<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 SEPTEMBER 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 November 5, 1997, 14,602,000 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
<PAGE> 2
CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - 3
September 30, 1997 (Unaudited), and December 31, 1996
Consolidated Statements of Income 4
(Unaudited) - Three and nine months ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows 5
(Unaudited) - Nine months ended September 30, 1997 and 1996
Notes to Consolidated Financial Statements - September 30, 1997 6-7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 10
Item 2. Changes in securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of matters to a vote of security-holders 10
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------ ------------
($ in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 25,011 $ 17,414
Trade accounts receivable 13,655 10,902
Inventories:
Finished goods 4,414 4,478
Raw materials and supplies 4,719 3,907
------------ ------------
Total inventories 9,133 8,385
Prepaid expenses and other current assets 1,241 608
Deferred income taxes 796 849
------------ ------------
Total current assets 49,836 38,158
Property, plant and equipment:
Land and land improvements 214 57
Buildings 4,536 4,536
Machinery and equipment 26,901 25,112
Construction in progress 3,421 401
------------ ------------
Total 35,072 30,106
Less accumulated depreciation 9,306 7,859
------------ ------------
Net property, plant and equipment 25,766 22,247
------------ ------------
Total assets $ 75,602 $ 60,405
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,554 $ 1,423
Accrued payroll and benefits 1,869 1,837
Accrued freight 1,310 659
Accrued utilities 440 326
Accrued income taxes 758 609
Other accrued expenses 558 350
------------ ------------
Total current liabilities 7,489 5,204
Deferred income taxes 2,190 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 22,858 10,169
------------ ------------
Total shareholders' equity 65,923 53,234
------------ ------------
Total liabilities and shareholders' equity $ 75,602 $ 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 23,062 $ 17,898 $ 61,795 $ 48,330
Cost of goods sold 11,593 9,432 30,986 25,707
------------ ------------ ------------ ------------
Gross profit 11,469 8,466 30,809 22,623
Selling, general and administrative expenses 2,255 1,585 6,356 6,321
------------ ------------ ------------ ------------
Operating profit 9,214 6,881 24,453 16,302
Other income (expense):
Interest income 230 97 672 146
Interest expense -- -- -- (86)
Other, net 22 (34) 31 (18)
------------ ------------ ------------ ------------
252 63 703 42
------------ ------------ ------------ ------------
Income before income taxes 9,466 6,944 25,156 16,344
Income taxes 3,527 2,595 9,182 3,598
------------ ------------ ------------ ------------
Net income $ 5,939 $ 4,349 $ 15,974 $ 12,746
============ ============ ============ ============
Pro forma data:
Income before income taxes $ 16,344
Income taxes 6,108
------------
Net income $ 10,236
============
Net income per share (pro forma for nine months 1996) $ 0.40 $ 0.30 $ 1.08 $ 0.70
============ ============ ============ ============
Weighted average number of shares (pro forma for nine
months 1996) 14,894,186 14,715,448 14,801,369 14,681,660
============ ============ ============ ============
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1997 1996
------------ ------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,974 $ 12,746
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,447 1,401
Amortization -- 1,316
Deferred income taxes 276 3,599
Changes in operating assets and liabilities:
Trade accounts receivable (2,753) (3,467)
Inventories (748) (462)
Prepaid expenses and other current assets (633) (449)
Accounts payable 1,131 (503)
Accrued payroll and benefits 32 (65)
Accrued freight 651 170
Accrued utilities 114 4
Accrued income taxes 149 --
Other accrued expenses 208 (301)
------------ ------------
Net cash provided by operating activities 15,848 13,989
INVESTING ACTIVITIES
Purchase of property, plant and equipment (4,966) (1,962)
------------ ------------
Net cash used in investing activities (4,966) (1,962)
FINANCING ACTIVITIES
Net payments on bank borrowings -- (2,780)
Net proceeds from initial public offering -- 35,285
Cash distributions -- (32,844)
Cash dividends (3,285) (1,095)
------------ ------------
Net cash used in financing activities (3,285) (1,434)
------------ ------------
Net increase in cash and cash equivalents 7,597 10,593
Cash and cash equivalents at beginning of period 17,414 201
------------ ------------
Cash and cash equivalents at end of period $ 25,011 $ 10,794
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ -- $ 92
============ ============
Income taxes paid $ 8,758 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 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.
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 July 9, 1997, the Board of Directors declared a cash dividend of $0.075
per common share payable to shareholders of record on July 31, 1997. The
dividend was paid on August 15, 1997.
3. NET INCOME PER SHARE
Net income per share for the three months ended September 30, 1997 and 1996
and the nine months ended September 30, 1997 is based on 14,602,000 shares of
Common Stock outstanding during each period, increased by 292,186, 113,448 and
199,369 average common stock equivalent shares, respectively, for the assumed
exercise of options.
