<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, 1998
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 May 8, 1998, 14,602,000 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
<PAGE> 2
CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - 3
March 31, 1998 (Unaudited) and December 31, 1997
Consolidated Statements of Income 4
(Unaudited) - Three months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows 5
(Unaudited) - Three months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements 6-7
(Unaudited) - March 31, 1998
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 9
Item 2. Changes in securities 9
Item 3. Defaults upon senior securities 9
Item 4. Submission of matters to a vote of security-holders 9
Item 5. Other information 9
Item 6. Exhibits and reports on Form 8-K 9
Signatures 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31,
(UNAUDITED) 1997
------------ -----------
($ in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,035 $ 8,899
Investment securities 10,910 13,905
Trade accounts receivable 16,389 14,243
Inventories:
Finished goods 4,249 4,347
Raw materials and supplies 4,474 4,034
------- -------
Total inventories 8,723 8,381
Prepaid expenses and other current assets 1,002 661
Deferred income taxes 822 772
------- -------
Total current assets 48,881 46,861
Property, plant and equipment:
Land and land improvements 214 214
Buildings 4,613 4,536
Machinery and equipment 27,843 27,773
Construction in progress 17,516 11,382
------- -------
Total 50,186 43,905
Less accumulated depreciation 10,336 9,812
------- -------
Net property, plant and equipment 39,850 34,093
------- -------
Total assets $88,731 $80,954
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable $ 2,447 $ 2,131
Accrued payroll and benefits 1,485 2,448
Accrued freight 969 851
Accrued utilities 395 422
Accrued income taxes 3,980 1,018
Other accrued expenses 1,027 746
------- -------
Total current liabilities 10,303 7,616
Deferred income taxes 2,789 2,396
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 32,574 27,877
------- -------
Total shareholders' equity 75,639 70,942
------- -------
Total liabilities and shareholders' equity $88,731 $80,954
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenues $22,617 $17,840
Cost of goods sold 11,100 8,847
------- -------
Gross profit 11,517 8,993
Selling, general and administrative expenses 2,508 2,021
------- -------
Operating profit 9,009 6,972
Other income (expense):
Interest income, net 317 187
Other income, net 29 11
------- -------
346 198
------- -------
Income before income taxes 9,355 7,170
Income taxes 3,563 2,584
------- -------
Net income $ 5,792 $ 4,586
======= =======
Earnings per share:
Basic $ 0.40 $ 0.31
======= =======
Diluted $ 0.39 $ 0.31
======= =======
</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>
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 5,792 $ 4,586
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 524 481
Deferred income taxes 343 (15)
Changes in operating assets and liabilities:
Trade accounts receivable (2,146) (1,964)
Inventories (342) (729)
Prepaid expenses and other current assets (341) (611)
Accounts payable 316 (247)
Accrued payroll and benefits (963) (711)
Accrued freight 118 198
Accrued utilities (27) 65
Accrued income taxes 2,962 1,940
Other accrued expenses 281 72
-------- --------
Net cash provided by operating activities 6,517 3,065
INVESTING ACTIVITIES
Maturities of investment securities 2,995 --
Purchases of property, plant and equipment (6,281) (165)
-------- --------
Net cash used in investing activities (3,286) (165)
FINANCING ACTIVITIES
Dividends paid (1,095) (1,095)
-------- --------
Net cash used in financing activities (1,095) (1,095)
-------- --------
Net increase in cash and cash equivalents 2,136 1,805
Cash and cash equivalents at beginning of period 8,899 17,414
-------- --------
Cash and cash equivalents at end of period $ 11,035 $ 19,219
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ -- $ --
======== ========
Income taxes paid $ 258 $ --
======== ========
</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, 1998
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, 1997
included in the Company's Form 10-K Annual Report for the year ended December
31, 1997.
The consolidated financial statements include the accounts of CARBO
Ceramics Inc. and its wholly owned subsidiaries, CARBO Ceramics Sales
Corporation and CARBO Ceramics (U.K. Limited). CARBO Ceramics Sales Corporation
was formed on July 31, 1996 under the laws of Barbados. CARBO Ceramics (U.K.
Limited) was formed on December 19, 1997 under the laws of Scotland. All
significant intercompany transactions have been eliminated.
