictions contained in the agreements under which
our long-term indebtedness is outstanding. Under those
agreements, we may not declare or pay any cash dividends on our
Common Shares, or return any capital to the holders of Common
Shares or authorize or make any other distribution, payment or
delivery of property or cash to such holders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly,
for consideration any Common Shares (any such action being
referred to as a Dividend), except within the
limitations specified in those agreements.
No preemptive
rights
The holders of fully-paid shares of common stock have no
preemptive rights or rights to convert their stock into any
other securities and are not subject to future calls or
assessments by the Company. All outstanding shares of common
stock are, and the shares offered hereby by the Company upon
issuance and sale will be, fully paid and non-assessable. There
are no sinking fund provisions or redemption provisions
applicable to the common stock.
Preferred
stock
We may elect to issue shares of our Preferred Stock,
$.01 par value, from time to time in one or more series.
Shares of our Preferred Stock may have dividend, redemption,
voting and liquidation rights taking priority over our common
stock and Class A stock, and shares of Preferred Stock may
be convertible into our common stock. The issuance of shares of
Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of shares of common stock
and Class A stock and could adversely affect the rights and
powers, including voting rights, of holders of shares of common
stock and Class A stock. The existence of authorized and
undesignated shares of Preferred Stock may also have an adverse
effect on the market price of our common stock. In addition, the
issuance of any shares of Preferred Stock could have the effect
of delaying, deferring or preventing a change of control.
Our Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more series without any approval of
our stockholders. Our Board of Directors determines the rights,
qualifications, restrictions and limitations relating to each
series of our Preferred Stock at the time of issuance, and such
rights, qualifications, restrictions and limitations may differ
with respect to those of shares of Preferred Stock of a
different series. Our Certificate of Incorporation, as amended,
authorizes our Board of Directors, without further stockholder
action, to provide for the issuance of up to
5,000,000 shares of Preferred Stock, in one or more series.
As of the date of this prospectus, 100,000 shares of
Preferred Stock have been designated as Series A Junior
Participating Preferred Stock (Series A Preferred
Stock), and no other shares of Preferred Stock have been
designated. No shares of Preferred Stock are issued and
outstanding as of the date of this prospectus. We may amend from
time to time our Certificate of Incorporation to increase the
number of authorized shares of Preferred Stock.
56
For a complete description of any series of Preferred Stock
issued by us, you should refer to the applicable Certificate of
Amendment to our Restated Certificate of Incorporation or the
applicable certificate of designations, as the case may be,
establishing a particular series of preferred stock, in either
case which will be filed with the Secretary of State of the
State of Delaware.
The Preferred Stock will, when issued, be fully paid and
nonassessable.
Dividend
rights
The Preferred Stock will be preferred over our common stock and
Class A stock as to payment of dividends. Before any
dividends or distributions (other than dividends or
distributions payable in common stock) on our common stock will
be declared and set apart for payment or paid, the holders of
shares of each series of Preferred Stock will be entitled to
receive dividends when, as and if declared by our Board of
Directors. We will pay those dividends either in cash, shares of
common stock or Preferred Stock or otherwise, at the rate and on
the date or dates set forth in the applicable prospectus
supplement. With respect to each series of Preferred Stock, the
dividends on each share of the series will be cumulative from
the date of issue of the share unless another date is set forth
in the applicable terms of the series of Preferred Stock.
Accruals of dividends will not bear interest.
Rights upon
liquidation
The Preferred Stock will be preferred over our common stock and
Class A stock as to assets so that the holders of each
series of Preferred Stock will be entitled to be paid, upon our
voluntary or involuntary liquidation, dissolution or winding up
and before any distribution is made to the holders of common
stock, the amount set forth in the applicable prospectus
supplement. However, in this case the holders of Preferred Stock
will not be entitled to any other or further payment. If upon
any liquidation, dissolution or winding up our net assets are
insufficient to permit the payment in full of the respective
amounts to which the holders of all outstanding Preferred Stock
are entitled, our entire remaining net assets will be
distributed among the holders of each series of Preferred Stock
in amounts proportional to the full amounts to which the holders
of each series are entitled.
Redemption
All shares of any series of Preferred Stock will be redeemable
to the extent set forth in the applicable terms of the series of
Preferred Stock. All shares of any series of Preferred Stock
will be convertible into shares of our common stock or into
shares of any other series of Preferred Stock to the extent set
forth in the applicable terms of the series of Preferred Stock.
Voting
rights
Except as indicated in the applicable terms of the series of
Preferred Stock, the holders of Preferred Stock will be entitled
to one vote for each share of Preferred Stock held by them on
all matters properly presented to stockholders. The holders of
common stock, Class A stock and the holders of all series
of Preferred Stock will vote together as one class.
57
Rights to
purchase Series A Junior Participating Preferred
Stock
On January 27, 2005, our Board of Directors approved the
execution of a Rights Agreement dated as of January 27,
2005 (the Rights Agreement), between Calgon Carbon
and StockTrans, Inc., as Rights Agent (the Rights
Agent). In connection with the implementation of the
Rights Agreement, on January 27, 2005, our Board of
Directors declared a dividend distribution of one Right to
Purchase Series A Junior Participating Preferred Stock (a
Right) for each outstanding share of our common
stock. The distribution was payable to the stockholders of
record at the close of business on February 3, 2005, and
was effective simultaneous with the expiration of the common
stock acquisition rights granted under the Rights Agreement
dated as of February 3, 1995, between Calgon Carbon and
First Chicago Trust Company of New York, as Rights Agent.
Each Right entitles the registered holder to purchase from us
one ten-thousandth of a share of a series of our preferred stock
designated as Series A Preferred Stock at a price of
$35.00 per one ten-thousandth of a share (the
Purchase Price), subject to adjustment.
Initially, the Rights are attached to all common stock
certificates representing shares outstanding, and no separate
Rights certificates have been distributed. Subject to certain
exceptions specified in the Rights Agreement, the Rights will
separate from the common stock and a distribution of Rights will
occur upon the earlier of
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ten business days following a public announcement that a person
or group of affiliated or associated persons (an Acquiring
Person) has acquired beneficial ownership of 10% or more
of the outstanding shares of common stock (15% or more, in the
case of certain institutional investors, as described
below) or
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ten business days (or such later date as the Board of Directors
shall determine) following the commencement of a tender offer or
exchange offer that would result in a person or group becoming
an Acquiring Person.
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Notwithstanding the foregoing, a person will not be deemed to be
an Acquiring Person if, among other things:
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such person acquires beneficial ownership of in excess of 10% of
the outstanding common stock as a result of repurchases of
common stock by us, provided such person does not subsequently
acquire any additional shares of common stock;
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such person beneficially owns more than 10% of the outstanding
common stock, but not more than 15% of the outstanding common
stock, and reports such beneficial ownership on
Schedule 13G; or
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such person was a holder of 10% or more of the outstanding
shares of common stock as of December 27, 2004, provided
such person does not subsequently acquire beneficial ownership
of additional shares representing 1% or more of the outstanding
common stock, other than through inadvertence or under certain
other circumstances.
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Until the distribution of Rights, the Rights will be evidenced
by the common stock certificates and will be transferred with
and only with such common stock certificates. New common stock
certificates issued after February 3, 2005 will contain a
notation incorporating the Rights Agreement by reference. The
surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the Rights
associated with the common stock represented by such certificate.
58
Pursuant to the Rights Agreement, we reserve the right to
require prior to the occurrence of a Triggering Event (as
defined below) that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Series A
Preferred Stock will be issued.
The Rights are not exercisable until the distribution date and
will expire at 5:00 P.M. (New York City time) on
February 3, 2015, unless such date is extended or the
Rights are earlier redeemed or exchanged by us as described
below.
As soon as practicable after the distribution date, Rights
certificates will be mailed to holders of record of the common
stock as of the close of business on the distribution date and,
thereafter, the separate Rights certificates alone will
represent the Rights. Except as otherwise determined by the
Board of Directors, only shares of common stock issued prior to
the distribution date will be issued with Rights.
In the event that a person becomes an Acquiring Person, each
holder of a Right will thereafter have the right to receive,
upon exercise, common stock (or, in certain circumstances, cash,
property or other of our securities) having a value equal to two
times the exercise price of the Right. Notwithstanding any of
the foregoing, following the occurrence of the event set forth
in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and
void. Rights are not exercisable following the occurrence of any
of the events set forth above until such time as the Rights are
no longer redeemable by us as set forth below. For example, at
an exercise price of $35.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following
any one of the events set forth in the preceding paragraph would
entitle its holder to purchase $70.00 worth of common stock (or
other consideration, as noted above) for $35.00. Assuming that
the common stock had a per share value of $10.00 at such time,
the holder of each valid Right would be entitled to purchase
seven shares of common stock for $35.00.
In the event that, at any time following the date on which a
person or group becomes an Acquiring Person (a Stock
Acquisition Date):
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we engage in a merger or other business combination transaction
in which we are not the surviving corporation;
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we engage in a merger or other business combination transaction
in which we are the surviving corporation and our common stock
is changed or exchanged; or
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50% or more of our assets, cash flow or earning power is sold or
transferred,
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each holder of a Right (except Rights which have previously been
voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second
preceding paragraph are referred to as the Triggering
Events.
Up to and including the tenth business day after a Stock
Acquisition Date, we may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right, rounded to the
nearest $0.01, but not less than $0.01. Promptly upon the action
of our Board of Directors electing to redeem the Rights, the
Rights will terminate and the only right of the holders of
Rights will be to receive the $0.001 Redemption Price.
If, at any time that the Rights become exercisable for common
stock, we have insufficient authorized but unissued common stock
to permit the issuance of all of the shares of common
59
stock the holders of the Rights would be entitled to purchase,
the Board of Directors may provide the holders of the Rights
(other than the Acquiring Person) with cash, other equity
securities or debt securities, take action to reduce the
Purchase Price of the Rights or do any combination of the
foregoing to ensure that holders of the Rights receive the
intended benefits of the Rights.
At any time after a person becomes an Acquiring Person and prior
to the acquisition by such person or group of fifty percent
(50%) or more of the outstanding common stock, the Board of
Directors may exchange the Rights (other than Rights owned by
such person or group which have become null and void), in whole
or in part, for common stock at an exchange ratio of one share
of common stock, or one ten-thousandth of a share of
Series A Preferred Stock (or of a share of a class or
series of our preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of Calgon Carbon, including,
without limitation, the right to vote or to receive dividends.
While the distribution of the Rights will not be taxable to
stockholders or to us, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the
Rights become exercisable for our common stock (or other
consideration) or for common stock of the acquiring company or
in the event of the redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by
our Board of Directors prior to the distribution date. After the
distribution date, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any
ambiguity, to make changes which do not adversely affect the
interests of holders of Rights, or to shorten or lengthen any
time period under the Rights Agreement. The foregoing
notwithstanding, no amendment may be made to the Rights
Agreement at such time as the Rights are not redeemable, except
to cure any ambiguity or correct or supplement any provision
contained in the Rights Agreement which may be defective or
inconsistent with any other provision therein.
The holder of each share of our common stock outstanding at the
close of business on February 3, 2005, received one Right.
So long as the Rights are attached to the common stock, one
additional Right (as such number may be adjusted pursuant to the
provisions of the Rights Agreement) shall be deemed to be
delivered for each share of common stock issued or transferred
by us in the future. In addition, following the distribution
date and prior to the expiration or redemption of the Rights, we
may issue Rights when we issue common stock only if the Board of
Directors deems it to be necessary or appropriate, or in
connection with the issuance of shares of common stock pursuant
to the exercise of stock options or under employee plans or upon
the exercise, conversion or exchange of certain of our
securities. One hundred thousand (100,000) shares of
Series A Preferred Stock were initially reserved for
issuance upon exercise of the Rights.
The Rights may have certain anti-takeover effects. The Rights
may cause substantial dilution to a person or group that
attempts to acquire us in a manner which causes the Rights to
become exercisable. The Rights, however, should not affect any
prospective offeror willing to make an offer at a price that is
fair and otherwise in the best interest of us and our
stockholders. The Rights should not interfere with any merger or
other business combination approved by the Board of Directors
since the Board of Directors may, at its option, at any time
until 10 business days following the Stock Acquisition Date
redeem the then outstanding Rights at the Redemption Price
or take other action to exempt such a transaction under the
Rights Agreement.
60
Possible
anti-takeover effect
Certain of the provisions of our Restated Certificate of
Incorporation and provisions of the Delaware General Corporation
Law, either independent from or in conjunction with the Rights
Agreement may be considered as having an anti-takeover effect.
For instance, under certain circumstances, the Board of
Directors could cause additional shares of common stock or
shares of Preferred Stock to be issued or cause rights to
purchase common stock or Preferred Stock to be issued to create
voting impediments or to frustrate persons seeking to effect a
takeover or gain control of the Company. The additional shares
of common stock, shares of Preferred Stock or rights could be
issued without any additional action by stockholders. Shares
could be privately placed with purchasers who might join with
the Board of Directors in opposing a hostile takeover bid or
could be sold with or without an option or requirement on the
part of the Company to repurchase the shares. The Board of
Directors could also authorize holders of the Preferred Stock to
vote as a class either separately or with the holders of common
stock on any merger, sale or exchange of assets by the Company
or any other extraordinary corporate transaction.
Section 203
of the Delaware General Corporation Law
We are a Delaware corporation subject to Section 203 of the
DGCL. Section 203 provides in general that an interested
stockholder acquiring more than 15% of the outstanding voting
stock of a corporation subject to Section 203 but less than
85% of such stock may not engage in certain business
combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date
on which the stockholder became an interested stockholder unless:
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prior to such date the corporations board of directors
approve either the business combination or the transaction in
which the stockholder became an interested stockholder; or
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the business combination is approved by the corporations
board of directors and authorized by a vote of at least
662/3%
of the outstanding voting stock of the corporation not owned by
the interested stockholder.
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A business combination includes mergers, asset sales
and other transactions resulting in financial benefit to a
stockholder. Section 203 could prohibit or delay mergers or
other takeover or change of control attempts with respect to us
and, accordingly, may discourage attempts that might result in a
premium over the market price for the shares held by
stockholders.
