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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934.
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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on March 20,
1997, as reported on the Nasdaq National Market, was approximately $34,084,125.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of March 20, 1997, Registrant had outstanding 14,602,000 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended December
31, 1996, are incorporated by reference into Parts II and IV. Portions of the
Proxy Statement for Registrant's Annual Meeting of Shareholders to be held April
15, 1997, are incorporated by reference in Part III.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Carbo Ceramics Inc. is the world's largest producer and supplier of
ceramic proppants for use in the hydraulic fracturing of natural gas and oil
wells. Demand for ceramic proppants depends generally upon the number of
natural gas and oil wells drilled, completed or recompleted worldwide, the depth
of these wells and the percentage of these wells that are hydraulically
fractured. Drilling, completion and recompletion of new zones and existing
producing zones and hydraulic fracturing activity are in turn largely dependent
upon the demand for natural gas and oil and the level and volatility of natural
gas and oil prices.
The hydraulic fracturing process consists of pumping fluids down a
natural gas or oil well at pressures and flow rates sufficient to split the
hydrocarbon bearing formation and create fractures in the formation. A granular
material, such as ceramic proppant or sand-based proppant, is suspended in the
fluid and packs the newly created fracture, keeping the fracture open once high
pressure pumping stops. The proppant-filled fracture creates a permeable
channel through which the hydrocarbons can flow more freely from the formation
to the well and then to the surface.
From its inception, the Company has pursued a strategy of
manufacturing high strength, premium priced proppants that can be used in very
deep wells, and introducing new, lightweight, intermediate strength ceramic
proppants that are more competitively priced to capture a greater portion of the
large existing market for sand-based proppants. While these new products do not
have the performance characteristics of the Company's premium product lines,
they are less costly to produce and are also technically superior to sand-based
proppants.
Based on industry sources, the Company believes that in 1996 the U.S.
market for fracturing proppants was approximately 3.5 billion pounds and that
ceramic proppants represented approximately 9% of proppants pumped in the United
States. The Company believes that the low relative market share for ceramic
proppants represents an opportunity for future domestic growth. The Company
also believes that there is an opportunity for continued growth in export
markets as operators explore new geographic areas and the Company is able to
demonstrate the economic benefits of using ceramics proppants in these areas.
The Company estimates that it supplies 60% of the ceramic proppants
used by the oilfield service companies that perform hydraulic fracturing
services worldwide. The Company also estimates that approximately 90% of its
North American sales and 80% of its worldwide sales are used in the fracturing
of natural gas wells as opposed to oil wells.
PRODUCTS
The Company's four product lines cover the entire spectrum of
commercially available ceramic proppants. CarboHSP/TM/ and CarboProp(R), which
are manufactured at the Company's plant in New Iberia, Louisiana, are premium
priced, high strength proppants designed primarily for use in deep gas wells.
CarboHSP/TM/, which was introduced in 1979, is the original ceramic proppant,
formerly marketed as "Sintered Bauxite". CarboHSP/TM/ is approximately 83%
alumina and offers the greatest level of strength and conductivity for use in
deeper wells. CarboProp(R), which was introduced by the Company in 1982, is
approximately 72% alumina and slightly lower in weight and strength than
CarboHSP/TM/. CarboProp(R) was developed for use in deep gas wells with less
extreme conditions that do not require the strength of CarboHSP/TM/.
The CarboLite(R) and EconoProp(R) products, produced at the Company's
Eufaula, Alabama plant, are lightweight, intermediate strength proppants
designed for use in gas wells of moderate depth and shallower oil wells and more
directly compete with sand-based proppants. CarboLite(R), introduced in 1984, is
approximately 51% alumina and is used in medium depth applications, where the
additional strength of ceramic proppants may not be essential, but their
roundness (i.e., their higher sphericity), uniform grain size, strength and the
resulting increase in permeability often justify the use of ceramic proppants.