2. DIVIDENDS PAID
On January 14, 1998, the Board of Directors declared a cash dividend of
$0.075 per common share payable to shareholders of record on January 30, 1998.
The dividend was paid on February 15, 1998.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended March 31, 1998 and 1997 ($ in
thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Numerator for basic and diluted earnings per share:
Net income ........................................ $ 5,792 $ 4,586
Denominator:
Denominator for basic earnings per share--
weighted-average shares ......................... 14,602,000 14,602,000
Effect of dilutive securities:
Employee stock options .......................... 177,885 66,713
----------- -----------
Dilutive potential common shares .................. 177,885 66,713
----------- -----------
Denominator for diluted earnings per share--
adjusted weighted-average shares ................ 14,779,885 14,668,713
=========== ===========
Basic earnings per share ............................ $ 0.40 $ 0.31
=========== ===========
Diluted earnings per share .......................... $ 0.39 $ 0.31
=========== ===========
</TABLE>
4. 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, 1998 and
December 31, 1997 are as follows:
6
<PAGE> 7
4. INCOME TAXES -- (CONTINUED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
Deferred tax assets: ($ in thousands)
<S> <C> <C>
Employee benefits ............................. $ 315 $ 271
Inventories ................................... 371 377
Other ......................................... 136 124
------ ------
Total deferred tax assets ..................... 822 772
Deferred tax liabilities:
Depreciation .................................. 2,717 2,356
Other ......................................... 72 40
------ ------
Total deferred tax liabilities ................ 2,789 2,396
------ ------
Net deferred liabilities ...................... $1,967 $1,624
====== ======
</TABLE>
5. COMMITMENTS
Construction in progress of $17.5 million at March 31, 1998 includes $13.6
million related to construction of the Company's new manufacturing facility in
McIntyre Georgia. The new facility is scheduled to be fully operational in the
fourth quarter of 1998 at a total estimated cost of $40 million.
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, 1998
Revenues. Revenues for the first quarter 1998 were $22.6 million, an increase of
27% over the first quarter 1997. The increase was due to an 18% 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 1998. Sales volumes
increased for each of the Company's products, except for CARBOHSP(R), which
decreased slightly. Domestic sales volume increased by 10%, while export sales
volume increased by 33% - with significant increases in sales to Canada, Mexico
and Australia.
While average natural gas prices declined by 25% from the first quarter 1997,
natural gas drilling activity in the first quarter 1998 increased by 20% versus
the same period a year earlier. The Company believes that the increased activity
was due to the industry's continued focus on long-term demand for natural gas
and the need to replace reserves.
Gross Profit. Gross profit for the quarter was $11.5 million or 51% of sales as
compared to $9 million or 50% of sales for the first quarter 1997. The increase
in gross profit margins was due to the price increase that went into effect in
January 1998 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 a reduction in maintenance downtime. These two
factors were partially offset by increased freight and packaging costs - a
direct result of the increase in export sales volume.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $2.5
million for the first quarter 1998 and $2 million for the corresponding period
in 1997. Expenses as a percentage of sales declined from 11.3% in the first
quarter 1997 to 11.1% for the same period in 1998. The largest increases were in
those expenses that vary with sales volume or profitability including warehouse
and shipping expenses, commissions expense and incentive compensation. Increases
in these expenses from year to year were offset by an even larger percentage
increase in sales revenue.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $11 million as of March 31, 1998, an increase
of $2.1 million from December 31, 1997. The increase in cash and cash
equivalents was due to cash generated from operations of $6.5 million and $3
million from maturities of U.S. government securities, net of capital spending
of $6.3 million and cash dividends of $1.1 million. As of March 31, 1998, the
Company held $10.9 million in investments expected to be held to maturity.
Capital spending of $6.3 million during the first quarter 1998 included $5.8
million related to continuing construction of a new manufacturing facility in
McIntyre, Georgia. The Company plans to spend an additional $26 million for the
completion of the new facility, with funding expected to be provided by 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, 1998.
b. Exhibits
27.1 Financial Data Schedule for the interim year to date period
ended March 31, 1998
27.2 Financial Data Schedule, as restated, for the year ended
December 31, 1996 and the interim year to date periods ended
March 31, 1996, June 30, 1996 and September 30, 1996.
27.3 Financial Data Schedule, as restated, for the interim year to
date periods ended March 31, 1997, June 30, 1997 and September
30, 1997.