Transfer agent
and registrar
The Transfer Agent and Registrar for the common stock is
StockTrans, Inc., Ardmore, Pennsylvania.
61
Registration
rights
We and the subsidiary guarantors entered into a registration
rights agreement with the initial purchaser of the notes
concurrently with the issuance of the notes.
Pursuant to the registration rights agreement, we agreed for the
benefit of the holders of the notes, the subsidiary guarantees
and the common stock issuable upon conversion of the notes that
we will, at our cost, subject to certain rights to suspend use
of the shelf registration statement of which this prospectus is
a part, use reasonable best efforts to keep the shelf
registration statement of which this prospectus is a part
effective until the date there are no longer any registrable
securities.
Registrable securities means:
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any notes and the subsidiary guarantees until the earliest of
(i) their effective registration under the Securities Act
and the resale of all such notes and subsidiary guarantees in
accordance with the shelf registration statement, (ii) the
date on which such notes and subsidiary guarantees are
(A) sold pursuant to Rule 144 under circumstances in
which any legend borne by such notes and subsidiary guarantees
relating to restrictions on transferability thereof, under the
Securities Act or otherwise, is removed or (B) freely
transferable without restriction under Rule 144(k) or
(iii) the date on which such notes have been converted (and
the related subsidiary guarantees have been terminated) or
otherwise cease to be outstanding;
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the shares of common stock, if any, issuable upon conversion of
the notes, until the earliest of (i) their effective
registration under the Securities Act and the resale of all such
shares in accordance with the shelf registration statement,
(ii) the date on which such shares are (A) sold
pursuant to Rule 144 under circumstances in which any
legend borne by such shares relating to restrictions on
transferability thereof, under the Securities Act or otherwise,
is removed or (B) freely transferable without restriction
under Rule 144(k) or (iii) the date on which such
shares cease to be outstanding.
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We are permitted to suspend the effectiveness of the shelf
registration statement of which this prospectus is a part or the
use of this prospectus during specified periods (not to exceed
120 days in the aggregate in any 12 month period) in
specified circumstances, including circumstances relating to
pending corporate developments. We need not specify the nature
of the event giving rise to a suspension in any notice to
holders of the notes of the existence of a suspension.
The following requirements and restrictions generally apply to a
holder selling the securities pursuant to this prospectus:
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the holder is required to be named as this selling
securityholder in this prospectus;
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the holder is required to deliver this prospectus to purchasers;
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the holder is subject to some of the civil liability provisions
under the Securities Act in connection with any sales; and
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62
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the holder is bound by the provisions of the registration rights
agreement which are applicable to the holder (including
indemnification obligations).
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We and the subsidiary guarantors agreed to pay predetermined
additional interest as described herein (additional
interest) to holders of the notes if this prospectus is
unavailable for periods in excess of that permitted above. The
additional interest will accrue until the unavailability is
cured at a rate per year equal to 0.25% for the first 90
calendar days after the occurrence of the event and 0.5%
thereafter of the outstanding principal amount thereof;
provided that no additional interest will accrue with
respect to any period after the second anniversary of the
original issuance of the notes; and provided further
that, if this prospectus is unavailable for periods in excess of
that permitted above, additional interest shall accrue on only
those notes that are registrable securities. No additional
interest or other additional amounts will be payable in respect
of shares of common stock which have been issued upon conversion
of notes and are required to bear a restrictive legend in
relation to any registration default.
The additional interest will accrue from and including the date
on which any registration default occurs to but excluding the
date on which all registration defaults have been cured. We will
have no other liabilities for monetary damages with respect to
our registration obligations, except that if we breach, fail to
comply with or violate some provisions of the registration
rights agreement, the holders of the notes may be entitled to
equitable relief, including injunction and specific performance.
We will provide to each registered holder copies of this
prospectus and take other actions that are required to permit,
subject to the foregoing, unrestricted resales of the notes, the
subsidiary guarantees and the shares of common stock issued upon
conversion of the notes.
The summary herein of provisions of the registration rights
agreement is subject to, and is qualified in its entirety by
reference to, all the provisions of the registration rights
agreement, a copy of which is available upon request as
described under Available information.
Selling
securityholders
The notes were originally issued by us in an offering exempt
from the registration requirements of the Securities Act to
initial purchasers who represented to us that they were
qualified institutional buyers. Each initial purchaser and
institution that purchased the notes from the initial purchaser
and who has provided us with a completed questionnaire setting
forth the information specified below, and that selling
securityholders transferees, pledgees, donees and other
successors which we refer to collectively as the selling
securityholders, may from time to time offer and sell
pursuant to this prospectus or any applicable prospectus
supplement, any or all of the notes held by that selling
securityholder, including the related guarantee, and common
stock into which the notes are convertible.
The following table sets forth, to our knowledge, information as
of July 17, 2007, with respect to the selling
securityholders and the principal amounts of notes beneficially
owned by each selling securityholder that may be offered under
this prospectus. This information is based on information
provided by or on behalf of the selling securityholders pursuant
to the
63
questionnaires referred to above. No holder of the notes may
sell the notes, including the related guarantee, or shares of
common stock without furnishing to us a questionnaire setting
forth the information specified below.
The selling securityholders may offer all, some or none of the
notes or common stock into which the notes are convertible. In
addition, the selling securityholders may have sold, transferred
or otherwise disposed of all or a portion of their notes since
the date on which they provided the information regarding their
notes in transactions exempt from the registration requirements
of the Securities Act. No selling securityholder beneficially
owns one percent or more of the notes or of our common stock,
assuming conversion of the selling securityholders notes,
and no selling securityholder has had any material relationship
with us or our affiliates within the past three years, except as
otherwise indicated in the table below.
Information concerning the selling securityholders may change
from time to time, and any changed information will be set forth
in supplements to this prospectus if and when necessary. In
addition, the conversion rate and, therefore, the number of
shares of common stock issuable upon conversion of the notes, is
subject to adjustment in the event of stock splits, stock
dividends, reorganizations and similar events described in this
prospectus.
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Maximum
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Principal
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Number of
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Amount of
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Percentage of
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Shares of
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Percentage of
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Notes That
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Notes
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Common Stock
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Common Stock
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May be Sold
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Outstanding
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That May be
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Outstanding
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Name of Selling
Securityholder
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(1)
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(1)
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Sold
(1)(2)
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(1)(3)
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Aristeia International Limited(4)
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$
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4,510,000
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6.01
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%
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884,313
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2.14
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%
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Aristeia Partners LP(5)
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615,000
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*
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120,588
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*
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Aristeia Special Investments
Master LP(4)
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511,000
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*
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100,196
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*
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CNH CA Master Account, L.P.(6)
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7,500,000
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10.00
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%
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1,470,588
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3.52
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%
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DBAG London(7)
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7,500,000
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10.00
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%
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1,470,588
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3.52
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%
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Ellington Overseas Partners, LTD(8)
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250,000
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*
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49,019
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*
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Guggenheim Portfolio Company XXXI,
LLC(9)
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854,000
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1.14
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%
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167,450
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*
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HFR RVA Combined Master Trust(10)
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502,000
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*
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98,431
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*
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Highbridge International LLC(11)
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8,125,000
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10.83
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%
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1,593,137
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3.80
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%
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J.P. Morgan Securities Inc.(12)
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1,625,000
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2.17
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%
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318,627
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*
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Linden Capital LP(13)
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12,000,000
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16.00
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%
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2,352,940
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5.51
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%
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Mohican VCA Master Fund, Ltd.(14)
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1,500,000
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2.00
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%
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294,117
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*
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Morgan Stanley & Co.
Incorporated(15)
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12,000,000
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16.00
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%
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2,352,940
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5.51
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%
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Polygon Global Opportunities
Master Fund (16)
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11,000,000
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14.67
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%
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2,156,862
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5.07
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%
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Vicis Capital Master Fund(17)
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3,000,000
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4.00
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%
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588,235
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1.44
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%
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Whitebox Convertible Arbitrage
Partners, L.P.(18)
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7,444,000
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9.93
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%
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1,459,607
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3.49
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%
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Whitebox Diversified Convertible
Arbitrage Partners, L.P.(19)
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1,200,000
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1.60
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%
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235,294
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*
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Total(1)
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$
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75,000,000
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100.00
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%
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14,705,880
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26.71
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%
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64
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* |
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Less than 1%. |
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(1) |
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The maximum principal amount of notes, including the related
guarantee, and underlying shares of common stock that may be
sold by selling securityholders pursuant to this prospectus may
not exceed $75,000,000 and 14,705,880 shares of common
stock issuable upon conversion of the notes. The sum of the
principal amount of notes beneficially owned by selling
securityholders that are included in this prospectus is more
than $75,000,000 because certain of the selling securityholders
may have transferred their notes in transactions exempt from the
registration requirements of the Securities Act, or otherwise
reduced their position prior to selling pursuant to this
prospectus, and as a result, we have received beneficial
ownership information from additional selling securityholders
with respect to the same notes or shares of underlying common
stock. Accordingly, there also may be additional holders of
notes who have not yet returned a questionnaire to us. |
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(2) |
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Assumes conversion of all of the selling securityholders
notes at the initial conversion rate of 196.0784 shares of
common stock per $1,000 principal amount of the notes. However,
the conversion rate will be subject to adjustment as described
under Description of the notes Conversion
rights. As a result, the amount of common stock issuable
upon conversion of the notes may increase or decrease in the
future. |
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(3) |
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Calculated based on 40,361,590 shares of common stock
outstanding as of June 1, 2007. In calculating these
percentages for each holder of notes, we also treated as
outstanding that number of shares of common stock issuable upon
conversion of the holders notes. However, we did not
assume the conversion of any other securities held by a
different holder. |
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(4) |
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Aristeia Capital LLC is the investment manager for the selling
securityholder. Aristeia Capital LLC is jointly owned by Kevin
Toner, Robert H. Lynch Jr., Anthony Frascella and William R.
Techar, who have voting or investment control over these
securities. |
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(5) |
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Aristeia Advisors LLC is the general partner for the selling
securityholder. Aristeia Advisors LLC is jointly owned by Kevin
Toner, Robert H. Lynch Jr., Anthony Frascella and William R.
Techar, who have voting or investment control over these
securities. |
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(6) |
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CNH Partners, LLC is Investment Advisor of the selling
securityholder and has sole voting and dispositive power over
these securities. Investment principles for CNH Partners, LLC
are Robert Krail, Mark Mitchell and Todd Pulvino. |
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(7) |
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Patrick Corrigan, a registered investment advisor under the
Investment Advisors Act of 1940, has investment or voting power
with respect to the securities listed for the selling
securityholder but disclaims beneficial ownership of such
securities. The selling securityholder has identified itself as
an affiliate of a broker-dealer registered pursuant to
Section 15 of the Exchange Act. The selling securityholder
has advised us that it purchased the securities reflected in
this table as being owned by it in the ordinary course of
business and, at the time of purchase, it had no agreements or
understandings, directly or indirectly, with any person to
distribute those securities. |
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(8) |
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Ellington Management Group, LLC is the investment adviser of the
selling securityholder. Michael Vranos, as principal of
Ellington Management Group, LLC, has voting and investment
control over these securities. Mr. Vranos disclaims
beneficial ownership over these securities except to the extent
of any indirect ownership interest he may have in such
securities through his economic participation in the selling
securityholder. |
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(9) |
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Andrew Redleaf, managing member, exercises voting control and
dispositive power with respect to the securities held by the
selling securityholder. |
65
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(10) |
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Whitebox Advisors, LLC, as managing member of the selling
securityholder, and Andrew Redleaf, as managing member of
Whitebox Advisors, LLC, share voting and investment powers with
respect to securities held by the selling securityholder. |
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(11) |
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Highbridge Capital Management, LLC is the trading manager of the
selling securityholder and has voting control and investment
discretion over the securities held by the selling
securityholder. Glenn Dubin and Henry Swieca control Highbridge
Capital Management, LLC and have voting control and investment
discretion over the securities held by Highbridge Capital
Management, LLC. Each of Highbridge Capital Management, Glenn
Dubin and Henry Swieca disclaims beneficial ownership of the
securities held by the selling securityholder. |
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(12) |
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The selling securityholder is an SEC-reporting company. The
selling securityholder has identified itself as a registered
broker-dealer pursuant to Section 15 of the Exchange Act
and is therefore deemed to be an underwriter within
the meaning of the Securities Act with respect to the securities
being offered. Please see Plan of Distribution for
required disclosure regarding the effect of classification as an
underwriter. The selling securityholder was the sole
book-running manager for the private offering of notes in August
2006. |
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(13) |
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Linden GP LLC is the general partner of the selling
securityholder. Siu Min Wong, managing member of Linden GP LLC,
has voting and investment powers with respect to these
securities. |
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(14) |
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Mohican Financial Mgmt., LLC holds voting and investment power
with respect to the securities held by the selling
securityholder. Eric Hage and Daniel Hage are the sole members
of Mohican Financial Mgmt., LLC. |
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(15) |
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The selling securityholder is a majority-owned subsidiary of
Morgan Stanley, an SEC reporting company. The selling
securityholder has identified itself as a registered
broker-dealer pursuant to Section 15 of the Exchange Act and
therefore may be deemed to be an underwriter within
the meaning of the Securities Act with respect to these
securities. Please see Plan of Distribution for
required disclosure regarding the effect of classification as an
underwriter. |
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(16) |
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Polygon Investment Partners LLP and Polygon Investment Partners
LP, Polygon Investments Ltd., Alexander E. Jackson, Reade E.
Griffith and Patrick G. G. Dear share voting and dispositive
power over the securities held by the selling securityholder.
Polygon Investment Partners LLP and Polygon Investment Partners
LP, Polygon Investments Ltd., Reade E. Griffith and Patrick G.