In addition, larger granule versions of CarboLite(R) provide additional
permeability, as the larger proppant granules will pack less tightly (and are
accordingly more porous) than sand-based proppants or smaller granule ceramic
proppants.
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EconoProp(R), introduced in 1992 to compete with sand-based proppants,
is the Company's lowest priced ceramic proppant and its fastest growing product.
EconoProp(R) has an alumina content of approximately 49%. EconoProp(R) is a cost
competitive alternative to sand in a large number of fracturing applications and
has helped expand the overall market share of ceramic proppants.
The following table shows each of these product lines together with
their typical areas of use:
<TABLE>
<CAPTION>
YEAR
PRODUCT INTRODUCED TYPICAL AREAS OF USE
------- ---------- --------------------
<S> <C> <C>
CarboHSP/TM/ 1979 Deep natural gas wells
CarboProp(R) 1982 Medium depth natural gas and oil wells
CarboLite(R) 1984 Medium depth natural gas and oil wells
EconoProp(R) 1992 Medium depth natural gas and oil wells
</TABLE>
CUSTOMERS AND MARKETING
During 1996, the Company's largest direct customers were, in alphabetical
order, BJ Services Company, Dowell and Halliburton Company, the three largest
participants in the worldwide petroleum pressure pumping industry. These
companies collectively accounted for approximately 84% of the Company's
revenues. The Company's other customers include smaller pumping service
companies, who compete in the worldwide fracturing business. The end users of
the Company's products, however, are the operators of natural gas and oil wells,
who engage pumping service companies to hydraulically fracture wells with the
Company's ceramic proppants in order to improve the recovery of natural gas or
oil from the wells and to enhance the rate of return on the investment made in
such wells. The Company works with its direct customers to present the
advantages of using the Company's products to the end user operators of natural
gas and oil wells. The Company generally supplies its customers with products
on a just-in-time basis, with transactions governed by individual purchase
orders. Continuing sales of product depend on the Company's direct customers
and the well operators being satisfied with both product and delivery
performance.
The Company recognizes the importance of aggressive marketing when
introducing a technically advanced and performance enhancing, but intrinsically
more costly, product. The Company must market its products both to its direct
customers and to owners and operators of the natural gas and oil wells. The
Company's sales and marketing staff regularly calls on and keeps close contact
with the people who are influential in the proppant purchasing decision:
production companies, regional offices of well service companies that offer
pressure pumping services, and various completion engineering consultants. The
Company provides a variety of technical support services and has developed
computer software that models the return on investment achievable by using the
Company's ceramic proppants versus that of other proppants in the hydraulic
fracturing of a natural gas or oil well.
The Company's Vice President of Marketing, who is based at the Company's
offices in Irving, Texas, coordinates worldwide sales and marketing activities.
The Company's export marketing efforts are conducted by three commissioned sales
agents located in Europe, South America and Australia.
The Company's ceramic proppants are used worldwide by U.S. customers
operating abroad and by foreign customers. Sales outside the United States
accounted for 26%, 37% and 31% of the Company's sales for 1994, 1995 and 1996,
respectively.
The distribution of the Company's export and domestic revenues is shown
below, based upon the region in which proppants were used by the customer:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(MILLIONS OF DOLLARS)
---------------------
<S> <C> <C> <C>
LOCATION
United States $39.7 $36.8 $45.3
International 13.6 21.2 19.9
----- ----- -----
Total $53.3 $58.0 $65.2
===== ===== =====
</TABLE>
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COMPETITION AND MARKET SHARE
The Company's chief worldwide competitor is Norton-Alcoa Proppants
("Norton-Alcoa"). Norton-Alcoa is a joint venture of Compagnie de Saint-Gobain,
the French glass and materials company, and Aluminum Company of America.
