Financial Performance

Summary of 2016 Financial Performance, as taken from the 2016 Annual Report

2016 Sales and Earnings

While we entered 2016 with expectations for improving both sales and earnings compared to 2015, several continuing and unexpected challenges weighed on our performance throughout the year:

  • Most significantly, the industrial sector slowdown we began to experience in 2015 persisted unabated throughout 2016. While we held onto market share, our industrial sector customers were simply using and purchasing less of our high-quality, high-performing products.
  • In the market for our mercury removal products, low natural gas prices and unseasonably warm winter weather conditions led to lower than expected usage rates of activated carbon by electric power plants in North America.
  • Expected growth of ballast water management system sales did not materialize in 2016, as it was not until late in the year when we finally received the long-awaited ratification of the International Maritime Organization's Ballast Water Management Convention regulation, and the U.S. Coast Guard issued its first three ballast water system Type Approvals for use in U.S. waterways and ports, boding well for future years.
  • The U.S. Dollar continued to strengthen against the Euro and the British pound sterling throughout the year, mainly following the June vote in the United Kingdom to approve its referendum to exit the European Union (Brexit). Combined with changes in exchange rates of other currencies, this had the effect of reducing our reported sales in U.S. dollars by $2.8 million from 2015.

However, on the positive side we realized year-over- year growth for our activated carbon and equipment solutions serving drinking water markets in North America - including the currently high profile market for removing an emerging class of contaminants known as perfluorinated compounds (PFCs) primarily from groundwater sources. We also increased our sales of products for metals-recovery applications, particularly in North America and Asia.

In aggregate, the combination of these factors led to a 6% decline in our legacy Calgon Carbon business sales to $502.1 million. The sales of the New Business for the final two months of the year added $12.1 million, and resulted in total sales of $514.2 million for 2016, compared to $535.0 million in the previous year.

As a result of our lower sales, as well as a less favorable mix of sales in the current year, our total gross margin* percentage, including the results of the New Business, declined to 32.6%, compared to 35.8% in 2015.

In addition, our 2016 results were significantly burdened with costs related to the acquisition of the New Business, which totaled $15.7 million. This, as well as the other factors I mentioned previously, contributed to a 2016 net income of $13.8 million, or $0.27 per fully diluted share, being significantly reduced from 2015 results of $43.5 million, or $0.82 per fully diluted share.

Returning Shareholder Value

In 2016, we returned $18.8 million to our shareholders. Given our strategic decision to commit significant capital resources to complete the value-added acquisition of the New Business, we announced the suspension of activities under our open market common stock repurchase program in early 2016.

However, reflective of our Board of Directors' continuing confidence in the fundamental strength and cash flows of the Company, it authorized quarterly $0.05 per share dividends throughout 2016 totaling $10.1 million.                                        

Financial Highlights

2016***

2015

2014

2013

2012***

Net Sales

$514,246

 $535,004

 $555,103

 $547,939

 $562,255

Gross Margin %*

32.6%

35.8%

34.6%

33.0%

30.2%

Operating Expense %

20.5%

17.1%

15.7%

15.1%

16.6%

Income from Operations

$24,522

 $64,794

 $74,605

 $68,889

 $39,861

Net Income

$13,797

 $43,463

 $49,370

 $45,713

 $23,272

Net Income per Common Share (Diluted)

$0.27

 $0.82

 $0.92

 $0.84

 $0.41

EBITDA %**

11.8%

18.6%

18.6%

17.6%

11.3%

* Net sales less the cost of products sold as a percentage of sales (excluding depreciation and amortization).
** Earnings before interest, taxes, depreciation, and amortization as a percentage of sales.
*** Includes $15.7 million of costs related to the November 2, 2016 acquisition of the wood-based activated carbon, reactivation, and mineral-based filtration media business (the New Business). Refer to the 2016 Annual Report for more information.
**** Includes $10.2 million of restructuring charges, $1.7 million of multi-employer pension charges, and a $1.7 million charge related to an agreement with the Company's former Chief Executive Officer.