<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ________.
COMMISSION FILE NO. 0-28178
CARBO CERAMICS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1100013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 E. LAS COLINAS BOULEVARD
SUITE 1520
IRVING, TEXAS 75039
(Address of principal executive offices)
(214)401-0090
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- -----
As of June 3, 1996, 14,602,000 shares of the registrant's Common
Stock, par value $.01 per share, were outstanding.
<PAGE>
CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------
Item 1. Financial Statements
Balance Sheets (Unaudited) - 3
March 31, 1996 and December 31, 1995
Statements of Income 4
(Unaudited) - Three months ended March 31, 1996 and 1995
Statements of Cash Flows 5
(Unaudited) - Three months ended March 31, 1996 and 1995
Notes to Financial Statements - March 31, 1996 6-7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
- -----------------------------
Item 1. Legal proceedings 9
Item 2. Changes in securities 9
Item 3. Defaults upon senior securities 9
Item 4. Submission of matters to a vote of security-holders 9
Item 5. Other information 9
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -------
CARBO CERAMICS INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, MARCH 31,
1996 1996 DECEMBER 31,
(UNAUDITED) (UNAUDITED) 1995
----------- ---------------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (overdraft) $ (353) $ (353) $ 201
Trade accounts receivable 7,997 7,997 8,783
Inventories:
Finished goods 4,404 4,404 3,852
Raw materials and supplies 4,371 4,371 3,979
------- ------- -------
8,775 8,775 7,831
Prepaid expenses and other current assets 439 439 270
Deferred income taxes - 5,408 -
------- ------- -------
Total current assets 16,858 22,266 17,085
Property, plant and equipment:
Land and land improvements 57 57 57
Buildings 4,505 4,505 2,759
Machinery and equipment 23,870 23,870 16,400
Construction in progress 683 683 8,746
------- ------- -------
29,115 29,115 27,962
Less accumulated depreciation 6,353 6,353 5,958
------- ------- -------
22,762 22,762 22,004
------- ------- -------
$39,620 $45,028 $39,089
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,404 $ 3,404 $ 2,780
Accounts payable 1,088 1,088 1,820
Accrued expenses 3,005 5,264 3,108
------- ------- -------
Total current liabilities 7,497 9,756 7,708
Deferred income taxes - 1,039 -
Notes payable to shareholders - 26,842 -
Shareholders' equity:
Preferred stock, par value $0.01 per share,
5,000 shares authorized, pro forma;
no shares outstanding, pro forma - - -
Common stock, par value $0.01 per share,
40,000,000 shares authorized:
12,002,000 shares outstanding;
12,302,000 shares outstanding, pro forma 120 123 120
Class B nonvoting common stock, par value $0.01 per share,
4,000,000 shares authorized; 300,000 shares outstanding;
no shares authorized or outstanding, pro forma 3 - 3
Additional paid-in capital 6,626 6,385 6,626
Unearned compensation (1,206) - (1,316)
Retained earnings 26,580 883 25,948
------- ------- -------
Total shareholders' equity 32,123 7,391 31,381
------- ------- -------
$39,620 $45,028 $39,089
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
CARBO CERAMICS INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1995
------------ -----------
($ IN THOUSANDS)
<S> <C> <C>
Sales $ 13,033 $ 13,258
Cost of goods sold 6,893 6,731
----------- -----------
Gross profit 6,140 6,527
Selling, general and administrative expenses 1,771 1,672
----------- -----------
Operating profit 4,369 4,855
Other income (expense):
Interest income 2 67
Interest expense (20) -
Other, net 24 34
----------- -----------
6 101
----------- -----------
Net income $ 4,375 $ 4,956
=========== ===========
Pro forma income data
Historical income before income taxes $ 4,375 $ 4,956
Pro forma adjustment for income taxes 1,663 1,883
----------- -----------
Pro forma net income $ 2,712 $ 3,073
=========== ===========
Pro forma net income per share $ 0.19 $ 0.21
=========== ===========
Pro forma weighted average number of shares 14,602,000 14,602,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CARBO CERAMICS INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,375 $ 4,956
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 395 257
Amortization of unearned compensation 110 110
Changes in operating assets and liabilities:
Trade accounts receivable 786 1,126
Inventories (944) (982)
Prepaid expenses and other current assets (169) 67
Accounts payable (732) (285)
Accrued expenses (103) (569)
------- -------
Net cash provided by operating activities 3,718 4,680
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,153) (2,332)
------- -------
Net cash used in investing activities (1,153) (2,332)
FINANCING ACTIVITIES
Net proceeds on bank borrowings 624 -
Dividends paid (3,743) (3,681)
------- -------
Net cash used in financing activities (3,119) (3,681)
------- -------
Net decrease in cash and cash equivalents (554) (1,333)
Cash and cash equivalents at beginning of period 201 4,413
------- -------
Cash and cash equivalents (overdraft) at end of period $ (353) $ 3,080
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 22 $ -
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
CARBO CERAMICS INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Carbo Ceramics Inc. have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation have been included. The results of the interim periods presented
herein are not necessarily indicative of the results to be expected for any
other interim period or the full year. These financial statements should be
read in conjunction with the financial statements and notes thereto for the year
ended December 31, 1995, included in the Company's Form S-1 Registration
Statement No. 333-1884 as filed with the SEC.