4. PRO FORMA INFORMATION
Pro Forma Net Income:
Pro forma net income for the nine months ended September 30, 1996 reflects
a provision for income taxes at the Company's historical effective tax rate 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.
Pro Forma Net Income Per Share:
Pro forma net income per share for the nine months ended September 30, 1996
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 79,660 average common stock equivalent shares for
the assumed exercise of options.
6
<PAGE> 7
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 September 30, 1997 are
as follows:
<TABLE>
<S> <C>
DEFERRED TAX ASSETS: ($ in thousands)
Employee benefits...................................... $ 328
Inventories............................................ 377
Other.................................................. 91
-------
Total deferred tax assets.............................. 796
DEFERRED TAX LIABILITIES:
Depreciation........................................... 2,141
Other.................................................. 49
-------
Total deferred tax liabilities......................... 2,190
-------
Net deferred liabilities............................... $(1,394)
=======
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997
Revenues. Revenues for the third quarter 1997 were $23.1 million, an increase of
29% over the third quarter 1996. The increase was due to a 27% 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
significantly for the company's lightweight products, particularly in the export
markets. The sales volume of our high strength products decreased from an
unusually high demand for these products during the third quarter 1996 - a
result of production problems experienced by our competitor during this period.
Domestic sales volume for the quarter increased by 18% and export sales
increased by 49%.
Natural gas prices increased approximately 19% from the third quarter 1996. In
addition, natural gas drilling activity continued to increase over 1996 with the
third quarter 1997 approximately 19% ahead of the same period of 1996. As of
September 30, 1997 over 61% of the total rig count was devoted to natural gas
drilling.
Gross Profit. Gross profit for the quarter was $11.5 million or 50% of sales
compared to $8.5 million or 47% of sales for the third 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 both the Eufaula and New
Iberia facilities during the third quarter of 1997 compared to the same period
in 1996. The improvement in cost performance at both facilities was due to
higher production rates in 1997 to meet increased sales requirements.
Selling, General and Administrative Expenses (SG&A). SG&A was $2.3 million for
the third quarter of 1997 and $1.6 million for the comparable period in 1996.
The increase in costs is due to an increase in those costs that vary with sales
volume and profitability including warehouse and shipping expenses, commission
expenses and incentive compensation, as well as expenses associated with being a
publicly traded company.
Nine Months Ended September 30, 1997
Revenues. Revenues for the nine months ended September 30, 1997 were $61.8
million, up 28% from the same period in 1996. The increase was the result of a
24% increase in sales volume and the 5% price increase effective January 1997.
Sales volumes increased for each of the company's products, with the company's
lightweight products increasing by 32%. Domestic sales increased by 21% and
export sales increased by 33% over 1996.
Gross Profit. Gross profit for the nine months ended September 30,1997 was $30.8
million or 50% of sales compared to $22.6 million or 47% of sales for the same
period in 1996. The increase in gross profit margins is due to the price
increase that went into effect in January 1997, and lower manufacturing costs,
primarily at the New Iberia facility which resulted from higher throughput
achieved through improved grinding operations.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $6.4
million for the first nine months of 1997 compared to $6.3 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 is offset by an increase
in 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.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $25.0 million as of September 30, 1997, an
increase of $7.6 million from December 31, 1996. The increase in cash and cash
equivalents was due to cash generated from operations of $15.9 million net of
capital spending of $5.0 million and cash dividends of $3.3 million. Capital
spending in the first nine months of 1997 was primarily related to expansion of
our San Antonio storage facility, expansion of our Eufaula manufacturing
facility, and initial spending related to the construction of a new
manufacturing facility in McIntyre, Georgia.
The company will continue to increase its capital expenditures in 1997 and 1998.
Up to $40 million will be spent in the 4th quarter of 1997 and throughout 1998
to complete the construction of the new facility in Georgia. 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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. There were no reports filed on Form 8-K during the three months ended
September 30, 1997.
b. Exhibits
27.1. Financial Data Schedule
10
<PAGE> 11
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.
/s/ JESSE P. ORSINI
---------------------------------
Jesse P. Orsini
President
& Chief Executive Officer
/s/ PAUL G. VITEK
---------------------------------
Paul G. Vitek
Vice President, Finance
Date: November 6, 1997
11
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
27.1 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> SEP-30-1997
<CASH> 25,011
<SECURITIES> 0
<RECEIVABLES> 13,655
<ALLOWANCES> 0
<INVENTORY> 9,133
<CURRENT-ASSETS> 49,836
<PP&E> 35,072
<DEPRECIATION> (9,306)
<TOTAL-ASSETS> 75,602
<CURRENT-LIABILITIES> 7,489
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 65,777
<TOTAL-LIABILITY-AND-EQUITY> 75,602
<SALES> 23,062
<TOTAL-REVENUES> 23,062
<CGS> 11,593
<TOTAL-COSTS> 11,593
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,466
<INCOME-TAX> 3,527
<INCOME-CONTINUING> 5,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,939
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