G. Dear disclaim beneficial ownership of the securities held by
the selling securityholder. |
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(17) |
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Vicis Capital LLC is the investment advisor of the selling
securityholder and exercises voting and investment control over
these securities. Shad Stastney, Sky Lucas and John Succo
control Vicis Capital LLC but disclaim individual ownership of
the securities. |
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(18) |
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Whitebox Convertible Arbitrage Advisors, LLC is the general
partner of the selling securityholder. Whitebox Advisors LLC and
Andrew Redleaf are managing members of Whitebox Convertible
Arbitrage Advisors, LLC and share voting and investment powers
with respect to these securities. |
With respect to selling securityholders that have identified
themselves as affiliates of broker-dealers, we believe that such
entities acquired their notes or underlying common stock in the
ordinary course of business and, at the time of the purchase of
the notes or the underlying common stock, such selling
securityholders had no agreements or understandings, directly or
indirectly, with any person to distribute the notes or
underlying common stock. To the extent
66
that we become aware that such entities did not acquire their
notes or underlying common stock in the ordinary course of
business or did have such an agreement or understanding, we will
file a post-effective amendment to the registration statement or
a prospectus supplement to this prospectus, to designate such
affiliate as an underwriter within the meaning of
the Securities Act.
We prepared this table based on the information supplied to us
by the selling securityholders named in the table. Unless
otherwise disclosed in the footnotes to the table, no selling
securityholder has indicated that it has held any position or
office or had any other material relationship with us or our
affiliates during the past three years. The selling
securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration
requirements of the Securities Act, some or all of their notes
since the date as of which the information is presented in the
above table. Because the selling securityholders may offer all
or some of their notes or the underlying common stock from time
to time, we cannot estimate the amount of the notes or the
underlying common stock that will be held by the selling
securityholders upon the termination of any particular offering.
See Plan of Distribution.
67
Material
U.S. federal income and estate tax consequences
The following general discussion represents the opinion of our
counsel, Kirkpatrick & Lockhart Preston Gates Ellis LLP, as
to the material U.S. federal income and estate tax
consequences of the ownership of notes and the shares of common
stock into which the notes may be converted, as of the date
hereof. Except where noted, this summary deals only with a note
or share of common stock held as a capital asset by a holder who
purchased the notes on original issuance at its initial offering
price, and does not represent a detailed description of the
U.S. federal income and estate tax consequences applicable
to you if you are subject to special treatment under the
U.S. federal income or estate tax laws, including if you
are:
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a dealer in securities or currencies;
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a financial institution;
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a regulated investment company;
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a real estate investment trust;
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a tax-exempt organization;
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an insurance company;
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a person holding the notes as part of a hedging, integrated,
conversion or constructive sale transaction or a straddle;
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a trader in securities that has elected the
mark-to-market
method of accounting for your securities;
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a person liable for alternative minimum tax;
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a person who is an investor in a pass-through entity;
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a U.S. person whose functional currency is not
the U.S. dollar;
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a controlled foreign corporation;
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a passive foreign investment company; or
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a U.S. expatriate.
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The summary is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the Code), and
regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively,
so as to result in U.S. federal income and estate tax
consequences different from those summarized below. This summary
does not address all aspects of U.S. federal income and
estate taxes and does not deal with all tax considerations that
may be relevant to holders in light of their personal
circumstances.
For purposes of this discussion, a U.S. holder
is a beneficial owner of a note that is:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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68
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more
U.S. persons have the authority to control all substantial
decisions of the trust or (2) has a valid election in
effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
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The term
non-U.S. holder
means a beneficial owner of a note or share of common stock
(other than a partnership) that is not a U.S. holder.
Special rules may apply to certain
non-U.S. holders
such as controlled foreign corporations and
passive foreign investment companies. Such entities
should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that
may be relevant to them.
If a partnership holds the notes, the tax treatment of a partner
will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a
partnership holding the notes, you should consult your own tax
advisors.
If you are considering the purchase of notes, you should
consult your own tax advisors concerning the particular
U.S. federal income and estate tax consequences to you of
the ownership of the notes, as well as the consequences to you
arising under the laws of any other taxing jurisdiction.
U.S. holders
The following discussion is a summary of the material
U.S. federal income tax consequences that will apply to you
if you are a U.S. holder of notes.
Payment of
interest
Interest on a note will generally be taxable to you as ordinary
income at the time it is paid or accrued in accordance with your
usual method of accounting for tax purposes.
Sale, exchange,
redemption, or other disposition of notes
Except as provided below under Conversion of notes into
common stock, cash or a combination thereof you will
generally recognize gain or loss upon the sale, exchange,
redemption or other disposition of a note equal to the
difference between the amount realized (less accrued interest
which will be taxable as such) upon the sale, exchange,
redemption or other disposition and your adjusted tax basis in
the note. Your tax basis in a note will generally be equal to
the amount you paid for the note. Any gain or loss recognized on
a taxable disposition of the note will be capital gain or loss.
If you are an individual and have held the note for more than
one year, such capital gain will be subject to preferential
rates of taxation. Your ability to deduct capital losses may be
limited.
Conversion of
notes into common stock, cash or a combination thereof
If you receive solely cash in exchange for your notes upon
conversion or repurchase, your gain or loss will be determined
in the same manner as if you disposed of the notes in a taxable
disposition (as described above under Sale, exchange,
redemption or other disposition of notes). If a
combination of cash and common stock is received in exchange for
your notes
69
upon conversion or repurchase, we intend to take the position
that gain, but not loss, will be recognized equal to the excess
of the fair market value of the common stock and cash received
(other than amounts attributable to accrued interest, which will
be treated as such, and cash in lieu of a fractional share) over
your adjusted tax basis in the note (excluding the portion of
the tax basis that is allocable to any fractional share), but in
no event should the gain recognized exceed the amount of cash
received. The amount of gain or loss recognized on the receipt
of cash in lieu of a fractional share will be equal to the
difference between the amount of cash you receive in respect of
the fractional share and the portion of your adjusted tax basis
in the note that is allocable to the fractional share.
The tax basis of the shares of common stock received upon a
conversion (other than common stock attributable to accrued
interest, the tax basis of which will equal its fair market
value) will equal the adjusted tax basis of the note that was
converted (excluding the portion of the tax basis that is
allocable to any fractional share), reduced by the amount of any
cash received (other than cash received in lieu of a fractional
share or cash attributable to accrued interest), and increased
by the amount of gain, if any, recognized (other than with
respect to a fractional share). Your holding period for shares
of common stock will include the period during which you held
the notes except that the holding period of any common stock
received with respect to accrued interest will commence on the
day after the date of receipt.
You should consult your tax advisors regarding the tax treatment
of the receipt of cash and stock in exchange for notes upon
conversion and the ownership of our common stock.
Constructive
distributions
The conversion rate of the notes will be adjusted in certain
circumstances. Under Section 305(c) of the Code,
adjustments (or failures to make adjustments) that have the
effect of increasing your proportionate interest in our assets
or earnings may in some circumstances result in a deemed
distribution to you. Adjustments to the conversion rate made
pursuant to a bona fide reasonable adjustment formula that has
the effect of preventing the dilution of the interest of the
holders of the notes, however, will generally not be considered
to result in a deemed distribution to you. Certain of the
possible conversion rate adjustments provided in the notes
(including, without limitation, adjustments in respect of
taxable dividends to holders of our common stock and as
discussed in Registration rights and in
Description of notesAdjustment to shares delivered
upon conversion upon certain fundamental changes) may not
qualify as being pursuant to a bona fide reasonable adjustment
formula. If such adjustments are made and such adjustments do
not qualify as being made pursuant to a bona fide reasonable
adjustment formula, the U.S. holders of notes will be
deemed to have received a distribution even though they have not
received any cash or property as a result of such adjustments.
Any deemed distributions will be taxable as a dividend, return
of capital, or capital gain in accordance with the earnings and
profits rules under the Code. It is not clear whether a
constructive dividend deemed paid to a non-corporate holder
would be eligible for the preferential rates of
U.S. federal income tax. It is also unclear whether
corporate holders would be entitled to claim the dividends
received deduction with respect to any such constructive
dividends.
Information
reporting and backup withholding
Information reporting requirements generally will apply to
payments of interest on the notes and dividends on shares of
common stock and to the proceeds of a sale of a note or share of
common stock paid to you unless you are an exempt recipient such
as a corporation. A backup withholding
70
tax will apply to those payments if you fail to provide your
taxpayer identification number, or certification of exempt
status, or if you fail to report in full interest and dividend
income.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal
income tax liability provided the required information is
furnished to the Internal Revenue Service (the IRS).
Non-U.S. holders
The following is a summary of the U.S. federal tax
consequences that will apply to you if you are a
non-U.S. holder
of notes or shares of common stock.
Payments of
interest
The 30% U.S. federal withholding tax will not apply to any
payment to you of interest on a note under the portfolio
interest rule provided that:
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interest paid on the note is not effectively connected with your
conduct of a trade or business in the United States
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you do not actually (or constructively) own 10% or more of the
total combined voting power of all classes of our voting stock
within the meaning of the Code and applicable U.S. Treasury
regulations;
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you are not a controlled foreign corporation that is related to
us through stock ownership;
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you are not a bank whose receipt of interest on a note is
described in section 881(c)(3)(A) of the Code; and
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either (a) you provide your name and address on an IRS
Form W-8BEN
(or other applicable form), and certify, under penalties of
perjury, that you are not a U.S. person or (b) you
hold your notes through certain foreign intermediaries and
satisfy the certification requirements of applicable
U.S. Treasury regulations.
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Special rules apply to
non-U.S. holders
that are pass-through entities rather than corporations or
individuals.
If you cannot satisfy the requirements described above, payments
of interest made to you will be subject to the 30%
U.S. federal withholding tax, unless you provide us with a
properly executed:
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IRS
Form W-8BEN
(or other applicable form) claiming an exemption from or
reduction in withholding under the benefit of an applicable
income tax treaty; or
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IRS
Form W-8ECI
(or other applicable form) stating that interest paid on the
notes is not subject to withholding tax because it is
effectively connected with your conduct of a trade or business
in the United States.
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The 30% U.S. federal withholding tax generally will not
apply to any gain that you realize on the sale, exchange,
retirement or other disposition of a note.
If you are engaged in a trade or business in the United States
and interest on the notes is effectively connected with the
conduct of that trade or business and, if required by an
applicable income tax treaty, is attributable to a
U.S. permanent establishment, then you will be
71
subject to U.S. federal income tax on that interest on a
net income basis (although you will be exempt from the 30%
United States federal withholding tax, provided the
certification requirements discussed above in Payments of
interest are satisfied) in the same manner as if you were
a U.S. person as defined under the Code. In addition, if
you are a foreign corporation, you may be subject to a branch
profits tax equal to 30% (or lower applicable income tax treaty
rate) of earnings and profits for the taxable year, subject to
adjustments, that are effectively connected with your conduct of
a trade or business in the United States.
Dividends and
constructive dividends
Any dividends paid to you with respect to the shares of common
stock (and any deemed dividends resulting from certain
adjustments, or failure to make adjustments, to the conversion
rate including, without limitation, adjustments in respect of
taxable dividends to holders of our common stock, see
U.S. holdersConstructive distributions
above) will be subject to withholding tax at a 30% rate (or
lower applicable income tax treaty rate). However, dividends
that are effectively connected with the conduct of a trade or
business within the United States and, where a tax treaty
applies, are attributable to a U.S. permanent
establishment, are not subject to the withholding tax, but
instead are subject to U.S. federal income tax on a net
income basis at applicable graduated individual or corporate
rates. Certain certification requirements and disclosure
requirements must be complied with in order for effectively
connected income to be exempt from withholding. Any such
effectively connected income received by a foreign corporation
may, under certain circumstances, be subject to an additional
branch profits tax at a 30% rate (or lower applicable income tax
treaty rate).
A
non-U.S. holder
of shares of common stock who wishes to claim the benefit of an
applicable treaty rate is required to satisfy applicable
certification and other requirements. If you are eligible for a
reduced rate of U.S. withholding tax pursuant to an income
tax treaty, you may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
Sale, exchange,
redemption, conversion or other disposition of notes or shares
of common stock
Any gain recognized on the sale, exchange, redemption or other
taxable disposition of a note or share of common stock and as
well as upon the conversion of a note into cash or into a
combination of cash and common stock generally will not be
subject to U.S. federal income tax unless:
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that gain is effectively connected with your conduct of a trade
or business in the United States (and, if required by an
applicable income tax treaty, is attributable to a
U.S. permanent establishment);
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you are an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or
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we are or have been a U.S. real property holding
corporation for U.S. federal income tax purposes.
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If you are an individual described in the first bullet point
above, you will be subject to tax on the net gain derived from
the sale, exchange, redemption, conversion or other taxable
disposition under regular graduated U.S. federal income tax
rates. If you are an individual described in the second bullet
point above, you will be subject to a flat 30% tax on the gain
72
derived from the sale, exchange, redemption, conversion or other
taxable disposition, which may be offset by U.S. source
capital losses, even though you are not considered a resident of
the United States. If you are a foreign corporation that falls
under the first bullet point above, you will be subject to tax
on your net gain in the same manner as if you were a
U.S. person as defined under the Code and, in addition, you
may be subject to the branch profits tax equal to 30% of your
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
Any common stock which you receive on the sale, exchange,
redemption, conversion or other disposition of a note which is
attributable to accrued interest will be subject to
U.S. federal income tax in accordance with the rules for
taxation of interest described above under Payments of
interest.
We believe that we are not and do not anticipate becoming a
U.S. real property holding corporation for
U.S. federal income tax purposes.
U.S. federal
estate tax
Your estate will not be subject to U.S. federal estate tax
on notes beneficially owned by you at the time of your death,
provided that any payment to you on the notes would be eligible
for exemption from the 30% U.S. federal withholding tax
under the portfolio interest rule described above
under Payments of interest without regard to the
statement requirement described in the last bullet point.
However, shares of common stock held by you at the time of your
death will be included in your gross estate for
U.S. federal estate tax purposes unless an applicable
estate tax treaty provides otherwise.
Information
reporting and backup withholding
Generally, we must report to the IRS and to you the amount of
interest and dividends paid to you and the amount of tax, if
any, withheld with respect to those payments. Copies of the
information returns reporting such interest payments and any
withholding may also be made available to the tax authorities in
the country in which you reside under the provisions of an
applicable income tax treaty.
