<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 MARCH 31, 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 April 29, 1997, 14,602,000 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
<PAGE> 2
CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - 3
March 31, 1997 (Unaudited) and December 31, 1996
Consolidated Statements of Income 4
(Unaudited) - Three months ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows 5
(Unaudited) - Three months ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements - March 31, 1997 6-7
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 9
Item 2. Changes in securities 9
Item 3. Defaults upon senior securities 9
Item 4. Submission of matters to a vote of security-holders 9
Item 5. Other information 9
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------- ----------
($ in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,219 $ 17,414
Trade accounts receivable 12,866 10,902
Inventories:
Finished goods 4,858 4,478
Raw materials and supplies 4,256 3,907
---------- ----------
Total inventories 9,114 8,385
Prepaid expenses and other current assets 1,219 608
Deferred income taxes 725 849
---------- ----------
Total current assets 43,143 38,158
Property, plant and equipment:
Land and land improvements 57 57
Buildings 4,536 4,536
Machinery and equipment 25,112 25,112
Construction in progress 566 401
---------- ----------
Total 30,271 30,106
Less accumulated depreciation 8,340 7,859
---------- ----------
Net property, plant and equipment 21,931 22,247
---------- ----------
$ 65,074 $ 60,405
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,176 $ 1,423
Accrued payroll and benefits 1,126 1,837
Accrued freight 857 659
Accrued utilities 391 326
Accrued income taxes 2,549 609
Other accrued expenses 422 350
---------- ----------
Total current liabilities 6,521 5,204
Deferred income taxes 1,828 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 13,660 10,169
---------- ----------
Total shareholders' equity 56,725 53,234
---------- ----------
$ 65,074 $ 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
MARCH 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Sales $ 17,840 $ 13,033
Cost of goods sold 8,847 6,893
------------ ------------
Gross profit 8,993 6,140
Selling, general and administrative expenses 2,021 1,771
------------ ------------
Operating profit 6,972 4,369
Other income (expense):
Interest income 187 2
Interest expense -- (20)
Other, net 11 24
------------ ------------
198 6
------------ ------------
Income before income taxes 7,170 4,375
Income taxes 2,584 --
------------ ------------
Net income $ 4,586 $ 4,375
------------ ------------
Pro forma data:
Income before income taxes $ 4,375
Income taxes 1,663
------------
Net income $ 2,712
------------ ------------
Net income per share (pro forma in 1996) $ 0.31 $ 0.19
------------ ------------
Weighted average number of shares (pro forma in 1996) 14,711,136 14,602,000
------------ ------------
</TABLE>
The accompanying notes are an
integral part of these statements.
4
<PAGE> 5
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,586 $ 4,375
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 481 395
Amortization -- 110
Deferred income taxes (15) --
Changes in operating assets and liabilities:
Trade accounts receivable (1,964) 786
Inventories (729) (944)
Prepaid expenses and other current assets (611) (169)
Accounts payable (247) (732)
Accrued payroll and benefits (711) (467)
Accrued freight 198 415
Accrued utilities 65 16
Accrued income taxes 1,940 --
Other accrued expenses 72 (67)
-------- --------
Net cash provided by operating activities 3,065 3,718
INVESTING ACTIVITIES
Purchase of property, plant and equipment (165) (1,153)
-------- --------
Net cash used in investing activities (165) (1,153)
FINANCING ACTIVITIES
Net proceeds from bank borrowings -- 624
Cash distributions -- (3,743)
Cash dividends (1,095) --
-------- --------
Net cash used in financing activities (1,095) (3,119)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,805 (554)
Cash and cash equivalents at beginning of period 17,414 201
-------- --------
Cash and cash equivalents (overdraft) at end of period $ 19,219 $ (353)
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ -- $ 22
======== ========
</TABLE>
The accompanying notes are an
integral part of these statements.
5
<PAGE> 6
CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 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
months ended March 31, 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 January 14, 1997, the Board of Directors declared a cash dividend of
$0.075 per common share payable to shareholders of record on January 24, 1997.
The dividend was paid on February 5, 1997.
3. NET INCOME PER SHARE
Net income per share for the three months ended March 31, 1997, is based
on 14,602,000 shares of Common Stock outstanding during the period, increased
by 109,136 average common stock equivalent shares for the assumed exercise of
options.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The effect of Statement
128 on the calculation of primary and fully diluted earnings per share for the
quarters ended March 31, 1997, and March 31, 1996, is not expected to be
material.