Norton-Alcoa manufactures ceramic proppants that directly compete with each of
the Company's products. In addition, the Brazil-based Mineraco Curimbaba
("Curimbaba") manufactures a sintered bauxite product similar to the Company's
CarboHSP/TM/, which is marketed in the United States under the name
"Sinterball". The Company believes that Curimbaba has not expanded its U.S.
product line to include a full range of ceramic proppants and is unlikely to do
so in light of patents held by the Company and Norton-Alcoa. The Company
believes that it supplies approximately 60% of the ceramic proppants used by the
oilfield services companies that perform fracturing services worldwide.
Competition for CarboHSP/TM/ and CarboProp(R) includes ceramic proppants
manufactured by Norton-Alcoa and Curimbaba. The Company's CarboLite(R) and
EconoProp(R) products compete with ceramic proppants produced by Norton-Alcoa
and with sand-based proppants for use in the hydraulic fracturing of medium
depth natural gas and oil wells. The leading suppliers of mined sand are Unimin
Corp., Badger Mining Corp., Wedron Silica Co., Ogelbay-Norton Company and
Colorado Silica Sand, Inc. The leading suppliers of resin-coated sand are Borden
Proppants Corp. and Santrol, a subsidiary of Fairmont Minerals Limited, Inc.
The Company believes that the most significant factors, in addition to
price, behind a customer's decision to purchase the Company's products are (i)
on-time delivery performance, (ii) technical support and (iii) proppant
availability. The Company believes that its delivery performance is excellent,
that it provides superior technical support to its customers and that it
maintains a sufficient product inventory to meet anticipated customer demand.
The Company believes that its technical support has enabled it to persuade
customers to use ceramic proppants in an increasingly broad range of
applications and thus increased the overall market for its products.
The Company is currently conducting testing and development activities
with respect to alternative raw materials to be used in the Company's existing
production methods and alternative production methods. The Company is not aware
of the development of alternative products for use as proppants in the hydraulic
fracturing process. The Company believes that the main barriers to entry for
additional competitors are the patent rights held by the Company and certain of
its current competitors and the capital costs involved in building production
facilities of sufficient size to be operated efficiently.
DISTRIBUTION
The Company maintains finished goods inventories at its plants in New
Iberia, Louisiana, and Eufaula, Alabama, and at six remote stocking facilities:
Rock Springs, Wyoming; Oklahoma City, Oklahoma; San Antonio, Texas; Fairbanks,
Alaska; Edmonton, Alberta, Canada; and Rotterdam, The Netherlands. The remote
stocking facilities consist of bulk storage silos with truck trailer loading
facilities. The Company leases the San Antonio site and subcontracts its
operations to a local trucking company. The remaining stocking facilities are
owned and operated by local trucking companies under contract with the Company.
The North American sites are supplied by rail, and the site in the Netherlands
is supplied by container ship. In total, the Company leases 79 rails cars, and
owns or leases 62 dedicated trailers. The price of the Company's products sold
for delivery in the lower 48 United States and Canada includes just-in-time
delivery of proppants to the operator's well site, which eliminates the need for
customers to maintain an inventory of ceramic proppants.
In anticipation of increased demand for its products, the Company plans
to increase storage capacity at its remote storage facilities in San Antonio,
Oklahoma City and Edmonton in 1997. Total expenditures are anticipated to be
$4.0 million.
RAW MATERIALS
Ceramic proppants are made from high alumina content ores (commonly
referred to as bauxite, bauxitic clay or kaolin, depending on the alumina
content), which are readily available on the world market. Bauxite is largely
used in the production of aluminum metal, refractory material and abrasives.
The two main deposits of high alumina content ores in the United States are in
Arkansas and Alabama; other economically mineable deposits are located in
Australia, China, Surinam and Jamaica. The Company's New Iberia facility
currently uses bauxite imported from Australia and bauxitic clay mined in
Arkansas. The Company has decreased its dependence on
4
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imported bauxite and bauxitic clay as it has entered into a long term contract
for the processing and supply of Arkansas bauxite and bauxitic clay for use at
the New Iberia facility. The Company believes that this agreement, which
stipulates a fixed price, subject to annual upward adjustments in accordance
with a producer price index, will provide a sufficient supply of bauxite and
bauxitic clay to meet the requirements of the New Iberia facility until 1999.