In general, you will not be subject to backup withholding with
respect to payments of interest or dividends that we make to you
provided that we do not have actual knowledge or reason to know
that you are a U.S. person, as defined under the Code, and
we have received from you the statement described above in the
last bullet point under Payments of interest.
In addition, no information reporting or backup withholding will
be required regarding the proceeds of the sale of a note made
within the United States or conducted through certain
U.S.-related
financial intermediaries, if the payor receives the statement
described above and does not have actual knowledge or reason to
know that you are a U.S. person, as defined under the Code,
or you otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal
income tax liability provided the required information is
furnished to the IRS.
73
Plan of
distribution
We will not receive any of the proceeds of the sale of the
notes, including the related guarantee, and the common stock
issuable upon conversion of the notes offered by this
prospectus. The notes, including the related guarantees, and the
underlying common stock may be sold from time to time to
purchasers:
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directly by the selling securityholders; or
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through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers
of the notes and the underlying common stock.
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The selling securityholders and any underwriters, broker-dealers
or agents who participate in the distribution of the notes and
the common stock issuable upon conversion of the notes may be
deemed to be underwriters within the meaning of the
Securities Act. As a result, any profits on the sale of the
underlying common stock by the selling securityholders and any
discounts, commissions or concessions received by any such
broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act. If the
selling securityholders were deemed to be underwriters, the
selling securityholders may be subject to liabilities including,
but not limited to, those of Sections 11, 12 and 17 of the
Securities Act and
Rule 10b-5
under the Exchange Act.
If the notes and the common stock issuable upon conversion of
the notes are sold through underwriters or broker-dealers, the
selling securityholders will be responsible for underwriting
discounts or commissions or agents commissions.
The notes and the common stock issuable upon conversion of the
notes may be sold in one or more transactions at:
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fixed prices;
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prevailing market prices at the time of sale;
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varying prices determined at the time of sale; or
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negotiated prices.
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These sales may be effected in transactions:
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on any national securities exchange or quotation service on
which the notes and underlying common stock may be listed or
quoted at the time of sale, including the New York Stock
Exchange in the case of the underlying common stock;
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in the
over-the-counter
market;
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in transactions otherwise than on such exchanges or services or
in the
over-the-counter
market; or
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through the writing of options.
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These transactions may include block transactions or crosses.
Crosses are transactions in which the same broker acts as an
agent on both sides of the transaction.
74
In connection with the sales of the notes and the common stock
issuable upon conversion of the notes or otherwise, the selling
securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short
sales of the notes and the underlying common stock in the course
of hedging their positions. The selling securityholders may also
sell the notes and the underlying common stock short and deliver
the notes and the underlying common stock to close out short
positions, or loan or pledge notes and the underlying common
stock to broker-dealers that, in turn, may sell the notes and
the underlying common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any
underwriter, broker-dealer or agent regarding the sale of the
notes and the common stock issuable upon conversion of the notes
by the selling securityholders. The selling securityholders may
decide not to sell all or a portion of the notes and the
underlying common stock offered by them pursuant to this
prospectus or may decide not to sell notes or the underlying
common stock under this prospectus. In addition, any selling
securityholder may transfer, devise or give the notes and the
underlying common stock by other means not described in this
prospectus. Any notes or underlying common stock covered by this
prospectus that qualify for sale pursuant to Rule 144 or
Rule 144A of the Securities Act, or Regulation S under
the Securities Act, may be sold under Rule 144 or
Rule 144A or Regulation S rather than pursuant to this
prospectus.
Our common stock is currently traded on the New York Stock
Exchange under the ticker symbol CCC. We do not
intend to apply for listing of the notes on any securities
exchange or for inclusion of the notes in any automated
quotation system. The notes originally issued in the private
offering are eligible for trading on The
PORTALsm
Market of the National Association of Securities Dealers, Inc.
However, notes sold pursuant to this prospectus will no longer
be eligible for trading on The
PORTALsm
Market. Accordingly, no assurance can be given as to the
development of liquidity or any trading market for the notes.
The selling securityholders and any other persons participating
in the distribution of the notes or the common stock issuable
upon conversion of the notes will be subject to the Exchange
Act. The Exchange Act rules include, without limitation,
Regulation M, which may limit the timing of purchases and
sales of any of the notes and the underlying common stock by the
selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability
of any person engaged in the distribution of the notes and the
underlying common stock to engage in market-making activities
with respect to the particular notes and underlying common stock
being distributed for a period of up to five business days prior
to the commencement of such distribution. This may affect the
marketability of the notes and the underlying common stock and
the ability to engage in market-making activities with respect
to the notes and the underlying common stock.
Under the registration rights agreement entered into with the
initial purchasers of the notes issued in the private offering,
we agreed to, at our expense, use commercially reasonable
efforts to keep the registration statement of which this
prospectus is a part effective until the earliest of:
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the date when the holders of transfer restricted notes and
shares of common stock issuable upon conversion of the notes are
able to sell all such securities immediately without restriction
under Rule 144(k) under the Securities Act;
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the date when all transfer restricted notes and shares of common
stock issuable upon conversion of the notes are registered under
the registration statement of which this prospectus is a part
and sold pursuant to such registration statement; and
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the date when all transfer restricted notes and shares of common
stock issuable upon conversion of the notes have ceased to be
outstanding (whether as a result of repurchase and cancellation,
conversion or otherwise).
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We may suspend the holders use of the prospectus for a
period not to exceed 45 days in any
90-day
period, and not to exceed an aggregate of 90 days in any
360-day
period, if
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the prospectus would, in our reasonable judgment, contain a
material misstatement or omission as a result of an event that
has occurred and is continuing, and
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we reasonably determine that the disclosure of this material
non-public information would have a material adverse effect on
us and our subsidiaries taken as a whole.
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However, if the disclosure relates to a previously undisclosed
proposed or pending material business transaction, the
disclosure of which would impede our ability to consummate such
transaction, we may extend the suspension period from
45 days to 60 days. Each holder, by its acceptance of
the notes, agrees to hold any communication by us in confidence.
Under the registration rights agreement we entered into in
connection with the issuance of the notes, we and the selling
securityholders will each indemnify the other against certain
liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection with
these liabilities.
We also agreed to pay liquidated damages to certain holders of
the notes and the shares of common stock issuable upon
conversion of the notes if the prospectus is unavailable for
periods in excess of those permitted.
We have agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the notes
and the common stock issuable upon conversion of the notes to
the public, other than commissions, fees and discounts of
underwriters, brokers, dealers and agents.
Legal
matters
The validity of the issuance of the notes, including the related
guarantees and the common stock issuable upon conversion of the
notes, will be passed upon for us by Kirkpatrick &
Lockhart Preston Gates Ellis LLP, Pittsburgh, Pennsylvania.
Experts
Except as noted below for Chemviron Carbon Limited and
subsidiaries (Chemviron UK), as of December 31,
2005 and for the years ended December 1, 2005 and 2004, the
consolidated financial statements of Calgon Carbon Corporation
and subsidiaries (the Company), as of
December 31, 2006 and December 31, 2005, and for each
of the three years in the period ended December 31, 2006
and managements report on the effectiveness of internal
control over financial reporting as of December 31, 2006,
appearing herein and the related financial statement schedule
incorporated by reference in this prospectus from the
Companys annual
76
report on Form
10-K for the
year ended December 31, 2006, have been audited by
Deloitte & Touche, LLP as stated in their reports
(which reports (1) express an unqualified opinion on the
financial statements and financial statement schedule and
include an explanatory paragraph regarding the Companys
adoption of two new accounting standards, (2) express an
unqualified opinion on managements assessment regarding
the effectiveness of internal control over financial reporting,
and (3) express an unqualified opinion on the effectiveness
of internal control over financial reporting). The financial
statements of Chemviron UK as of December 31, 2005 and for
the years ended December 31, 2005 and 2004 (consolidated
with those of the Company) have been audited by KPMG LLP as
stated in their report appearing herein. Such financial
statements of the Company are included herein and the financial
statement schedule is incorporated by reference herein in
reliance upon the respective reports of such firms given their
authority as experts in accounting and auditing. All of the
foregoing firms are independent registered public accounting
firms.
Available
information
We file annual, quarterly and special reports, proxy statements,
and other documents with the SEC under the Exchange Act. Our SEC
filings and exhibits thereto are available to the public at the
SECs website at www.sec.gov. You may also read and copy
any document we file at the SEC public reference room located at
100 F Street, N.E., Washington, D.C. 20549 or at the
SECs website (www.sec.gov).
Incorporation of
certain documents by reference
This prospectus incorporates by reference certain
information we file with the SEC under the Exchange Act. This
means that we are disclosing important information to you by
referring you to these filings. The information we incorporate
by reference is considered a part of this prospectus, and
subsequent information that we file with the SEC will
automatically update and supersede this information.
Any statement contained in a document incorporated or considered
to be incorporated by reference in this prospectus shall be
considered to be modified or superseded for purposes of this
prospectus to the extent a statement contained in this
prospectus or in any other subsequently filed document that is
or is considered to be incorporated by reference in this
prospectus modifies or supersedes such statement.
We incorporate by reference the following documents that we have
filed with the SEC:
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our Annual Report on
Form 10-K
(except for Item 8), including information specifically
incorporated by reference into our
Form 10-K
from our Proxy Statement for our Annual Meeting of Stockholders
to be held on May 17, 2007, for the fiscal year ended
December 31, 2006;
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our Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007;
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our Current Reports on
Form 8-K
filed on January 30, February 26, March 7, 21 and
30, April 26, May 18, June 25 and 27 and
July 5, 2007;
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the description of our common stock contained in our Current
Report on
Form 8-K
filed on February 16, 1996; and
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our Registration Statement on
Form 8-A
filed with the SEC on January 28, 2005.
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In addition, we incorporate by reference any future filings we
make with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this prospectus until
all of the notes to which this prospectus relates have been sold
or the offering is otherwise terminated. We will provide free
copies of any of those documents, if you write or telephone us
at: Calgon Carbon Corporation, Attention: Dennis
Sheedy, Esq., P.O. Box 717, Pittsburgh, Pennsylvania
15230-0717.
Pursuant to General Instruction B of
Form 8-K,
any information submitted under Item 2.02, Results of
Operations and Financial Condition, or Item 7.01,
Regulation FD Disclosure, of
Form 8-K
is not deemed to be filed for the purpose of
Section 18 of the Exchange Act, and we are not subject to
the liabilities of Section 18 with respect to information
submitted under Item 2.02 or Item 7.01 of
Form 8-K.
We are not incorporating by reference any information submitted
under Item 2.02 or Item 7.01 of
Form 8-K
into any filing under the Securities Act or the Exchange Act or
into this prospectus.
Statements contained in this prospectus as to the contents of
any contract or other document referred to in this prospectus do
not purport to be complete, and where reference is made to the
particular provisions of that contract or other document, those
references are qualified in all respects by reference to all of
the provisions contained in that contract or other document. Any
statement contained in a document incorporated by reference, or
deemed to be incorporated by reference, into this prospectus
will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is incorporated
by reference in this prospectus modifies or supersedes that
statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a
part of this prospectus.
78
Index to
consolidated financial statements
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Page
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F-2
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F-3
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F-4
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F-6
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F-7
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F-8
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F-9
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F-10
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F-11
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F-12
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F-1
Explanatory
note
Effective December 31, 2006, we adopted Statement of
Financial Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements Nos. 87, 88, 106 and
132(R) (SFAS 158). SFAS 158 required
us to record a transition adjustment to recognize the funded
status of postretirement defined benefit plans, measured as the
difference between the fair value of plan assets and the benefit
obligations, in our balance sheet after adjusting for
derecognition of our minimum pension liability as of
December 31, 2006. We complied with the provisions of
SFAS 158; however, we incorrectly presented the effect of
this transition adjustment as part of 2006 comprehensive income
on our Consolidated Statements of Income and Comprehensive
Income (Loss) included in Item 8 of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006. The impact of
removing the SFAS 158 transition adjustment from the 2006
Consolidated Statements of Income and Comprehensive Income
(Loss) changes the reported comprehensive income (loss) from
$(3,935,000) to $1,440,000. The Consolidated Statements of
Income and Comprehensive Income (Loss) set forth in this
prospectus on
page F-8
correctly presents 2006 comprehensive income (loss) excluding
the SFAS 158 transition adjustment. The reported net loss
of $(7,798,000) for 2006 and the related loss per share of
$(.20) are unaffected by this change. There are no other changes
to the Consolidated Statements of Income and Comprehensive
Income (Loss) included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, other than
this correction of 2006 comprehensive income.
F-2
Report of
management
Responsibility for Preparation of the Financial Statements and
Establishing and Maintaining Adequate Internal Control Over
Financial Reporting
Responsibility
for financial statements
Management is responsible for the preparation of the financial
statements included in this Annual Report. The Consolidated
Financial Statements were prepared in accordance with accounting
principles generally accepted in the United States of America
and include amounts that are based on the best estimates and
judgments of management. The Notes to the Consolidated Financial
Statements contained within this Annual Report are consistent
with the Consolidated Financial Statements.
Managements
annual report on internal control over financial
reporting
Management is responsible for establishing and maintaining
adequate internal controls over financial reporting. The
Companys internal control system is designed to provide
reasonable assurance concerning the reliability of the financial
data used in the preparation of the Companys financial
statements, as well as reasonable assurance with respect to
safeguarding the Companys assets from unauthorized use or
disposition. However, no matter how well designed and operated,
an internal control system can provide only reasonable, not
absolute, assurance that the objectives of the control system
are met.
Management conducted an evaluation of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2006. In making this evaluation, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
ControlIntegrated Framework. Managements evaluation
included reviewing the documentation of our controls, evaluating
the design effectiveness of controls, and testing their
operating effectiveness. Based on this evaluation, management
believes that, as of December 31, 2006, the Companys
internal controls over financial reporting were effective and
provide reasonable assurance that the accompanying financial
statements do not contain any material misstatement.
Managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2006,
has been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, who also audited
our consolidated financial statements. Deloitte &
Touche LLPs attestation report on managements
assessment of our internal control over financial reporting
appears below.