2. PLANT EXPANSION
The Company substantially completed the expansion of its Eufaula, Alabama
plant in the quarter ended March 31, 1996. The expansion became fully
operational in March 1996 with project-to-date spending at $12,177,534. The
Company estimates additional spending of approximately $168,000 to complete the
expansion.
3. DIVIDENDS PAID
On March 28, 1996, the Company declared a $3,383,050 dividend ($0.275 per
share based on 12,302,000 shares) payable to all shareholders of record on March
28, 1996. The dividend was paid on March 29, 1996, and was partially funded by
borrowing against the Company's revolving line of credit which had an
outstanding balance of $3,404,000 at March 31, 1996.
4. PRO FORMA INFORMATION
The unaudited pro forma balance sheet as of March 31, 1996, reflects the pro
forma effects of certain transactions associated with the initial public
offering of the Company's common stock including:
(i) vesting of 800,000 restricted shares of Common Stock upon the occurrence
of the initial public offering, and the resulting recognition of (A)
compensation expense totaling $1,206,175 (no change in total shareholders'
equity) and (B) a deferred income tax asset with a corresponding increase in
additional paid-in capital of $3,486,196, which is equal to 38% of the tax
deduction the Company will receive as compensation expense (to the extent that
such deduction exceeds the amount recognized as compensation expense in the
financial statements);
(ii) recognition of a deferred income tax asset of $1,922,039 and a deferred
income tax liability of $1,038,536 for the effect of cumulative temporary
differences upon the termination of the Company's S Corporation status in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes;
(iii) issuance of notes payable to the current shareholders for the
distribution of the Company's previously taxed, undistributed S Corporation
income as of December 31, 1995, of $26,841,926, and payment of the final S
Corporation distribution of $2,258,961 which represents the Company's remaining
undistributed S Corporation earnings (as measured under the rules governing S
Corporations under the Internal Revenue Code, but prior to deductions for
compensation expense arising from distributions with respect to restricted
shares of Common Stock) from January 1, 1996, through the termination of the
Company's S Corporation status;
(iv) conversion of all outstanding shares of Class B nonvoting common stock
to voting shares of Common Stock; and
(v) authorization of 5,000 shares of Preferred Stock.
6
<PAGE>
Significant components of pro forma deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
<S> <C>
DEFERRED TAX ASSETS:
Compensation related to restricted stock........... $4,655,076
Employee benefits.................................. 258,696
Inventories........................................ 390,174
Other.............................................. 104,289
----------
Total deferred tax assets.......................... 5,408,235
DEFERRED TAX LIABILITIES:
Depreciation....................................... 1,038,536
----------
Total deferred tax liabilities..................... 1,038,536
----------
Net deferred assets................................ $4,369,699
==========
</TABLE>
Pro forma net income reflects the pro forma effects for income taxes at an
effective tax rate of 38%, as if the Company were a taxable entity during the
periods presented.
Pro forma net income per share is calculated by dividing pro forma net income by
the pro forma weighted average number of shares of Common Stock outstanding,
adjusted to reflect a 2,000 for 1 stock split and the assumed issuance of an
additional 2,300,000 shares of Common Stock which are equivalent to the number
of shares issued by the Company in the initial public offering of its Common
Stock, including the exercise of the Underwriters' over-allotment option of
300,000 shares.
5. SUBSEQUENT EVENTS
On April 17, 1996, the Company filed an Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware authorizing
5,000 shares of Preferred Stock with a par value of $0.01 per share, a 2,000 for
1 split of the Company's Common Stock and the conversion of all previously
issued and outstanding shares of Class B common stock into voting shares of
Common Stock. (All capital amounts, share and per share data in these financial
statements have been retroactively restated to reflect the stock split.)
