Calgon Carbon Corporation announced that it has entered into an accelerated share repurchase (ASR) agreement with Morgan Stanley & Co. LLC to buy back roughly $50 million of its stock. The company will receive around 3.3 million shares at the beginning of the ASR with the total number of shares to be purchased under the deal will be decided upon the final settlement.
The share repurchase will be funded through Calgon Carbon's revolving credit facility, which stood at $118 million as of September 30, 2012. The share repurchases will be completed by the third quarter of 2013. The deal signifies the company’s ability to enhance shareholders’ value through the proper utilization of its capital structure.
The announcement was made a day after the company announced a share repurchase program worth approximately $100 million. The ASR represents a part of this program.
Calgon initiated the stock repurchase program as part of its short-term strategy and its confidence in the growth from the emerging markets. The company initiated this plan after the completion of its 2013 profit plan.
A few weeks ago, Calgon Carbon released its third-quarter 2012 results. The company incurred a loss of $4.5 million or 8 cents a share in the quarter compared with a profit of $14.5 million or 25 cents a share a year ago. Excluding a restructuring charge of $8 million, the Pennsylvania-based pollution control company earned 6 cents a share in the quarter, which missed the Zacks Consensus Estimate of 12 cents.
Revenues dipped 5.6% year over year to $135.5 million, and missed the Zacks Consensus Estimate of $143 million. Currency translation had a negative impact of $3.2 million on sales, stemming from a stronger dollar.
Calgon Carbon remains confident in its ability to balance the need for future investment with its responsibility to provide short-term returns. Despite some challenges, the company expects to continue to capitalize on its growth opportunities. Healthy sales gains and strategic initiatives will be beneficial in the longer term.
We, however, remain concerned about the economic challenges that it might face in the remainder of 2012. Moreover, escalating costs remain a headwind.
We currently have a long-term (more than 6 months) Neutral recommendation on Calgon Carbon. The company, which competes with MeadWestvaco Corporation , retains a Zacks #4 Rank that translates to a short-term (1 to 3 months) Sell rating.