Material weakness
previously identified
As previously reported in our quarterly report on
Form 10-Q
for the period ended September 30, 2006, on
October 30, 2006, management and the Audit Committee of the
Company determined that as of September 30, 2006, a
material weakness existed in internal control over financial
reporting related to the calculation of the Companys
interim tax provision. This determination resulted from errors
identified in the quarterly tax provision calculation for the
quarters ended March 31 and June 30, 2006, respectively.
Changes in
internal control
During the most recent fiscal quarter ended December 31,
2006, the Company completed its remediation related to the
material weakness identified above related to the calculation of
the Companys interim tax provision. Pursuant to Exchange
Act
Rule 13a-15(d),
this effort constituted a material change to the internal
control structure.
F-3
Internal
controlsreport of independent registered
public accounting firm
To the Board of Directors and Stockholders of
Calgon Carbon Corporation
Pittsburgh, Pennsylvania
We have audited managements assessment, included in the
accompanying Managements Annual Report on Internal
Control over Financial Reporting, included in the Report
of Management, that Calgon Carbon Corporation and
subsidiaries (the Company) maintained effective
internal control over financial reporting as of
December 31, 2006, based on criteria established in
Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
F-4
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2006, is fairly stated, in all material
respects, based on the criteria established in Internal
ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our
opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2006, based on the criteria established in
Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States) the
consolidated financial statements as of and for the year ended
December 31, 2006 of the Company and our report dated
April 24, 2007 (July 5, 2007 as to Note 1)
expressed an unqualified opinion on those financial statements
and includes an explanatory paragraph regarding the
Companys adoption of two new accounting standards.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
April 24, 2007
F-5
Financial
statementsreport of independent registered public
accounting firm
To the Board of Directors and Stockholders of
Calgon Carbon Corporation
Pittsburgh, Pennsylvania
We have audited the accompanying consolidated balance sheets of
Calgon Carbon Corporation and subsidiaries (the
Company) as of December 31, 2006 and 2005, and
the related consolidated statements of income and comprehensive
income, shareholders equity, and cash flows for each of
the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on the financial statements based on our audits. We did
not audit the consolidated financial statements of Chemviron
Carbon Ltd. and subsidiaries (Chemviron UK) as of
and for the years ending December 31, 2005 and 2004, which
statements reflect total assets constituting 9 percent of
consolidated total assets as of December 31, 2005, and
total revenues constituting 12 percent and 11 percent
of consolidated total revenues for the years ended
December 31, 2005 and 2004, respectively. Those
consolidated financial statements were audited by other auditors
whose report was furnished to us, and our opinion, insofar as it
relates to the amounts included for such subsidiary Chemviron
UK, is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards 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. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, such consolidated financial statements present fairly,
in all material respects, the financial position of Calgon
Carbon Corporation and subsidiaries as of December 31, 2006
and 2005, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2006, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial
statements, on January 1, 2006, the Company adopted the
provisions of Statement of Financial Accounting Standards
No. 123(R), Share-Based Payment and on
December 31, 2006, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2006, based on the
criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
April 24, 2007 expressed an unqualified opinion on
managements assessment of the effectiveness of the
Companys internal control over financial reporting and an
unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
April 24, 2007 (July 5, 2007 as to Note 1)
F-6
Financial
statementsreport of independent registered public
accounting firm
The Board of Directors and Stockholders
Chemviron Carbon Limited
We have audited the accompanying consolidated balance sheet of
Chemviron Carbon Limited and subsidiaries as of
December 31, 2005, and the related consolidated statements
of income, shareholders equity, and cash flows for the
years ended December 31, 2005 and 2004. These consolidated
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards 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. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Chemviron Carbon Limited and subsidiaries as of
December 31, 2005, and the results of their operations and
their cash flows for the years ended December 31, 2005 and
2004 in conformity with U.S. generally accepted accounting
principles.
KPMG LLP
Manchester, United Kingdom
April 24, 2007
F-7
Consolidated
statements of income and
comprehensive income (loss)
Calgon Carbon Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended
December 31,
|
|
(Dollars
in thousands except per share data)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Net Sales
|
|
$
|
316,122
|
|
|
$
|
290,835
|
|
|
$
|
295,877
|
|
|
|
|
|
|
|
Cost of products sold (excluding
depreciation)
|
|
|
236,673
|
|
|
|
215,330
|
|
|
|
207,523
|
|
Depreciation and amortization
|
|
|
18,933
|
|
|
|
21,042
|
|
|
|
22,004
|
|
Selling, general and
administrative expenses
|
|
|
62,003
|
|
|
|
59,547
|
|
|
|
54,543
|
|
Research and development exercises
|
|
|
4,248
|
|
|
|
4,506
|
|
|
|
3,801
|
|
(Gain) loss from insurance
settlement (Note 3)
|
|
|
(8,072
|
)
|
|
|
1,000
|
|
|
|
|
|
Goodwill impairment charge
(Note 8)
|
|
|
6,940
|
|
|
|
|
|
|
|
|
|
Gulf Coast facility impairment
charge (Note 7)
|
|
|
|
|
|
|
2,158
|
|
|
|
|
|
Restructuring charges (Note 4)
|
|
|
7
|
|
|
|
412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320,732
|
|
|
|
303,995
|
|
|
|
287,871
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
|
(4,610
|
)
|
|
|
(13,160
|
)
|
|
|
8,006
|
|
Interest income
|
|
|
822
|
|
|
|
719
|
|
|
|
697
|
|
Interest expense
|
|
|
(5,977
|
)
|
|
|
(4,891
|
)
|
|
|
(3,409
|
)
|
Other expensenet
|
|
|
(2,209
|
)
|
|
|
(2,138
|
)
|
|
|
(3,238
|
)
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes, equity in income (loss), and
minority interest
|
|
|
(11,974
|
)
|
|
|
(19,470
|
)
|
|
|
2,056
|
|
Income tax benefit (Note 15)
|
|
|
(2,676
|
)
|
|
|
(9,688
|
)
|
|
|
(846
|
)
|
|
|
|
|
|
|
Income (loss) from continuing
operations before equity in income (loss) and minority interest
|
|
|
(9,298
|
)
|
|
|
(9,782
|
)
|
|
|
2,902
|
|
Equity in income (loss) of equity
investments
|
|
|
286
|
|
|
|
(725
|
)
|
|
|
1,000
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
(9,012
|
)
|
|
|
(10,507
|
)
|
|
|
3,968
|
|
Income from discontinued
operations (Note 5)
|
|
|
1,214
|
|
|
|
3,091
|
|
|
|
1,920
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(7,798
|
)
|
|
|
(7,416
|
)
|
|
|
5,888
|
|
Other comprehensive income (loss),
net of tax provision (benefit) of $2,752, ($3,019), and ($816),
respectively
|
|
|
9,238
|
|
|
|
(9,811
|
)
|
|
|
3,939
|
|
|
|
|
|
|
|
Comprehensive income (loss)
(2006 restated, see Note 1)
|
|
$
|
1,440
|
|
|
$
|
(17,227
|
)
|
|
$
|
9,827
|
|
|
|
|
|
|
|
Basic and diluted income (loss)
from continuing operations per common share
|
|
$
|
(.23
|
)
|
|
$
|
(.27
|
)
|
|
$
|
.10
|
|
Income from discontinued
operations per common share
|
|
|
.03
|
|
|
|
.08
|
|
|
|
.05
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per common share
|
|
$
|
(.20
|
)
|
|
$
|
(.19
|
)
|
|
$
|
.15
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, in thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
39,927
|
|
|
|
39,615
|
|
|
|
39,054
|
|
Diluted
|
|
|
39,927
|
|
|
|
39,615
|
|
|
|
39,456
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial
statements.
F-8
Consolidated
balance sheets
Calgon Carbon Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars
in thousands except per share data)
|
|
2006
|
|
|
2005
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,631
|
|
|
$
|
5,446
|
|
Receivables, net of allowance for
losses of $1,981 and $2,172
|
|
|
55,036
|
|
|
|
51,224
|
|
Revenue recognized in excess of
billings on uncompleted contracts
|
|
|
7,576
|
|
|
|
5,443
|
|
Inventories
|
|
|
70,339
|
|
|
|
67,655
|
|
Deferred income taxescurrent
|
|
|
5,761
|
|
|
|
8,448
|
|
Other current assets
|
|
|
4,369
|
|
|
|
6,044
|
|
Assets held for sale (Note 5)
|
|
|
|
|
|
|
21,340
|
|
|
|
|
|
|
|
Total current assets
|
|
|
148,712
|
|
|
|
165,600
|
|
Property, plant and equipment, net
|
|
|
106,101
|
|
|
|
108,745
|
|
Equity investments
|
|
|
6,971
|
|
|
|
7,219
|
|
Intangibles
|
|
|
8,521
|
|
|
|
10,049
|
|
Goodwill
|
|
|
27,497
|
|
|
|
33,874
|
|
Deferred income taxeslong term
|
|
|
20,225
|
|
|
|
18,684
|
|
Other assets
|
|
|
4,337
|
|
|
|
3,697
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
322,364
|
|
|
$
|
347,868
|
|
|
|
|
|
|
|
Liabilities and
Shareholders Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
|
36,614
|
|
|
|
36,479
|
|
Billings in excess of revenue
recognized on uncompleted contracts
|
|
|
2,516
|
|
|
|
3,933
|
|
Accrued interest
|
|
|
1,440
|
|
|
|
23
|
|
Payroll and benefits payable
|
|
|
6,533
|
|
|
|
11,396
|
|
Accrued income taxes
|
|
|
8,423
|
|
|
|
10,783
|
|
Liabilities held for sale
(Note 5)
|
|
|
|
|
|
|
6,683
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
55,526
|
|
|
|
69,297
|
|
Long-term debt
|
|
|
74,836
|
|
|
|
83,925
|
|
Deferred income taxeslong term
|
|
|
1,679
|
|
|
|
1,389
|
|
Accrued pension and other
liabilities
|
|
|
42,450
|
|
|
|
42,697
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
174,491
|
|
|
|
197,308
|
|
|
|
|
|
|
|
Commitments and contingencies
(Notes 11 and 20)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common shares, $.01 par value,
100,000,000 shares authorized, 42,550,290 and
42,459,733 shares issued
|
|
|
425
|
|
|
|
425
|
|
Additional paid-in capital
|
|
|
70,851
|
|
|
|
69,906
|
|
Retained earnings
|
|
|
94,035
|
|
|
|
101,833
|
|
Accumulated other comprehensive
income
|
|
|
10,305
|
|
|
|
6,442
|
|
Deferred compensation
|
|
|
(506
|
)
|
|
|
(917
|
)
|
|
|
|
|
|
|
|
|
|
175,110
|
|
|
|
177,689
|
|
Treasury stock, at cost, 2,819,690
and 2,787,258 shares
|
|
|
(27,237
|
)
|
|
|
(27,129
|
)
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
147,873
|
|
|
|
150,560
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
322,364
|
|
|
$
|
347,868
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial
statements.
F-9
Consolidated
statements of cash flows
Calgon Carbon Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
(Dollars
in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(7,798
|
)
|
|
$
|
(7,416
|
)
|
|
$
|
5,888
|
|
Adjustments to reconcile net income
(loss) to net cash (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on insurance settlement
|
|
|
(8,072
|
)
|
|
|
|
|
|
|
|
|
Gain from divestitures
|
|
|
(6,719
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
18,935
|
|
|
|
22,062
|
|
|
|
23,126
|
|
Noncash impairment and
restructuring charge
|
|
|
7,728
|
|
|
|
2,976
|
|
|
|
|
|
Equity in (income) loss from equity
investments
|
|
|
(286
|
)
|
|
|
725
|
|
|
|
(1,000
|
)
|
Distributions received from equity
investments
|
|
|
|
|
|
|
254
|
|
|
|
|
|
Employee benefit plan provisions
|
|
|
3,285
|
|
|
|
4,046
|
|
|
|
4,580
|
|
Changes in assets and
liabilitiesnet of effects from purchase of businesses and
foreign exchange:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in receivables
|
|
|
3,232
|
|
|
|
4,273
|
|
|
|
(3,469
|
)
|
Increase in inventories
|
|
|
(1,508
|
)
|
|
|
(13,009
|
)
|
|
|
(2,076
|
)
|
Decrease in revenue in excess of
billings on uncompleted contracts and other current assets
|
|
|
2,800
|
|
|
|
2,787
|
|
|
|
1,410
|
|
Decrease in restructuring reserve
|
|
|
(293
|
)
|
|
|
(498
|
)
|
|
|
(336
|
)
|
(Decrease) increase in accounts
payable and accrued liabilities
|
|
|
(6,631
|
)
|
|
|
5,346
|
|
|
|
(2,606
|
)
|
Decrease in long-term deferred
income taxes
|
|
|
(973
|
)
|
|
|
(6,284
|
)
|
|
|
(2,373
|
)
|
Decrease in accrued pensions and
other liabilities
|
|
|
(11,395
|
)
|
|
|
(4,532
|
)
|
|
|
(4,908
|
)
|
Other itemsnet
|
|
|
1,910
|
|
|
|
2,110
|
|
|
|
1,838
|
|
|
|
|
|
|
|
Net cash (used in) provided by
operating activities
|
|
|
(5,785
|
)
|
|
|
12,840
|
|
|
|
20,074
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of businesses (net of cash)
|
|
|
|
|
|
|
(856
|
)
|
|
|
(35,250
|
)
|
Purchase of intangible assets
|
|
|
|
|
|
|
|
|
|
|
(687
|
)
|
Proceeds from divestitures
|
|
|
21,265
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
expenditures
|
|
|
(12,855
|
)
|
|
|
(15,996
|
)
|
|
|
(12,413
|
)
|
Proceeds from insurance settlement
for property and equipment
|
|
|
4,595
|
|
|
|
|
|
|
|
|
|
Proceeds from disposals of
property, plant and equipment
|
|
|
1,205
|
|
|
|
1,356
|
|
|
|
1,527
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
14,210
|
|
|
|
(15,496
|
)
|
|
|
(46,823
|
)
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
156,517
|
|
|
|
108,821
|
|
|
|
171,900
|
|
Repayments of borrowings
|
|
|
(165,606
|
)
|
|
|
(109,496
|
)
|
|
|
(141,561
|
)
|
Treasury stock purchased
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
(3,555
|
)
|
|
|
(4,685
|
)
|
Common stock issued
|
|
|
464
|
|
|
|
3,050
|
|
|
|
856
|
|
|
|
|
|
|
|
Net cash (used in) provided by
financing activities
|
|
|
(8,733
|
)
|
|
|
(1,180
|
)
|
|
|
26,510
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash
|
|
|
493
|
|
|
|
502
|
|
|
|
65
|
|
|
|
|
|
|
|
Increase (decrease) in cash and
cash equivalents
|
|
|
185
|
|
|
|
(3,334
|
)
|
|
|
(174
|
)
|
|
|
|
|
|
|
Cash and cash equivalents,
beginning of year
|
|
|
5,446
|
|
|
|
8,780
|
|
|
|
8,954
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
year
|
|
|
5,631
|
|
|
$
|
5,446
|
|
|
$
|
8,780
|
|
|
|
|
|
|
|
Noncash transactions from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of an additional 20%
interest in Datong Carbon Corporation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
745
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial
statements.