The Company's Eufaula facility exclusively employs locally produced uncalcined
kaolin, and the Company has entered into a contract requiring the supplier to
sell to the Company up to 200,000 net tons of kaolin per year and the Company to
purchase from the supplier 80% of the Eufaula facility's annual kaolin
requirements, each through 2003. This agreement stipulates a fixed price,
subject to annual adjustment in accordance with fluctuations (within an 8%
annual limit) in the producer price index. Raw material costs for the Eufaula
facility are substantially below those for the New Iberia plant, due to the
Eufaula facility's proximity to raw material reserves and use of uncalcined raw
materials.
PRODUCTION PROCESS
Ceramic proppants are made by grinding or dispersing ore to a fine powder,
combining the powder into small, green (i.e., unfired) pellets and sintering the
pellets at 2,500 (degrees) F to 3,000 (degrees) F in a rotary kiln.
The Company uses two different methods to produce ceramic proppants. The
Company's plant in New Iberia, Louisiana, uses a dry process (the "Dry Process")
which starts with dry, calcined bauxite and bauxitic clay. These materials are
ground into a dry powder. Pellets are formed by combining the powder with water
and binders and introducing the mixture into a high-shear mixer. The process is
completed once the green pellets are sintered in a rotary kiln. The Company's
competitors also use the Dry Process to produce ceramic proppants.
The Company's plant in Eufaula, Alabama, uses a wet process (the "Wet
Process"), which starts with moist, uncalcined kaolin from local mines. The
kaolin is dispersed with chemicals in a water slurry. With an atomizer, the
slurry is sprayed like a mist into a dryer which causes the slurry to harden
into green pellets. Finally, these green pellets are sintered in rotary kilns.
The Company believes that the Wet Process is unique to its plant in Eufaula,
Alabama.
PATENT PROTECTION
The Company's ceramic proppants are made by processes and techniques that
involve a high degree of proprietary technology, some of which are patented.
The Company owns outright six issued U.S. patents and seven issued foreign
patents; three of these U.S. patents and four of these foreign patents relate to
the CarboProp(R) product produced by the Dry Process.
The Company jointly owns with A/S NIRO Atomizer ("NIRO"), the Danish
designer and manufacturer of the spray atomizer device used in the Wet Process,
three issued U.S. patents and 17 issued foreign patents. The patents owned
jointly with NIRO generally relate to the Wet Process, and the products produced
thereby (CarboLite(R) and EconoProp(R)).
The current versions of the Company's six most important U.S. patents
expire at various times in the years 2002 through 2009 with its two key product
patents expiring in 2006 and 2009. The Company believes that these patents have
been and will continue to be important in enabling the Company to compete in the
market to supply proppants to the natural gas and oil industry. The Company
intends to enforce and has in the past vigorously enforced its patents and it
may be involved from time to time in the future, as it has been in the past, in
litigation to determine the enforceability, scope and validity of its patent
rights. Past disputes with its main competitor have been resolved in ways that
permit the Company to continue to benefit fully from its patent rights. The
Company and this competitor have cross licensed certain of their respective
patents relating to intermediate and low density proppants on both a royalty-
free and royalty-bearing basis. (Royalties under these licenses are not
material to the Company's financial results.) The Company and NIRO have not
granted any licenses to third parties relating to the use of the Wet Process.
As a result of these cross licensing arrangements, both the Company and its main
competitor are able to produce a broad range of ceramic proppants, while third
parties are unlikely to be able to enter the ceramic proppants market without
infringing on the patent rights held by the Company, its main competitor or both
of them.