6
<PAGE> 7
4. PRO FORMA INFORMATION
Pro Forma Net Income:
Pro forma net income for the three months ended March 31, 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.
Pro Forma Net Income Per Share:
For the three months ended March 31, 1996, pro forma net income per share
is based on 12,302,000 shares of Common Stock outstanding during the period,
increased by the assumed issuance of 2,300,000 shares of Common Stock as issued
in the initial public offering of the Company's Common Stock on April 26, 1996.
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 March 31, 1997, are
as follows:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS: ($ in thousands)
<S> <C>
Employee benefits ............................ $ 282
Inventories .................................. 357
Other ........................................ 86
--------------
Total deferred tax assets .................... 725
DEFERRED TAX LIABILITIES:
Depreciation ................................. 1,764
Other ........................................ 64
--------------
Total deferred tax liabilities ............... 1,828
--------------
Net deferred liabilities ..................... $ (1,103)
==============
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997
Revenues. Revenues for the first quarter 1997 were a record $17.8 million, an
increase of 37% over the first quarter 1996. The increase was due to a 29%
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
volume increased for each of the Company's products. However, the largest
percentage volume increases were in the Company's highest margin product lines,
CarboLite and Carbo HSP. Domestic and export sales volumes each increased by
29%.
While average natural gas prices declined by 7% from the first quarter 1996,
natural gas drilling activity in the first quarter 1997 actually increased by
21% versus the same period a year earlier. The Company believes that the
increased activity was due to the industry's focus on the long term demand for
natural gas and the increasing need to drill new wells to meet increased demand
and replace reserves.
Gross Profit. Gross profit for the quarter was $9.0 million or 50% of sales as
compared to $6.1 million or 47% of sales for the first quarter 1996. The
increase in gross profit margins was due to the price increase that went into
effect in January 1997 and a reduction in manufacturing costs at the Company's
New Iberia manufacturing facility. The cost reduction was due to increased
operating efficiency brought about by increased demand for the Company's
high-strength proppants which are manufactured in the New Iberia facility and
the fact that the facility experienced reduced throughput in the first quarter
1996 due to a maintenance shutdown.
Selling, General and Administrative Expenses (SG&A). SG&A was $2.0 million for
the first quarter 1997 and $1.8 million for the corresponding period in 1996.
Expenses as a percentage of sales declined from 13.6% in the first quarter 1996
to 11.3% for the same period in 1997. The reduction was primarily due to the
elimination of consulting fees that had been paid to the Chairman of the Board
of Directors prior to the initial public offering of the Company's stock in
April 1996 and the amortization of unearned compensation that was recorded to
recognize the value of stock granted to the Company's president prior to the
initial public offering. These reductions were partially offset by new costs
incurred in connection with filing costs and shareholder communication costs
associated with being a publicly traded company. Other SG&A components that
increased were those that vary with sales volume or profitability including
warehouse and shipping expenses, commissions expense and incentive
compensation.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $19.2 million as of March 31, 1997, an
increase of $1.8 million from December 31, 1996. The increase in cash and cash
equivalents was due to cash generated from operations of $3.1 million net of
capital spending of $.2 million and cash dividends of $1.1 million.
The Company has announced that it will significantly increase its capital
expenditures in 1997 and 1998. In 1997, the Company expects that, in addition
to maintenance capital spending of approximately $2.0 million, it will spend
$4.0 million to expand its distribution capabilities and up to $12.0 million to
begin the construction of a new manufacturing facility in Georgia. In addition,
the Company expects to spend approximately $22.0 million in 1998 to complete
the 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.
8
<PAGE> 9
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 March 31, 1997.
(b) Exhibits
27.1 Financial Data Schedule
9
<PAGE> 10
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
& Chief Financial Officer
Date: April 29, 1997
10
<PAGE> 11
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<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> MAR-31-1997
<CASH> 19,219
<SECURITIES> 0
<RECEIVABLES> 12,866
<ALLOWANCES> 0
<INVENTORY> 9,114
<CURRENT-ASSETS> 43,143
<PP&E> 30,271
<DEPRECIATION> (8,340)
<TOTAL-ASSETS> 65,074
<CURRENT-LIABILITIES> 6,521
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 56,579
<TOTAL-LIABILITY-AND-EQUITY> 65,074
<SALES> 17,840
<TOTAL-REVENUES> 17,840
<CGS> 8,847
<TOTAL-COSTS> 8,847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,170
<INCOME-TAX> 2,584
<INCOME-CONTINUING> 4,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,586
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