F-10
Consolidated
statements of shareholders equity
Calgon Carbon Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
Additional
|
|
|
|
|
Deferred
|
|
|
other
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
thousands,
|
|
shares
|
|
Common
|
|
paid-in
|
|
Retained
|
|
|
compen-
|
|
|
comprehensive
|
|
|
|
|
|
Treasury
stock
|
|
|
|
|
except per share
data)
|
|
issued
|
|
shares
|
|
capital
|
|
earnings
|
|
|
sation
|
|
|
income
|
|
|
Sub-total
|
|
|
Shares
|
|
Amount
|
|
|
Total
|
|
|
|
|
Balance, December 31, 2003
|
|
|
41,793,683
|
|
$
|
418
|
|
$
|
64,669
|
|
$
|
111,601
|
|
|
$
|
|
|
|
$
|
12,314
|
|
|
$
|
189,002
|
|
|
|
2,787,258
|
|
$
|
(27,129
|
)
|
|
$
|
161,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
5,888
|
|
|
|
|
|
|
|
|
|
|
|
5,888
|
|
|
|
|
|
|
|
|
|
|
5,888
|
|
Employee and director stock plans
|
|
|
165,250
|
|
|
2
|
|
|
854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
856
|
|
|
|
|
|
|
|
|
|
|
856
|
|
Common stock dividends Cash ($0.12
per share)
|
|
|
|
|
|
|
|
|
|
|
|
(4,685
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,685
|
)
|
|
|
|
|
|
|
|
|
|
(4,685
|
)
|
Translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,421
|
|
|
|
5,421
|
|
|
|
|
|
|
|
|
|
|
5,421
|
|
Additional minimum pension
liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,380
|
)
|
|
|
(1,380
|
)
|
|
|
|
|
|
|
|
|
|
(1,380
|
)
|
Unrecognized loss on derivatives,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
(102
|
)
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
|
|
|
|
Balance, December 31, 2004
|
|
|
41,958,933
|
|
$
|
420
|
|
$
|
65,523
|
|
$
|
112,804
|
|
|
$
|
|
|
|
$
|
16,253
|
|
|
$
|
195,000
|
|
|
|
2,787,258
|
|
$
|
(27,129
|
)
|
|
$
|
167,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(7,416
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,416
|
)
|
|
|
|
|
|
|
|
|
|
(7,416
|
)
|
Employee and director stock plans
|
|
|
500,800
|
|
|
5
|
|
|
4,383
|
|
|
|
|
|
|
(1,338
|
)
|
|
|
|
|
|
|
3,050
|
|
|
|
|
|
|
|
|
|
|
3,050
|
|
Employee and director deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
421
|
|
|
|
|
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
421
|
|
Common stock dividends Cash ($0.06
per share)
|
|
|
|
|
|
|
|
|
|
|
|
(3,555
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,555
|
)
|
|
|
|
|
|
|
|
|
|
(3,555
|
)
|
Translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,799
|
)
|
|
|
(4,799
|
)
|
|
|
|
|
|
|
|
|
|
(4,799
|
)
|
Additional minimum pension
liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,856
|
)
|
|
|
(4,856
|
)
|
|
|
|
|
|
|
|
|
|
(4,856
|
)
|
Unrecognized loss on derivatives,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
(156
|
)
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
42,459,733
|
|
$
|
425
|
|
$
|
69,906
|
|
$
|
101,833
|
|
|
$
|
(917
|
)
|
|
$
|
6,442
|
|
|
$
|
177,689
|
|
|
|
2,787,258
|
|
$
|
(27,129
|
)
|
|
$
|
150,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(7,798
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,798
|
)
|
|
|
|
|
|
|
|
|
|
(7,798
|
)
|
Translation adjustments, net of
tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,644
|
|
|
|
4,644
|
|
|
|
|
|
|
|
|
|
|
4,644
|
|
Additional minimum pension
liability, net of tax (See Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,790
|
|
|
|
4,790
|
|
|
|
|
|
|
|
|
|
|
4,790
|
|
Unrecognized loss on
derivatives, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(196
|
)
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
(196
|
)
|
Cumulative effect adjustment due
to the adoption of SFAS No. 158, net of tax (See
Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,375
|
)
|
|
|
(5,375
|
)
|
|
|
|
|
|
|
|
|
|
(5,375
|
)
|
Employee and director stock
plans
|
|
|
90,557
|
|
|
|
|
|
945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945
|
|
|
|
|
|
|
|
|
|
|
945
|
|
Employee and director deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
411
|
|
|
|
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
411
|
|
Treasury stock
purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,432
|
|
|
(108
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
Balance, December 31,
2006
|
|
|
42,550,290
|
|
$
|
425
|
|
$
|
70,851
|
|
$
|
94,035
|
|
|
$
|
(506
|
)
|
|
$
|
10,305
|
|
|
$
|
175,110
|
|
|
|
2,819,690
|
|
$
|
(27,237
|
)
|
|
$
|
147,873
|
|
|
|
The accompanying notes are an
integral part of these consolidated financial
statements.
F-11
Notes to the
consolidated financial statements
Calgon Carbon Corporation
|
|
1.
|
Summary of
accounting policies
|
Operations
Calgon Carbon Corporation (the Company) is a global
leader in services and solutions for purifying water and air,
food, beverage, and industrial process streams. The
Companys operations are principally conducted in three
business segments: Activated Carbon and Service, Equipment, and
Consumer. Each of these segments includes the production, design
and marketing of products and services specifically developed
for the purification, separation and concentration of liquids
and gases. The Activated Carbon and Service segment relies on
activated carbon as a base material, while Equipment relies on a
variety of other methods and materials which involve other
materials in addition to activated carbon. The Consumer segment
brings the Companys purification technologies directly to
the consumer in the form of products and services. The
Companys largest markets are in the United States, Europe,
and Japan. The Company also markets in Africa, Canada, India,
Latin America, and Asia.
Principles of
consolidation
The consolidated financial statements include the accounts of
Calgon Carbon Corporation and its wholly owned subsidiaries,
Chemviron Carbon GmbH, Calgon Carbon Canada, Inc., Chemviron
Carbon Ltd., Calgon Carbon Investments Inc., Solarchem
Environmental Systems Inc., Charcoal Cloth (International)
Limited, Charcoal Cloth Ltd., Advanced Separation Technologies
Inc., Calgon Carbon (Tianjin) Co., Ltd., Calgon Carbon Asia
Ltd., Waterlink UK Holdings Ltd., Sutcliffe Croftshaw Ltd.,
Sutcliffe Speakman Ltd., Sutcliffe Speakman Carbons Ltd.,
Lakeland Processing Ltd., and Sutcliffe Speakmanco 5 Ltd. In
December 2004, the Company increased its equity ownership in
Datong Carbon Corporation from 80% to 100% for a purchase price
of $0.7 million which resulted in the Company recording
additional goodwill of $0.4 million. The Company has a 49%
ownership stake in a joint venture with Mitsubishi Chemical
Corporation named Calgon Mitsubishi Chemical Corporation (CMCC).
CMCC is accounted for in the Companys financial statements
under the equity method. In May 2005, the Company formed a joint
venture company with C. Gigantic Carbon. The joint venture
company was named Calgon Carbon (Thailand) Ltd. and is 20% owned
by the Company which is accounted for in the Companys
financial statements under the equity method. Intercompany
accounts and transactions have been eliminated. Certain of the
Companys international operations in Europe are owned
directly by the Company and are operated as branches.
Foreign
currency
Substantially all assets and liabilities of the Companys
international operations are translated at year-end exchange
rates; income and expenses are translated at average exchange
rates prevailing during the year. Translation adjustments
represent other comprehensive income or loss and are accumulated
in a separate component of shareholders equity, net of tax
effects. Transaction gains and losses are included in other
expense-net.
F-12
Revenue
recognition
Revenue and related costs are recognized when goods are shipped
or services are rendered to customers provided that ownership
and risk of loss have passed to the customer. Revenue for major
equipment projects is recognized under the percentage of
completion method. The Companys major equipment projects
generally have a long project life cycle from bid solicitation
to project completion. The nature of the contracts are generally
fixed price with milestone billings. The Company recognizes
revenue for these projects based on the fixed sales prices
multiplied by the percentage of completion. In applying the
percentage-of-completion method, a projects percent
complete as of any balance sheet date is computed as the ratio
of total costs incurred to date divided by the total estimated
costs at completion. As changes in the estimates of total costs
at completion
and/or
estimated total losses on projects are identified, appropriate
earnings adjustments are recorded during the period that the
change or loss is identified. The Company has a history of
making reasonably dependable estimates of costs at completion on
contracts that follow the percentage-of-completion method;
however, due to uncertainties inherent in the estimation
process, it is possible that estimated project costs at
completion could vary from estimates. The principal components
of costs include material, direct labor, subcontracts, and
allocated indirect costs. Indirect costs primarily consist of
administrative labor and associated operating expenses, which
are allocated to the respective projects on actual hours charged
to the project utilizing a standard hourly rate.
Allowance for
doubtful accounts
The Company maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers
to make required payments. The amount of allowance recorded is
based upon a quarterly review of specific customer transactions
that remain outstanding at least three months beyond their
respective due dates.
Inventories
Inventories are carried at the lower of cost or market.
Inventory costs are primarily determined using the
first-in,
first-out (FIFO) method.
Property, plant
and equipment
Property, plant and equipment are recorded at cost. Repair and
maintenance costs are expensed as incurred. Depreciation for
financial reporting purposes is computed on the straight-line
method over the estimated service lives of the assets, which are
from 10 to 30 years for land improvements and buildings
including leasehold improvements, 5 to 30 years for
furniture, and machinery and equipment, 10 to 15 years for
customer capital, 5 to 15 years for transportation
equipment, and 5 to 10 years for computer hardware and
software.
Goodwill and
other intangible assets
Goodwill represents the excess of the cost of an acquired
business over the fair value of the identifiable tangible and
intangible assets acquired and liabilities assumed in a business
combination. Identifiable intangible assets acquired in business
combinations are recorded based on their fair values at the date
of acquisition. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets
(SFAS No. 142), goodwill and identifiable
intangible assets with indefinite lives are not subject to
amortization
F-13
but must be evaluated for impairment. None of the Companys
identifiable intangible assets other than goodwill have
indefinite lives.
The Company tests goodwill for impairment at least annually by
initially comparing the fair value of each of the Companys
reporting units to their related carrying values. If the fair
value of the reporting unit is less than its carrying value, the
Company performs an additional step to determine the implied
fair value of the goodwill. The implied fair value of goodwill
is determined by first allocating the fair value of the
reporting unit to all of the assets and liabilities of the unit
and then computing the excess of the units fair value over
the amounts assigned to the assets and liabilities. If the
carrying value of goodwill exceeds the implied fair value of
goodwill, such excess represents the amount of goodwill
impairment, and the Company recognizes such impairment
accordingly. Fair values are estimated using discounted cash
flow and other valuation methodologies that are based on
projections of the amounts and timing of future revenues and
cash flows, assumed discount rates and other assumptions as
deemed appropriate. The Company considers such factors as
historical performance, anticipated market conditions, operating
expense trends and capital expenditure requirements.
The Companys identifiable intangible assets other than
goodwill have finite lives. Certain of these intangible assets,
such as customer relationships, are amortized using an
accelerated methodology while others, such as patents, are
amortized on a straight-line basis over their estimated useful
lives. In addition, intangible assets with finite lives are
evaluated for impairment whenever events or circumstances
indicate that their carrying amount may not be recoverable, as
prescribed by SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS No. 144).
Long-lived
assets
The Company evaluates long-lived assets under the provisions of
SFAS No. 144, which addresses financial accounting and
reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of. For assets to be held and
used, the Company groups a long-lived asset or assets with other
assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash
flows of other assets and liabilities. An impairment loss for an
asset group reduces only the carrying amounts of a long-lived
asset or assets of the group being evaluated. The loss is
allocated to the long-lived assets of the group on a pro-rata
basis using the relative carrying amounts of those assets,
except that the loss allocated to an individual long-lived asset
of the group does not reduce the carrying amount of that asset
below its fair value whenever that fair value is determinable
without undue cost and effort. Estimates of future cash flows
used to test the recoverability of a long-lived asset group
include only the future cash flows that are directly associated
with and that are expected to arise as a direct result of the
use and eventual disposition of the asset group. The future cash
flow estimates used by the Company exclude interest charges. A
long-lived asset to be disposed of other than by sale shall
continue to be classified as held and used until it is disposed
of. A long-lived asset or group of assets classified as held for
sale shall be measured at the lower of its carrying amount or
fair value less cost to sell.
