<PAGE> 1
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 JUNE 30, 1997
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)
(972) 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 X No
--- ---
As of August 1, 1997, 14,602,000 shares of the registrant's Common
Stock, par value $.01 per share, were outstanding.
<PAGE> 2
CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 1997 (Unaudited), and December 31, 1996
Consolidated Statements of Income 4
(Unaudited) - Three months and six months ended June 30,
1997 and 1996
Consolidated Statements of Cash Flows 5
(Unaudited) - Six months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements - June 30, 1997 6-7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 10
Item 2. Changes in securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of matters to a vote of security-holders 10
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 11
Signatures 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
($ in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,271 $ 17,414
Trade accounts receivable 12,541 10,902
Inventories:
Finished goods 5,338 4,478
Raw materials and supplies 4,386 3,907
------------- ------------
Total inventories 9,724 8,385
Prepaid expenses and other current assets 1,212 608
Deferred income taxes 740 849
------------- ------------
Total current assets 44,488 38,158
Property, plant and equipment:
Land and land improvements 57 57
Buildings 4,536 4,536
Machinery and equipment 25,276 25,112
Construction in progress 2,651 401
------------- ------------
Total 32,520 30,106
Less accumulated depreciation 8,820 7,859
------------- ------------
Net property, plant and equipment 23,700 22,247
------------- ------------
Total assets $ 68,188 $ 60,405
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,502 $ 1,423
Accrued payroll and benefits 1,547 1,837
Accrued freight 1,005 659
Accrued utilities 400 326
Accrued income taxes 480 609
Other accrued expenses 223 350
------------- ------------
Total current liabilities 5,157 5,204
Deferred income taxes 1,952 1,967
Shareholders' equity:
Preferred Stock, par value $0.01 per share,
5,000 shares authorized,
none outstanding - -
Common Stock, par value $0.01 per share,
40,000,000 shares authorized:
14,602,000 shares issued and
outstanding 146 146
Additional paid-in capital 42,919 42,919
Retained earnings 18,014 10,169
------------- ------------
Total shareholders' equity 61,079 53,234
------------- ------------
Total liabilities and shareholders' equity $ 68,188 $ 60,405
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 20,893 $ 17,399 $ 38,733 $ 30,432
Cost of goods sold 10,546 9,382 19,393 16,275
----------- ----------- ----------- -----------
Gross profit 10,347 8,017 19,340 14,157
Selling, general and administrative expenses 2,080 2,965 4,101 4,736
----------- ----------- ----------- -----------
Operating profit 8,267 5,052 15,239 9,421
Other income (expense):
Interest income 255 47 442 49
Interest expense - (66) - (86)
Other, net (2) (8) 9 16
----------- ----------- ----------- -----------
253 (27) 451 (21)
----------- ----------- ----------- ------------
Income before income taxes 8,520 5,025 15,690 9,400
Income taxes 3,071 1,003 5,655 1,003
----------- ----------- ----------- -----------
Net income $ 5,449 $ 4,022 $ 10,035 $ 8,397
=========== =========== =========== ===========
Pro forma data:
Income before income taxes $ 5,025 $ 9,400
Income taxes 1,910 3,572
----------- -----------
Net income $ 3,115 $ 5,828
=========== ===========
Net income per share (pro forma in 1996) $ 0.37 $ 0.21 $ 0.68 $ 0.40
=========== =========== =========== ===========
Weighted average number of shares (pro
forma in 1996) 14,865,303 14,729,863 14,865,303 14,665,932
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1997 1996
--------------- --------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 10,035 $ 8,397
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 961 897
Amortization - 1,316
Deferred income taxes 94 1,003
Changes in operating assets and liabilities:
Trade accounts receivable (1,639) (3,756)
Inventories (1,339) (1,041)
Prepaid expenses and other current assets (604) (454)
Accounts payable 79 (512)
Accrued payroll and benefits (290) (220)
Accrued freight 346 188
Accrued utilities 74 83
Accrued income taxes (129) -
Other accrued expenses (127) (129)
---------------- -----------------
Net cash provided by operating activities 7,461 5,772
INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,414) (1,825)
--------------- ----------------
Net cash used in investing activities (2,414) (1,825)
FINANCING ACTIVITIES
Net payments on bank borrowings - (2,780)
Net proceeds from initial public offering - 35,285
Cash distributions - (32,844)
Cash dividends (2,190) -
--------------- ----------------
Net cash used in financing activities (2,190) (339)
--------------- ----------------
Net increase in cash and cash equivalents 2,857 3,608
Cash and cash equivalents at beginning of period 17,414 201
--------------- ----------------
Cash and cash equivalents at end of period $ 20,271 $ 3,809
=============== ================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ - $ 86
=============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated 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
consolidated financial statements and notes thereto for the year ended December
31, 1996 included in the Company's Form 10-K Annual Report for the year ended
December 31, 1996.