On April 19, 1996, the Company declared a dividend of $26,841,926, the amount
of previously undistributed S Corporation earnings as of December 31, 1995. The
Company issued notes to its shareholders in payment of the dividend. On April
24, 1996, the Company terminated its election to be taxed as an S Corporation
under the Internal Revenue Code.
The Company completed an initial public offering of its Common Stock on April
26, 1996, pursuant to which the Company sold 2,300,000 shares of Common Stock at
an initial public offering price of $17.00 per share. Net proceeds from the
offering after deducting the underwriting discount of $2,737,000 and estimated
expenses of $875,000 incurred in connection with the offering were $35,488,000.
Of the net proceeds received from the Offering, the Company has used (i)
$26,841,926 to prepay the principal of notes issued by the company to its
current shareholders in payment of an S Corporation dividend and (ii) $3,615,000
to repay borrowings on its revolving line of credit.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Results of Operations
Revenues were $13.0 million for the three months ended March 31, 1996, compared
to $13.3 million for the same period in the prior year, a decrease of 1.7%.
Revenues declined from the prior year due to a reduction in export shipments,
principally those destined for use in the North Sea. Revenues increased from
the prior year by 9% in the U.S. and 6% in Canada.
Gross profit in the first quarter 1996 was $6.1 million, or 47.1% of revenues, a
5.9% reduction from the gross profit of $6.5 million or 49.2% in the same
quarter in 1995. Gross profit declined primarily due to the fact that the
geographic areas in which sales volume and revenue increased utilized the lower
margin CarboEconoProp(R) product while the export markets in which sales volume
and revenues declined, had used the higher margin CarboLite(R) product. This
shift in the product mix resulted in a reduction in the average selling price of
the Company's products and a corresponding reduction in gross profit.
Selling, general and administrative expenses were $1.8 million in the first
quarter 1996, a 5.9% increase as compared to $1.7 million for the same period a
year earlier. Costs associated with the warehousing and shipping of the
Company's products increased by $143,000 from the previous year. The increase
in these costs was associated with an increase in inventory levels and a
continuing upgrade of equipment in the Company's distribution operation.
Liquidity and Capital Resources
Through the first quarter 1996, the Company has continued to rely on internally
generated cash flows and borrowings under its existing credit facility to
finance its operations and growth. Cash provided by operations during the three
months ended March 31, 1996, was $3.7 million net of a $1.2 million use of cash
for increases in working capital. Working capital increased primarily due to an
increase in finished goods inventories and a decrease in accounts payable
balances in connection with payments made for the expansion of the Company's
Eufaula manufacturing facility.
During the three months ended March 31, 1996, the Company recorded additions to
property, plant and equipment of $1.2 million including $759,000 for the
expansion of its Eufaula manufacturing facility which was completed in February
1996.
The Company currently has an unsecured line of credit in the amount of $9.0
million. During the first quarter 1996, the Company borrowed an additional
$624,000 against its line of credit bringing the total amount outstanding to
$3.4 million as of March 31, 1996.
The Company anticipates that it will be able to satisfy its operational and
capital spending requirements for the remainder of 1996 with cash flow generated
from operations. On April 24, 1996, the Company and its shareholders terminated
their election to be treated as an S Corporation under the Internal Revenue
Code. However, due to a deferred tax asset arising primarily from the vesting
of 800,000 shares of restricted common stock in connection with the initial
public offering of the Company's common stock, the Company does not anticipate
actually paying income taxes until the fourth quarter of 1996.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARBO CERAMICS INC.
By: /S/Paul G. Vitek
------------------------------------
Paul G. Vitek
Vice President, Finance
Date: June 3, 1996
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from consolidated
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> (353)
<SECURITIES> 0
<RECEIVABLES> 7,997
<ALLOWANCES> 0
<INVENTORY> 8,775
<CURRENT-ASSETS> 16,858
<PP&E> 29,115
<DEPRECIATION> (6,353)
<TOTAL-ASSETS> 39,620
<CURRENT-LIABILITIES> 7,497
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 32,000
<TOTAL-LIABILITY-AND-EQUITY> 39,620
<SALES> 13,033
<TOTAL-REVENUES> 13,059
<CGS> 6,893
<TOTAL-COSTS> 8,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 4,375
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,375
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