5
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PRODUCTION CAPACITY
The Company believes that constructing adequate capacity ahead of demand
while incorporating new technology to reduce manufacturing costs are important
competitive strategies to increase its overall share of the market for proppants
used in hydraulic fracturing. Prior to 1993, the Company's production capacity
was substantially in excess of its sales requirements. Since that time,
however, the Company has been expanding its capacity in order to meet the
generally increasing demand for its products. In October 1993, the Company
increased the capacity of the Eufaula facility from 90 million pounds per year
to 160 million pounds per year, in response to the increasing demand for the
Company's CarboLite(R) and EconoProp(R) products. In May 1995, the Company
completed a 40 million pound per year capacity expansion at the New Iberia
facility, intended to meet increasing demand for CarboHSP/TM/ and CarboProp(R).
Most recently, in February 1996, the Company commenced operations of its second
70 million pound per year expansion of the Eufaula plant. Total annual capacity
is currently 100 million pounds at the New Iberia facility and is 230 million
pounds at the Eufaula facility.
The following table sets forth the date of construction of and recent
expansion of the Company's manufacturing facilities:
<TABLE>
<CAPTION>
YEAR OF ANNUAL
LOCATION COMPLETION CAPACITY PRODUCTS
---------- ---------- ------------- ----------
(MILLIONS OF
POUNDS)
<S> <C> <C> <C>
NEW IBERIA, LOUISIANA
Unit 1 1979 20 CarboHSP/TM/ and CarboProp(R)
Unit 2 1981 40 CarboHSP/TM/ and CarboProp(R)
1995 Expansion 1995 40 CarboHSP/TM/ and CarboProp(R)
---
Total 100
===
EUFAULA, ALABAMA
Unit 3 1983 90 CarboLite(R) and EconoProp(R)
1993 Expansion 1993 70 CarboLite(R) and EconoProp(R)
1996 Expansion 1996 70 CarboLite(R) and EconoProp(R)
---
Total 230
===
</TABLE>
The Company believes that it has adequate capacity to meet current demand.
However, if the Company's sales volume, in pounds, continues to grow (as it has
since 1988, at a compound annual rate in excess of 18%), demand for the
Company's products would exceed capacity by the end of 1998. The Company
believes that the next expansion of its production capacity would require a new
manufacturing facility which would provide 150 million pounds of capacity with
an investment of $30-35 million. Construction time for this facility would be
approximately 18 months. The Company has begun preliminary engineering work and
site selection for a facility that could be completed in 1998. The Company's
current supply contracts do not provide the raw materials that would be used at
such a new facility. However, the Company believes that there are sufficient
reserves of raw materials available for purchase in the United States and that
it will be able to enter into a satisfactory long-term contract for the supply
of its raw material requirements prior to completion of any new manufacturing
facility.
ORDER BACKLOG
The Company generally operates without any material backlog.
ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS
The Company believes that its operations are in substantial compliance with
applicable federal, state and local environmental and safety laws and
regulations. The Company does not anticipate any significant expenditures in
order to continue to comply with such laws and regulations.
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EMPLOYEES
At December 31, 1996, the Company had 108 full-time employees. In addition
to the services of its employees, the Company employs the services of
consultants as required. The Company's employees are not represented by labor
unions. There have been no work stoppages or strikes during the last three
years which have resulted in the loss of production or production delays. The
Company believes its relations with its employees are satisfactory.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Form 10-K, the company's Annual
Report to Shareholders, any Form 10-Q or any Form 8-K of the Company or any
other written or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from such statements. This document
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 concerning, among other things, the Company's
prospects, developments and business strategies for its operations, all of which
are subject to certain risks, uncertainties and assumptions. These forward-
looking statements are identified by their use of terms and phrases such as
"expect", "estimate", "believe" and similar terms and phrases. These risks and
uncertainties include but are not limited to, changes in the demand for oil and
natural gas, the development of alternative stimulation techniques and the
development of alternative proppants for use in hydraulic fracturing. The words
"believe", "expect", "anticipate", "project" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date the
statement was made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters (approximately 2,700
square feet of leased office space) in Irving, Texas, and owns its manufacturing
facilities, land and substantially all of the related production equipment in
New Iberia, Louisiana, and Eufaula, Alabama.