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 share and per share data for the three and
six months ended June 30, 1996 in the accompanying financial statements have
been retroactively restated to reflect the stock split.
The consolidated financial statements include the accounts of CARBO
Ceramics Inc. and its wholly owned subsidiary, CARBO Ceramics Sales
Corporation. CARBO Ceramics Sales Corporation was formed on July 31, 1996 under
the laws of Barbados. All significant intercompany transactions have been
eliminated.
2. DIVIDENDS PAID
On April 15, 1997, the Board of Directors declared a cash dividend of
$0.075 per common share payable to shareholders of record on April 28, 1997.
The dividend was paid on May 9, 1997.
3. NET INCOME PER SHARE
Net income per share for the three and six months ended June 30, 1997 is
based on 14,602,000 shares of Common Stock outstanding during each period,
increased by 263,303 average Common Stock equivalent shares for the assumed
exercise of options.
4. PRO FORMA INFORMATION
Pro Forma Net Income:
Pro forma net income for the three and six months ended June 30, 1996
reflects a provision for income taxes at an effective rate of 38% to illustrate
how historical net income might have been affected if the Company had not been
an S Corporation for income tax purposes. The Company elected to be treated as
an S Corporation pursuant to the Internal Revenue Code from June 23, 1987
through April 23, 1996, immediately after which it terminated its S Corporation
election in conjunction with its initial public offering. As a result, the
Company was not subject to federal income taxes during this period. By election
of the shareholders, S Corporation status was also applicable to the state
jurisdictions where the Company had significant operations during this period.
6
<PAGE> 7
Pro Forma Net Income Per Share:
Pro forma net income per share is based on 14,602,000 shares of Common
Stock outstanding, including 2,300,000 shares issued in the initial public
offering of the Company's Common Stock on April 26, 1996, increased by 127,863
and 63,932 average common stock equivalent shares for the three and six months
ended June 30, 1996, respectively, for the assumed exercise of options.
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of June 30, 1997 are as
follows:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS: ($ in thousands)
<S> <C>
Employee benefits................................................................ $ 297
Inventories...................................................................... 357
Other............................................................................ 86
-------
Total deferred tax assets........................................................ 740
DEFERRED TAX LIABILITIES:
Depreciation..................................................................... 1,896
Other............................................................................ 56
-------
Total deferred tax liabilities................................................... 1,952
-------
Net deferred liabilities......................................................... $(1,212)
=======
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997
Revenues. Revenues for the second quarter 1997 were a record $20.9 million, an
increase of 20% over the second quarter 1996. The increase was due to a 17%
increase in sales volume and an increase in the average selling price due to a
price increase of approximately 5% which was effective in January 1997. Sales
volumes increased for each of the Company's products, except for CARBOLITE(R),
which showed a slight decrease. The largest percentage volume increases were in
CARBOECONOPROP and CARBOHSP(R). Domestic and export sales volumes each
increased by approximately 17% over the comparable period in 1996.
Natural gas prices declined slightly from the second quarter 1996. However,
natural gas drilling activity continued its increase over 1996 with the second
quarter of 1997 about 18% ahead of the comparable period in 1996. The
industry's focus on the long-term demand for natural gas is evidenced by the
fact that almost 60% of the total rig count is devoted to drilling for natural
gas.
Gross Profit. Gross profit for the quarter was $10.3 million or 50% of sales
compared to $8.0 million or 46% of sales for the second quarter 1996. The
increase in gross profit margins was due to the price increase that went into
effect in January 1997 and lower manufacturing costs at the Eufaula facility.
The cost reduction in Eufaula was due to higher production rates in 1997.
Selling, General and Administrative Expenses (SG&A). SG&A was $2.1 million for
the second quarter of 1997 and $3.0 million for the comparable period in 1996.