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.
/s/ JESSE P. ORSINI
------------------------------------
Jesse P. Orsini
President
& Chief Executive Officer
/s/ PAUL G. VITEK
------------------------------------
Paul G. Vitek
Vice President, Finance
Date: May 8, 1998
10
<PAGE> 11
INDEX TO EXHIBITS
EXHIBITS DESCRIPTION
- -------- -----------
27.1 Financial Data Schedule for the interim year to date period ended March
31, 1998
27.2 Financial Data Schedule, as restated, for the year ended December 31,
1996 and the interim year to date periods ended March 31, 1996, June
30, 1996 and September 30, 1996.
27.3 Financial Data Schedule, as restated, for the interim year to date
periods ended March 31, 1997, June 30, 1997 and September 30, 1997.
<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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,035
<SECURITIES> 10,910
<RECEIVABLES> 16,389
<ALLOWANCES> 0
<INVENTORY> 8,723
<CURRENT-ASSETS> 48,881
<PP&E> 50,186
<DEPRECIATION> 10,336
<TOTAL-ASSETS> 88,731
<CURRENT-LIABILITIES> 10,303
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 75,493
<TOTAL-LIABILITY-AND-EQUITY> 88,731
<SALES> 22,617
<TOTAL-REVENUES> 22,617
<CGS> 11,100
<TOTAL-COSTS> 11,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,355
<INCOME-TAX> 3,563
<INCOME-CONTINUING> 5,792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,792
<EPS-PRIMARY> .40
<EPS-DILUTED> .39
</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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 17,414 (353) 3,809 10,794
<SECURITIES> 0 0 0 0
<RECEIVABLES> 10,902 7,997 12,539 12,250
<ALLOWANCES> 0 0 0 0
<INVENTORY> 8,385 8,775 8,872 8,293
<CURRENT-ASSETS> 38,158 16,858 29,694 33,577
<PP&E> 30,106 29,115 29,787 29,924
<DEPRECIATION> 7,859 6,353 6,855 7,359
<TOTAL-ASSETS> 60,405 39,620 52,626 56,142
<CURRENT-LIABILITIES> 5,204 7,497 4,338 4,233
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 146 123 146 146
<OTHER-SE> 53,088 32,000 46,875 50,129
<TOTAL-LIABILITY-AND-EQUITY> 60,405 39,620 52,626 56,142
<SALES> 65,151 13,033 30,432 48,330
<TOTAL-REVENUES> 65,151 13,033 30,432 48,330
<CGS> 34,517 6,893 16,275 25,707
<TOTAL-COSTS> 34,517 6,893 16,275 25,707
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 86 20 86 86
<INCOME-PRETAX> 22,683 4,375 9,400 16,344
<INCOME-TAX> 5,883 0 1,003 3,598
<INCOME-CONTINUING> 16,800 4,375 8,397 12,746
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 16,800 4,375 8,397 12,746
<EPS-PRIMARY> .98 .19 .40 .70
<EPS-DILUTED> .97 .19 .40 .70
</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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 19,219 20,271 25,011
<SECURITIES> 0 0 0
<RECEIVABLES> 12,866 12,541 13,655
<ALLOWANCES> 0 0 0
<INVENTORY> 9,114 9,724 9,133
<CURRENT-ASSETS> 43,143 44,488 49,836
<PP&E> 30,271 32,520 35,072
<DEPRECIATION> 8,340 8,820 9,306
<TOTAL-ASSETS> 65,074 68,188 75,602
<CURRENT-LIABILITIES> 6,521 5,157 7,489
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 146 146 146
<OTHER-SE> 56,579 60,933 65,777
<TOTAL-LIABILITY-AND-EQUITY> 65,074 68,188 75,602
<SALES> 17,840 38,733 61,795
<TOTAL-REVENUES> 17,840 38,733 61,795
<CGS> 8,847 19,393 30,986
<TOTAL-COSTS> 8,847 19,393 30,986
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 7,170 15,690 25,156
<INCOME-TAX> 2,584 5,655 9,182
<INCOME-CONTINUING> 4,586 10,035 15,974
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,586 10,035 15,974
<EPS-PRIMARY> .31 .68 1.09
<EPS-DILUTED> .31 .69 1.09
</TABLE>