The facility in New Iberia, Louisiana, located on 24 acres of land owned by
the Company, consists of two production units (approximately 85,000 square
feet), a laboratory (approximately 4,000 square feet) and an office building
(approximately 3,000 square feet). The Company also owns an 80,000 square foot
warehouse on the plant grounds in New Iberia, Louisiana.
The facility in Eufaula, Alabama, located on 14 acres of land owned by the
Company, consists of one production unit (approximately 111,000 square feet), a
laboratory (approximately 2,000 square feet) and an office (approximately 1,700
square feet).
The Company's customer service and distribution operations are located at
the New Iberia facility, while its quality control, testing and development
functions operate out of both the New Iberia and Eufaula facilities.
The Company's distribution facility in San Antonio, Texas, is located on
6.8 acres of land leased by the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently engaged in litigation and is not currently
aware of any material claims that are likely to be asserted against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Jesse P. Orsini (age, 56): Mr. Orsini, President and Chief Executive
Officer, has served as President, Chief Executive Officer and a Director of the
Company since its organization in 1987.
Paul G. Vitek (age, 38): Mr. Vitek has been the Vice President of Finance
since February 1996 and has served as Treasurer and Secretary of the Company
since 1988.
All officers are elected at the Annual Meeting of the Board of Directors
for one-year terms or until their successors are duly elected. There are no
arrangements between any officer and any other person pursuant to which he was
selected as an officer. There is no family relationship between any of the
named executive officers or between any of them and the Company's directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this Item is incorporated by reference to page
31 of the Company's 1996 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to page
26 of the Company's 1996 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to pages
27 through 30 of the Company's 1996 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
14 through 25 of the Company's 1996 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in that the
Registrant will file a definitive proxy statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement that
specifically address the items set forth herein are incorporated by reference.
Such incorporation does not include the Compensation Committee Report or the
Performance Graph included in the Proxy Statement.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to the Company's Proxy Statement dated March 20, 1997.
Information concerning executive officers is set forth in Part I of this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement dated March 20, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement dated March 20, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement dated March 20, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Consolidated Financial Statements:
The consolidated financial statements of Carbo Ceramics Inc. listed below
are incorporated herein by reference to pages 14 through 25 of the Registrant's
1996 Annual Report to Shareholders:
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for each of the three years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for each of the three years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1996, 1995 and 1994
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1996.
(c) Exhibits
The exhibits listed on the accompanying Exhibit Index (page 11) are filed
as part of, or incorporated by reference into, this Report.
(d) Financial Statement Schedules:
All schedules have been omitted since they are either not required or not
applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 and Chief Executive Officer
By: /s/ PAUL G. VITEK
-----------------
Paul G. Vitek
Vice President, Finance
Dated March 24, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jesse P. Orsini and Paul G. Vitek,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ WILLIAM C. MORRIS Chairman of the Board
- ---------------------
William C. Morris
/s/ JESSE P. ORSINI President, Chief Executive Officer and
- ------------------- Director (Principal Executive
Jesse P. Orsini Officer)
/s/ PAUL G. VITEK Chief Financial Officer
- ----------------- (Principal Financial and
Paul G. Vitek Accounting Officer)
/s/ CLAUDE E. COOKE, JR. Director
- ------------------------
Claude E. Cooke, Jr.
/s/ WILLIAM A. GRIFFIN, JR. Director
- ---------------------------
William A. Griffin, Jr.