The significant decrease is almost entirely attributable to a $1.1 million
non-recurring, non-cash charge incurred in connection with the vesting of
restricted stock at the time of the Company's initial public offering which
occurred in the second quarter of 1996. Excluding these costs, expenses
increased approximately $200,000 due to costs associated with being a publicly
traded company as well as costs that vary with sales volume and profitability
including warehouse and shipping expenses, commission expenses, and incentive
compensation.
Six Months Ended June 30, 1997
Revenues. Revenues for the six months ended June 30, 1997 were $38.7 million,
up 27% from the same period in 1996. The increase was due to a 22% increase in
sales volume and the 5% price increase effective January 1997. Sales volume
increased for each of the Company's products, with the largest percentage
increase in CARBOHSP(R). Domestic and export sales volumes each increased by
approximately 22% over the comparable period in 1996.
Gross Profit. Gross profit for the six months ended June 30, 1997 was $19.3
million or 50% of sales compared to $14.2 million or 47% of sales for the same
period in 1996. The increase in gross profit margins was due to the price
increase that went into effect in January 1997, and lower manufacturing costs
at the New Iberia facility as a result of higher throughput achieved through
improving grinding operations.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $4.1
million for the first six months of 1997 compared to $4.7 million for the same
period in 1996. Included in the 1996 costs is a $1.1 million non-recurring,
non-cash charge incurred in connection with the vesting of restricted stock at
the time of the Company's initial public offering. This was partially off-set
by an increase in costs of $.5 million for those expenses associated with being
a publicly traded company as well as costs that vary with sales volume and
profitability including warehouse and shipping expenses, commission expenses
and incentive compensation.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $20.3 million as of June 30, 1997, an
increase of $2.9 million from December 31, 1996. The increase in cash and cash
equivalents was due to cash generated from operations of $7.5 million net of
capital spending of $2.4 million and cash dividends of $2.2 million. Capital
spending in the first six months of 1997 was primarily related to expansion of
the Company's San Antonio storage and Eufaula manufacturing facilities, and
preliminary spending related to the construction of a new manufacturing
facility in Georgia.
The Company will continue to increase its capital expenditures through the
remainder of 1997 and in 1998. The Company expects to spend $4.0 million to
expand its distribution capabilities and up to $12.0 million to begin
construction of the new manufacturing facility in Georgia in 1997, and an
additional $22.0 million in 1998 to complete construction of its new
manufacturing facility. The Company expects to fund its capital spending
requirements from existing cash balances and cash generated from operations.
The Company believes that its existing credit agreement is sufficient to fund a
portion of its capital spending program if necessary.
9
<PAGE> 10
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
a. The Annual Meeting of Shareholder's of Carbo Ceramics Inc. was held on
April 15, 1997.
b. The following matters were submitted to a vote at the meeting:
(1) the election of the following nominees as directors of Carbo Ceramics
Inc. The vote with respect to each nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Dr. Claude E. Cooke, Jr. 13,737,592 100
William A. Griffin, Jr. 13,737,592 100
William C. Morris 13,737,592 100
John J. Murphy 13,737,592 100
Jesse P. Orsini 13,737,592 100
</TABLE>
(2) a recommendation of the Board of Directors that the shareholders
appoint the firm of Ernst & Young LLP as independent accountants to
audit the consolidated financial statements of Carbo Ceramics Inc. for
the year 1997. The vote on this matter was as follows:
<TABLE>
<CAPTION>
For Against Abstentions
--- ------- -----------
<S> <C> <C>
13,737,592 0 100
</TABLE>
ITEM 5. OTHER INFORMATION
None
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. There were no reports filed on Form 8-K during the three months ended
June 30, 1997.
b. Exhibits
27.1 Financial Data Schedule
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/Jesse P. Orsini
-------------------------
Jesse P. Orsini
President
& Chief Executive Officer
By: /S/Paul G. Vitek
-------------------------
Paul G. Vitek
Vice President, Finance
Date: August 12, 1997
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,271
<SECURITIES> 0
<RECEIVABLES> 12,541
<ALLOWANCES> 0
<INVENTORY> 9,724
<CURRENT-ASSETS> 44,488
<PP&E> 32,520
<DEPRECIATION> (8,820)
<TOTAL-ASSETS> 68,188
<CURRENT-LIABILITIES> 5,157
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 60,933
<TOTAL-LIABILITY-AND-EQUITY> 68,188
<SALES> 20,893
<TOTAL-REVENUES> 20,893
<CGS> 10,546
<TOTAL-COSTS> 10,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,520
<INCOME-TAX> 3,071
<INCOME-CONTINUING> 5,449
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,449
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