Income
taxes
The Company provides an estimate for income taxes based on an
evaluation of the underlying accounts, its tax filing positions,
and interpretations of existing law. The Company also provides
for estimated income tax exposure associated with uncertainty in
tax positions taken by the
F-14
Company when it is probable that the Companys tax position
will not be sustained upon examination by tax authorities. The
Company believes that its primary exposures for uncertain tax
positions involve intercompany loans owed to a Controlled
Foreign Corporation (CFC) for periods prior to 2005,
differing computation methodologies for the extraterritorial
income exclusion and research and development tax credits, which
have not yet been utilized for tax purposes. While the Company
believes that its tax positions have merit, it has accrued for
its estimated exposure accordingly. Changes in estimates are
reflected in the year of settlement or expiration of the statute
of limitations. The Company does not believe that the resolution
of existing unresolved tax matters will have a material impact
on the consolidated financial condition of the Company, although
a resolution could have a material impact on the Companys
consolidated statement of income and comprehensive income for a
particular future period and on the Companys effective tax
rate.
Deferred tax assets and liabilities are recognized for the
future tax consequences of temporary differences between the
book and tax basis of assets and liabilities. If it is more
likely than not that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recognized. The
Company assesses its ability to realize deferred tax assets
based on normalized historical performance and on projections of
future taxable income in the relevant tax jurisdictions.
Normalized historical performance for purposes of this
assessment includes adjustments for those income and expense
items that are unusual and non-recurring in nature and are not
expected to affect results in future periods. Such unusual and
non-recurring items include the effects of discontinued
operations, legal fees or settlements associated with specific
litigation matters, pension curtailment costs, and restructuring
costs. The Companys projections of future taxable income
consider known or pending events, such as the passage of
legislation, and do not reflect a general growth assumption.
Such projections do not include taxable income from the reversal
of deferred tax liabilities. The Companys estimates of
future taxable income are reviewed annually or whenever events
or changes in circumstances indicate that such projections may
require modification.
No provision is made for U.S. income taxes on the
undistributed earnings of
non-U.S. subsidiaries
because these earnings are deemed permanently invested or
otherwise indefinitely retained for continuing international
operations. Determination of the amount of unrecognized deferred
income tax liability related to these earnings is not
practicable.
Pensions
Accounting for pensions involves estimating the cost of benefits
to be provided well into the future and attributing that cost
over the time period each employee works. To accomplish this,
extensive use is made of assumptions about inflation, investment
returns, mortality, turnover and discount rates. These
assumptions are reviewed annually. In determining the expected
return on plan assets, the Company evaluates long-term actual
return information, the mix of investments that comprise plan
assets and future estimates of long-term investment returns.
Net income (loss)
per common share
Basic net income (loss) per common share is computed by dividing
net income (loss) by the weighted average number of common
shares outstanding during the period. Diluted net income per
common share is computed by dividing net income by the weighted
average number of common shares outstanding plus all potential
dilutive common shares outstanding during the period. Potential
dilutive common shares outstanding excludes those shares that
are
F-15
antidilutive. Dilutive common shares are determined using the
treasury stock method. Under the treasury stock method, exercise
of options is assumed at the beginning of the period when the
average stock price during the period exceeds the exercise price
of outstanding options and common shares are assumed issued. The
proceeds from exercise are assumed to be used to purchase common
stock at the average market price during the period. The
incremental shares to be issued are considered to be the
potential dilutive common shares outstanding. The treasury stock
method is also used for the Companys convertible senior
notes when the average stock price exceeds the conversion price.
Cash and cash
equivalents
The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to
be cash equivalents.
Derivative
instruments
The Company applies SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(SFAS No. 133). SFAS No. 133, as
amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities.
Derivative financial instruments are occasionally utilized by
the Company to manage risk exposure to movements in foreign
exchange rates or interest rates. The Company, from time to
time, enters into forward exchange contracts to obtain foreign
currencies at specified rates based on expected future cash
flows for each currency. The premium or discount on the
contracts is amortized over the life of the contract. Changes in
the value of derivative financial instruments are measured at
the balance sheet date and recognized in current earnings or
other comprehensive income depending on whether the derivative
is designated as part of a hedge transaction and, if it is, the
type of transaction. The Company does not hold derivative
financial instruments for trading purposes or any fair value
hedges.
Use of
estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Labor
agreements
Collective bargaining agreements cover approximately 33% of the
Companys labor force at December 31, 2006 under
agreements which expire in 2007, 2008, 2009, and 2010.
Stock-based
compensation
The Company has various stock-based compensation plans which are
described more fully in Note 13. Through December 31,
2005, the Company accounted for those plans under the
recognition and measurement principles of Accounting Principles
Board Opinion No. 25,
F-16
Accounting for Stock Issued to Employees (APB
25), and related interpretations. No stock-based
compensation cost was reflected in net income for stock options
at the date of grant, as all options granted had an exercise
price equal to the market value of the underlying common stock
on the date of grant. Deferred compensation for restricted stock
under the Companys stock-based compensation plans was
charged to equity when the restricted stock was granted and
expensed over the vesting period as contingencies of the
restricted stock grant were met and adjusted if not met.
The Company adopted SFAS No. 123(R), Share-based
Payments (SFAS 123(R)), on
January 1, 2006 using the modified prospective application
method. See further discussion in Note 13. Under this
transition method, compensation cost recognized for the year
ended December 31, 2006 includes the applicable amounts of
compensation cost of all stock-based payments granted prior to,
but not yet vested, as of January 1, 2006 (based on the
grant-date fair value estimated in accordance with the original
provisions of SFAS No. 123 and previously presented in
the pro forma footnote disclosures). Compensation cost in the
future will also include stock-based payments granted subsequent
to January 1, 2006 (based on the grant-date fair value
estimated in accordance with the new provisions of
SFAS No. 123(R)). Results for prior periods have not
been restated. Prior to the adoption of
SFAS No. 123(R), no compensation cost was reflected in
net income for stock options or stock appreciation rights
(SARs) as all options and SARs granted had an
exercise price equal to the market value of the underlying
common stock on the date of grant. In accordance with
SFAS No. 123(R), compensation expense for stock
options and SARs is now recorded over the vesting period using
the fair value on the date of grant, as calculated by the
Company using the Black-Scholes model. The nonvested restricted
stock grant date fair value, which is the market price of the
underlying common stock, is expensed over the vesting period.
The following pro forma information is provided for comparative
purposes and illustrates the pro forma effect on net income and
earnings per share as if the fair value recognition provision of
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), had
been applied to stock-based compensation prior to
January 1, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
(Dollars
in thousands except per share data)
|
|
2005
|
|
|
2004
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(7,416
|
)
|
|
$
|
5,888
|
|
Stock-based employee compensation
expense included in reported net income (loss), net of tax effect
|
|
|
256
|
|
|
|
|
|
Stock-based compensation at fair
value, net of tax effects
|
|
|
(769
|
)
|
|
|
(979
|
)
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$
|
(7,929
|
)
|
|
$
|
4,909
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(.19
|
)
|
|
$
|
15
|
|
Pro forma
|
|
$
|
(.20
|
)
|
|
$
|
.13
|
|
Diluted
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(.19
|
)
|
|
$
|
.15
|
|
Pro forma
|
|
$
|
(.20
|
)
|
|
$
|
.12
|
|
|
|
F-17
Concentration of
credit risk
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and customer receivables. The Company places its
cash with high credit quality financial institutions and invests
in low-risk, highly liquid instruments. With respect to customer
receivables, the Company believes that it has no significant
concentration of credit risk with its largest customer
receivable comprising less than 3% of total receivables as of
December 31, 2006.
Fair value of
financial instruments excluding derivative instruments
The Companys financial instruments, excluding derivative
instruments, consist primarily of cash and cash equivalents and
long-term debt. The fair value of the cash and cash equivalents
approximates their carrying value because of the short-term
maturity of the instruments. See Note 10 for a discussion
of the fair value of the Companys long-term debt.
New accounting
pronouncements
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans
(SFAS No. 158). SFAS No. 158
requires recognition of the funded status of a benefit plan on
the balance sheet; the recognition in other comprehensive income
of gains or losses and prior service costs or credits arising
during the period but which are not included as components of
periodic benefit cost; the measurement of defined benefit plan
assets and obligations as of the balance sheet date; and
disclosure of additional information about the effects on
periodic benefit cost for the following fiscal year arising from
gains and losses in the current period. The Company adopted
SFAS No. 158 on December 31, 2006 as required,
and the related adjustments are reflected in these financial
statements. The Company incorrectly presented the effect of this
transition adjustment as part of 2006 comprehensive income on
its Consolidated Statements of Income and Comprehensive Income
(Loss) for the fiscal year ended December 31, 2006. The
Consolidated Statements of Income and Comprehensive Income
(Loss) have been restated to present 2006 comprehensive income
excluding the SFAS No. 158 transition adjustment. The
impact of removing the SFAS No. 158 transition
adjustment from the 2006 Consolidated Statements of Income and
Comprehensive Income (Loss) changed the reported comprehensive
income (loss) from $(3,935,000) to $1,440,000. See Note 14
for additional disclosures including the effects of adoption.
In September 2006, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 108, Considering
the Effects of Prior Year Misstatements in Current Year
Financial Statements (SAB No. 108).
SAB No. 108 provides guidance on how prior year
misstatements should be taken into consideration when
quantifying misstatements in current year financial statements
for purposes of determining whether the current years
financial statements are materially misstated. SAB 108 was
effective during fiscal year 2006 and had no material impact on
the financial statements.
In June 2006, the FASB issued FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement
No. 109 (FIN No. 48).
FIN No. 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial
statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. FIN No. 48, which is effective for
fiscal years beginning after December 15, 2006, will
F-18
be adopted by the Company effective January 1, 2007 as
required. The Company is in the process of evaluating the effect
that the adoption of this interpretation will have on the
Companys consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands
disclosure about fair value measurements. SFAS No. 157
is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods
within those fiscal years. The Company will adopt
SFAS No. 157 as required for the fiscal year 2008 and
expects that adoption will not have a material impact on the
financial statements.
In December 2006, the FASB issued
EITF 00-19-2,
Accounting for Registration Payment Arrangements
(EITF 00-19-2).
This FASB Staff Position (FSP) addresses an
issuers accounting for registration payment arrangements.
This FSP specifies that the contingent obligation to make future
payments or otherwise transfer consideration under a
registration payment arrangement, whether issued as a separate
agreement or included as a provision of a financial instrument
or other agreement, should be separately recognized and measured
in accordance with FASB Statement No. 5, Accounting
for Contingencies (SFAS No. 5). The
guidance in this FSP amends SFAS No. 133,
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity, and FIN No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, to include
scope exceptions for registration payment arrangements. This FSP
further clarifies that a financial instrument subject to a
registration payment arrangement should be accounted for in
accordance with other applicable GAAP without regard to the
contingent obligation to transfer consideration pursuant to the
registration payment arrangement. The Company has adopted
EITF 00-19-2
on January 1, 2007 as required and is in the process of
evaluating the effects on the Companys financial
statements. The Company expects this liability to be
approximately $0.2 million.
Reclassifications
Certain amounts from prior years have been reclassified to
conform to 2006 presentation.
On February 18, 2004, the Company acquired substantially
all of the assets of Waterlink, Incorporateds
(WSP) United States-based subsidiary Barnebey
Sutcliffe Corporation, and 100% of the outstanding common shares
of Waterlink (UK) Limited, a holding company that owns 100% of
the outstanding common shares of Waterlinks operating
subsidiaries in the United Kingdom.
The aggregate purchase price, including direct acquisition costs
and net of cash acquired, was $35.3 million, plus the
assumption of certain non-working capital liabilities amounting
to $14.2 million. The Company funded approximately
$33.3 million of the purchase price through borrowings from
its refinanced U.S. revolving credit facility.
In December 2004, the Company entered into an agreement to
purchase the additional 20% interest of the then 80% owned
Datong Carbon Corporation for a purchase price of
$0.7 million, which was paid in 2005. The purchase resulted
in the Company recording additional goodwill of
$0.4 million in 2004 related to the purchase.
F-19
In May 2005, the Company formed a joint venture company with C.
Gigantic Carbon to provide carbon reactivation services to the
Thailand market. The joint venture company was named Calgon
Carbon (Thailand) Ltd. and is 20% owned by the Company after an
initial investment of $0.2 million and exchange of
technology. It is accounted for in the Companys financial
statements under the equity method.
|
|
3.
|
Gain or loss on
insurance settlement
|
In August 2005, the Companys plant located in Pearlington,
Mississippi was damaged by Hurricane Katrina, and the Company
recorded $1.0 million of non-reimbursable expense in the
year ended December 31, 2005. In accordance with
FIN No. 30, Accounting for Involuntary
Conversions of Non-Monetary Assets to Monetary Assets, the
Company wrote off the net book value of the destroyed inventory
and property totaling $1.8 million. The replacement value
of the inventory and property exceeded its net book value by
approximately $4.9 million, which was recorded as a gain on
insurance settlement in the year ended December 31, 2006.
The Company also settled its business interruption insurance
claim with its insurance company for $3.8 million. This
amount, net of costs related to business interruption of
$0.6 million, was recorded as a gain on insurance
settlement in the year ended December 31, 2006.
|
|
4.
|
Restructuring of
operations
|
On February 4, 2005, the Companys Board of Directors
approved a re-engineering plan. The plan included the closure of
two small manufacturing facilities, the potential divestiture of
two non-core businesses, and the elimination of approximately
70 employee positions globally. All activities related to
these components of the re-engineering plan other than the
divestitures were completed by year-end 2005. At
December 31, 2006, the Company has no remaining
restructuring reserves.
The restructuring charges for the years ended December 31,
2006, 2005, and 2004 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
(Dollars
in thousands)
|
|
2006
|
|
2005
|
|
2004
|
|
|
Pension curtailment charge
|
|
$
|
|
|
$
|
215
|
|
$
|
|
Closure of manufacturing facility
|
|
|
7
|
|
|
197
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7
|
|
$
|
412
|
|
$
|
|
|
|
|
|
5.
|
Discontinued
operations and assets held for sale
|
The Companys financial statements for all periods
presented were significantly impacted by activities relating to
the divestiture of two of the Companys businesses.
On February 4, 2005, the Companys Board of Directors
approved a re-engineering plan. The plan included the
divestiture of two non-core businesses in order to allow the
Company to focus on its core activated carbon and service
related businesses. In the fourth quarter of 2005, management
concluded that such divestitures were probable.