/s/ JOHN J. MURPHY Director
- ------------------
John J. Murphy
10
<PAGE>
EXHIBIT INDEX
3.1 Certificate of Incorporation of Carbo Ceramics Inc. (incorporated
by reference to exhibit 3.1 to the registrant's Form S-1 Registration Statement
No. 33-31884)
3.2 Bylaws of Carbo Ceramics Inc. (incorporated by reference to exhibit
3.2 to the registrant's Form S-1 Registration Statement No. 33-31884)
4.1 Form of Common Stock Certificate of Carbo Ceramics Inc. (incorporated
by reference to exhibit to the registrant's Form S-1 Registration Statement No.
33-31884)
10.1 Credit Agreement dated as of December 29, 1993, between Brown
Brothers Harriman & Co. and Carbo Ceramics Inc., as amended (incorporated by
reference to exhibit 10.1 to the registrant's Form S-1 Registration Statement
No. 33-31884)
10.2 Form of Tax Indemnification Agreement between Carbo Ceramics Inc. and
William C. Morris, Robert J. Rubin, Lewis C. Glucksman, George A. Wiegers,
William A. Griffin, and Jesse P. Orsini (incorporated by reference to exhibit
10.2 to the registrant's Form S-1 Registration Statement No. 33-31884)
10.3 Form of Employment Agreement between Carbo Ceramics Inc. and
Jesse P. Orsini (incorporated by reference to exhibit 10.4 to the registrant's
Form S-1 Registration Statement No. 33-31884)
10.4 Purchase and Sale Agreement dated as of March 31, 1995, between
Carbo Ceramics Inc. and GEO Specialty Chemicals, Inc., as amended (incorporated
by reference to exhibit 10.5 to the registrant's Form S-1 Registration Statement
No. 33-31884)
10.5 Raw Material Requirements Agreement dated as of November 21, 1995,
between Carbo Ceramics Inc. and C-E Minerals Inc. (incorporated by reference to
exhibit 10.6 to the registrant's Form S-1 Registration Statement No. 33-31884)
10.6 Lease by and between Carbo Ceramics Inc., as tenant, and Missouri
Pacific RR Co. as landlord, re: San Antonio, Texas property (incorporated by
reference to exhibit 10.7 to the registrant's Form S-1 Registration Statement
No. 33-31884)
10.7 Incentive Compensation Plan (incorporated by reference to exhibit
10.8 to the registrant's Form S-1 Registration Statement No. 33-31884)
10.8 Carbo Ceramics Inc. 1996 Stock Option Plan for Key Employees
(incorporated by reference to exhibit 10.9 to the registrant's Form S-1
Registration Statement No. 33-31884)
10.9 Form of Stock Option Award Agreement (incorporated by reference
to exhibit 10.10 to the registrant's Form S-1 Registration Statement No. 33-
31884)
13.1 Carbo Ceramics Inc. 1996 Annual Report to Shareholders containing the
report of independent auditors. Except for the information that is expressly
incorporated by reference, this exhibit is furnished for the information of the
Securities and Exchange Commission and is not deemed to be filed as part of this
report.
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Carbo Ceramics Inc. of our report dated January 22, 1997, included in
the 1996 Annual Report to Shareholders of Carbo Ceramics Inc.
/s/Ernst & Young LLP
New Orleans, Louisiana
January 22, 1997
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 17,414
<SECURITIES> 0
<RECEIVABLES> 10,902
<ALLOWANCES> 0
<INVENTORY> 8,385
<CURRENT-ASSETS> 38,158
<PP&E> 30,106
<DEPRECIATION> (7,859)
<TOTAL-ASSETS> 60,405
<CURRENT-LIABILITIES> 5,204
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 53,088
<TOTAL-LIABILITY-AND-EQUITY> 60,405
<SALES> 65,151
<TOTAL-REVENUES> 65,151
<CGS> 34,517
<TOTAL-COSTS> 34,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86
<INCOME-PRETAX> 22,683
<INCOME-TAX> 5,883
<INCOME-CONTINUING> 16,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,800
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