The Company reclassified the following businesses from
continuing operations to discontinued operations and assets held
for sale for all periods presented: Charcoal/Liquid in
Bodenfelde, Germany and Solvent Recovery in Columbus, Ohio; Vero
Beach, Florida; and Ashton, United
F-20
Kingdom. The Charcoal/Liquid and Solvent Recovery businesses
were reported in the Companys Consumer and Equipment
segments, respectively.
On February 17, 2006, Calgon Carbon Corporation, through
its wholly owned subsidiary Chemviron Carbon GmbH, executed an
agreement (the Charcoal Sale Agreement) with
proFagus GmbH, proFagus Grundstuecksverwaltungs GmbH and
proFagus Beteiligungen GmbH (as Guarantor) to sell, and sold,
substantially all the assets, real estate, and specified
liabilities of the Bodenfelde, Germany facility (the
Charcoal/Liquid business). The facility includes the production
of charcoal for consumer use and liquids that are recovered
during charcoal production. The products are sold to retail and
industrial markets. The aggregate sales price, based on an
exchange rate of 1.19 Dollars per Euro, consisted of
$20.4 million of cash which included a final working
capital adjustment of $1.3 million. The Company provided
guarantees to the buyer related to pre-divestiture tax
liabilities, future environmental remediation costs related to
pre-divestiture activities and other contingencies. Management
believes the ultimate cost of such guarantees is not material.
An additional $5.0 million could be received contingent
upon the business meeting certain earnings targets over the next
three years. As of the year ended December 31, 2006, the
Company has recorded a pre-tax gain of $4.8 million or
$1.7 million, net of tax, on the sale of the
Charcoal/Liquid divestiture.
On April 24, 2006, the Company completed the sale of the
assets of its Solvent Recovery business to MEGTEC Systems, Inc.
(MEGTEC), a subsidiary of Sequa Corporation. The
Solvent Recovery unit provides turnkey
on-site
regenerable solvent recovery systems, distillation systems,
on-site
regenerable volatile organic compound concentrators, vapor-phase
biological oxidation systems, and related services on a
worldwide basis. The sale price of $1.8 million included
cash proceeds of approximately $0.8 million and
$0.7 million of assumed liabilities, primarily accounts
payable. The transaction was also subject to a pre-tax working
capital adjustment of $0.4 million, which management
finalized and recorded in the fourth quarter of 2006. As of the
year ended December 31, 2006, the Company recorded a
pre-tax gain of $63 thousand, or $41 thousand, net of tax, on
the sale of the Solvent Recovery business.
The following table details selected financial information for
the businesses included within the discontinued operations in
the Consolidated Statements of Income and Comprehensive Income
(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charcoal/Liquid
|
|
Solvent
Recovery
|
|
|
Year ended
December 31,
|
|
Year ended
December 31,
|
(Thousands)
|
|
2006
|
|
|
2005
|
|
2004
|
|
2006
|
|
|
2005
|
|
2004
|
|
|
Net sales
|
|
$
|
1,375
|
|
|
$
|
30,037
|
|
$
|
25,160
|
|
$
|
2,775
|
|
|
$
|
13,916
|
|
$
|
15,530
|
Income (loss) from operations
|
|
|
(589
|
)
|
|
|
2,973
|
|
|
2,080
|
|
|
(161
|
)
|
|
|
1,709
|
|
|
789
|
Other incomenet
|
|
|
4,715
|
|
|
|
44
|
|
|
67
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
4,126
|
|
|
|
3,017
|
|
|
2,147
|
|
|
(98
|
)
|
|
|
1,709
|
|
|
789
|
Provision (benefit) for income
taxes
|
|
|
2,848
|
|
|
|
1,044
|
|
|
743
|
|
|
(34
|
)
|
|
|
591
|
|
|
273
|
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
$
|
1,278
|
|
|
|
1,973
|
|
$
|
1,404
|
|
|
(64
|
)
|
|
$
|
1,118
|
|
$
|
516
|
|
|
F-21
The major classes of assets and liabilities of operations held
for sale in the Consolidated Balance Sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charcoal/Liquid
|
|
Solvent
Recovery
|
|
|
Year ended
December 31,
|
|
Year ended
December 31,
|
(Thousands)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
$
|
|
|
$
|
1,059
|
|
$
|
|
|
$
|
4,018
|
Inventories
|
|
|
|
|
|
6,924
|
|
|
|
|
|
113
|
Property, plant and equipment, net
|
|
|
|
|
|
7,310
|
|
|
|
|
|
42
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
Other assets
|
|
|
|
|
|
181
|
|
|
|
|
|
693
|
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
|
|
$
|
15,474
|
|
$
|
|
|
$
|
5,866
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
liabilities
|
|
|
|
|
|
2,604
|
|
|
|
|
|
3,157
|
Accrued pensions and other
liabilities
|
|
|
|
|
|
922
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities held for sale
|
|
$
|
|
|
$
|
3,526
|
|
$
|
|
|
$
|
3,157
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(Thousands)
|
|
2006
|
|
2005
|
|
|
Raw materials
|
|
$
|
16,587
|
|
$
|
16,501
|
Finished goods
|
|
|
53,752
|
|
|
51,154
|
|
|
|
|
|
|
Total
|
|
$
|
70,339
|
|
$
|
67,655
|
|
|
Inventories at December 31, 2006 and 2005 are recorded net
of adjustments of $1.4 million and $1.5 million,
respectively, for obsolete and slow-moving items.
F-22
|
|
7.
|
Property, plant
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Thousands)
|
|
2006
|
|
|
2005
|
|
|
|
|
Land and improvements
|
|
$
|
12,960
|
|
|
$
|
10,581
|
|
Buildings
|
|
|
28,247
|
|
|
|
27,836
|
|
Machinery, equipment and customer
capital
|
|
|
296,433
|
|
|
|
286,753
|
|
Computer hardware and software
|
|
|
18,874
|
|
|
|
18,191
|
|
Furniture and vehicles
|
|
|
7,812
|
|
|
|
7,368
|
|
Construction-in-progress
|
|
|
11,631
|
|
|
|
11,640
|
|
|
|
|
|
|
|
|
|
|
375,957
|
|
|
|
362,369
|
|
Less accumulated depreciation
|
|
|
(269,856
|
)
|
|
|
(253,624
|
)
|
|
|
|
|
|
|
Net
|
|
$
|
106,101
|
|
|
$
|
108,745
|
|
|
|
Depreciation expense for the years ended December 31, 2006,
2005 and 2004 totaled $17.2 million, $19.1 million and
$20.0 million, respectively.
In 2003, the Company temporarily suspended construction of a new
facility in the Gulf Coast region of the United States as it
evaluated strategic alternatives. On March 22, 2005, the
Company concluded, and the Board of Directors approved, that
cancellation of this project was warranted and that construction
of such a facility should be suspended for the foreseeable
future. Accordingly, the Company recorded an impairment charge
of $2.2 million in 2005.
Also in 2003, the Company partially discontinued operation of
one of its three activated carbon lines at its Catlettsburg,
Kentucky facility. The Company will need to install pollution
abatement equipment estimated at approximately $7.0 million
in order to remain in compliance with state requirements
regulating air emissions before resuming full operation of this
line. In the fourth quarter of 2006, management approved for
preliminary engineering work to be performed to more accurately
assess the costs and length of time to make the idled activated
carbon line operational again in anticipation of a favorable
ruling by the International Trade Commission (ITC)
on the Companys antidumping petition for steam activated
carbon imported into the United States from China and subsequent
demand of U.S. manufactured products. Management expects to
complete its assessment regarding the
start-up of
this idled activated carbon line to address potential future
market opportunities in 2007. If at any point it is determined
that a shutdown of the full operation of the activated carbon
line for other than a temporary period is warranted, the impact
to current operating results would be insignificant.
In January 2006, the Company announced the temporary idling of
its reactivation facility in Blue Lake, California in an effort
to reduce operating costs and to more efficiently utilize the
capacity at its other existing locations. The Company conducted
an impairment review of the plants assets having a net
book value of $1.3 million in connection with the temporary
idling of the facility and concluded that the assets were not
impaired. It is managements intention to resume operation
of the plant in late 2007 if market conditions warrant it. If
management should conclude that the idling of the plant beyond
2007 is necessary, operating results may be adversely affected
by impairment charges.
F-23
|
|
8.
|
Goodwill and
other identifiable intangible assets
|
The Company has elected to do the annual impairment test of its
goodwill, as required by SFAS No. 142, on December 31
of each year. For purposes of the test, the Company has
identified reporting units, as defined within
SFAS No. 142, at a regional level for the Activated
Carbon and Service segment and at the technology level for the
Equipment segment and has allocated goodwill to these reporting
units accordingly. The goodwill associated with the Consumer
segment is not material and has not been allocated below the
segment level.
The following is a table showing the results of the annual
impairment tests at December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2006
|
|
At
December 31, 2005
|
|
|
Fair
|
|
Carrying
|
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Carrying
|
(Thousands)
|
|
value
of
|
|
value
of
|
|
value
of
|
|
value
of
|
|
value
of
|
|
value
of
|
Reporting
unit
|
|
unit
|
|
unit*
|
|
goodwill
|
|
unit
|
|
unit
|
|
goodwill
|
|
|
Activated Carbon and Service
Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas/Asia
|
|
$
|
187,000
|
|
$
|
141,740
|
|
$
|
16,768
|
|
$
|
129,447
|
|
$
|
113,906
|
|
$
|
16,768
|
Europe
|
|
|
56,800
|
|
|
43,306
|
|
|
4,288
|
|
|
53,052
|
|
|
42,148
|
|
|
3,766
|
|
|
|
|
|
|
Equipment Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISEP equipment (ISEP)
|
|
|
22,900
|
|
|
4,668
|
|
|
4,419
|
|
|
20,985
|
|
|
5,475
|
|
|
4,419
|
Ultraviolet light equipment (UV)
|
|
|
14,445
|
|
|
9,222
|
|
|
1,962
|
|
|
61,888
|
|
|
14,676
|
|
|
8,861
|
|
|
|
|
|
|
Consumer Segment
|
|
|
N/A
|
|
|
N/A
|
|
|
60
|
|
|
N/A
|
|
|
N/A
|
|
|
60
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
27,497
|
|
|
|
|
|
|
|
$
|
33,874
|
|
|
|
|
|
* |
|
After recognition of impairment
for UV reporting unit. |
On November 14, 2006, the Federal Court of Canada found
that the Companys patent for the use of ultraviolet light
to prevent infection from cryptosporidium in drinking water is
invalid. As a result, the Companys estimate of future
royalties used in determining the fair value of the UV reporting
unit as of December 31, 2006 declined substantially from
the prior year resulting in goodwill impairment of
$6.9 million. This impairment represents the difference
between the implied fair value of goodwill for the UV reporting
unit and the carrying value of the goodwill before recognition
of the impairment.
F-24
The changes in the carrying amount of goodwill by segment for
the years ended December 31, 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activated
|
|
|
|
|
|
|
|
|
|
|
|
Carbon and
|
|
|
Equipment
|
|
|
Consumer
|
|
|
|
(Thousands)
|
|
Service
Segment
|
|
|
Segment
|
|
|
Segment
|
|
Total
|
|
|
|
|
Balance as of January 1, 2005
|
|
$
|
20,983
|
|
|
$
|
13,028
|
|
|
$
|
60
|
|
$
|
34,071
|
|
Foreign currency translation
|
|
|
(449
|
)
|
|
|
252
|
|
|
|
|
|
|
(197
|
)
|
|
|
|
|
|
|
Balance as of December 31,
2005
|
|
|
20,534
|
|
|
|
13,280
|
|
|
|
60
|
|
|
33,874
|
|
Impairment
|
|
|
|
|
|
|
(6,940
|
)
|
|
|
|
|
|
(6,940
|
)
|
Foreign currency translation
|
|
|
522
|
|
|
|
41
|
|
|
|
|
|
|
563
|
|
|
|
|
|
|
|
Balance as of December 31,
2006
|
|
$
|
21,056
|
|
|
$
|
6,381
|
|
|
$
|
60
|
|
$
|
27,497
|
|
|
|
The following is a summary of the Companys identifiable
intangible assets as of December 31, 2006 and 2005,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2006
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Gross
|
|
|
|
|
|
|
|
Net
|
|
|
amortization
|
|
carrying
|
|
Foreign
|
|
|
Accumulated
|
|
|
carrying
|
(Dollars
in thousands)
|
|
period
|
|
amount
|
|
exchange
|
|
|
amortization
|
|
|
amount
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
|
15.4 Years
|
|
$
|
1,369
|
|
$
|
|
|
|
$
|
(793
|
)
|
|
$
|
576
|
Customer relationships
|
|
|
17.0 Years
|
|
|
9,323
|
|
|
11
|
|
|
|
(3,596
|
)
|
|
|
5,738
|
Customer contracts
|
|
|
2.8 Years
|
|
|
664
|
|
|
(20
|
)
|
|
|
(644
|
)
|
|
|
|
License agreement
|
|
|
5.0 Years
|
|
|
500
|
|
|
|
|
|
|
(317
|
)
|
|
|
183
|
Product certification
|
|
|
7.9 Years
|
|
|
665
|
|
|
|
|
|
|
(321
|
)
|
|
|
344
|
Unpatented technology
|
|
|
20.0 Years
|
|
|
2,875
|
|
|
|
|
|
|
(1,195
|
)
|
|
|
1,680
|
|
|
|
|
|
|
Total
|
|
|
16.0 Years
|
|
$
|
15,396
|
|
$
|
(9
|
)
|
|
$
|
(6,866
|
)
|
|
$
|
8,521
|
|
|
F-25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2005
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Gross
|
|
|
|
|
|
|
|
Net
|
|
|
amortization
|
|
carrying
|
|
Foreign
|
|
|
Accumulated
|
|
|
carrying
|
(Dollars
in thousands)
|
|
period
|
|
amount
|
|
exchange
|
|
|
amortization
|
|
|
amount
|
|
|
Amortized intangible assets:
|
|
|
|
|
|