<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ______.
COMMISSION FILE NO. 0-28178
CARBO CERAMICS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1100013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 E. LAS COLINAS BOULEVARD
SUITE 1520
IRVING, TEXAS 75039
(Address of principal executive offices)
(972) 401-0090
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of August 11, 2000, 14,699,500 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
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CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 2000 (Unaudited) and December 31, 1999
Consolidated Statements of Income 4
(Unaudited) - Three and six months ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows 5
(Unaudited) - Six months ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 6-7
(Unaudited) - June 30, 2000
Item 2. Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 10
Item 2. Changes in securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of matters to a vote of security-holders 10
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 11
Signatures 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ --------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 1,617 $ 193
Trade accounts receivable ................................................... 16,053 10,883
Refundable income taxes ..................................................... -- 288
Inventories:
Finished goods ............................................................ 8,621 7,123
Raw materials and supplies ................................................ 4,902 4,154
------------ ------------
Total inventories ....................................................... 13,523 11,277
Prepaid expenses and other current assets ................................... 765 481
Deferred income taxes ....................................................... 884 687
------------ ------------
Total current assets ...................................................... 32,842 23,809
Property, plant and equipment:
Land and land improvements .................................................. 944 944
Buildings ................................................................... 7,378 7,378
Machinery and equipment ..................................................... 91,265 90,092
Construction in progress .................................................... 989 1,298
------------ ------------
Total ..................................................................... 100,576 99,712
Less accumulated depreciation ............................................... 19,897 16,541
------------ ------------
Net property, plant and equipment ......................................... 80,679 83,171
------------ ------------
Total assets ................................................................ $ 113,521 $ 106,980
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings ............................................................. $ -- $ 1,809
Accounts payable ............................................................ 1,549 1,477
Accrued payroll and benefits ................................................ 1,412 1,954
Accrued freight ............................................................. 2,300 1,545
Accrued utilities ........................................................... 889 451
Accrued income taxes ........................................................ 208 --
Other accrued expenses ...................................................... 877 221
------------ ------------
Total current liabilities ................................................. 7,235 7,457
Deferred income taxes .......................................................... 7,822 6,123
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: 14,644,500 shares issued and outstanding ...................... 146 146
Additional paid-in capital .................................................. 43,888 42,919
Retained earnings ........................................................... 54,430 50,335
------------ ------------
Total shareholders' equity ................................................ 98,464 93,400
------------ ------------
Total liabilities and shareholders' equity .................................. $ 113,521 $ 106,980
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
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CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues ......................................... $ 21,998 $ 15,404 $ 44,099 $ 35,482
Cost of goods sold ............................... 12,918 8,426 28,272 18,502
------------ ------------ ------------ ------------
Gross profit ..................................... 9,080 6,978 15,827 16,980
Selling, general and administrative expenses ..... 3,070 2,606 5,894 5,811
Plant start-up costs ............................. -- 722 27 1,082
------------ ------------ ------------ ------------
Operating profit ................................. 6,010 3,650 9,906 10,087
Other income (expense):
Interest, net ................................. 34 (75) 6 (107)
Other, net .................................... 13 14 (6) 15
------------ ------------ ------------ ------------
47 (61) -- (92)
------------ ------------ ------------ ------------
Income before income taxes ....................... 6,057 3,589 9,906 9,995
Income taxes ..................................... 2,232 1,061 3,619 3,368
------------ ------------ ------------ ------------
Net income ....................................... $ 3,825 $ 2,528 $ 6,287 $ 6,627
============ ============ ============ ============
Earnings per share:
Basic ......................................... $ 0.26 $ 0.17 $ 0.43 $ 0.45
============ ============ ============ ============
Diluted ....................................... $ 0.26 $ 0.17 $ 0.43 $ 0.45
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
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CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
2000 1999
------------ ------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................................ $ 6,287 $ 6,627
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ......................................................... 3,356 1,366
Deferred income taxes ................................................ 1,502 145
Changes in operating assets and liabilities:
Trade accounts receivable .......................................... (5,170) 50
Inventories ........................................................ (2,246) 608
Prepaid expenses and other current assets .......................... (284) (237)
Accounts payable ................................................... 72 781
Accrued payroll and benefits ....................................... (542) (916)
Accrued freight .................................................... 755 139
Accrued utilities .................................................. 438 96
Accrued income taxes ............................................... 736 334
Other accrued expenses ............................................. 656 (328)
------------ ------------
Net cash provided by operating activities ................................. 5,560 8,665
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................ (864) (11,076)
------------ ------------
Net cash used in investing activities ..................................... (864) (11,076)
FINANCING ACTIVITIES
Proceeds from bank borrowings ............................................. 5,273 12,259
Repayments on bank borrowings ............................................. (7,082) (7,300)
Proceeds from issuance of common stock for exercise of stock options ...... 729 --
Dividends paid ............................................................ (2,192) (2,190)
------------ ------------
Net cash provided by (used in) financing activities ....................... (3,272) 2,769
------------ ------------
Net increase in cash and cash equivalents ................................. 1,424 358
Cash and cash equivalents at beginning of period .......................... 193 622
------------ ------------
Cash and cash equivalents at end of period ................................ $ 1,617 $ 980
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid ............................................................. $ 38 $ 109
============ ============
Income taxes paid ......................................................... $ 1,380 $ 2,889
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
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CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
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, 1999
included in the Company's Form 10-K Annual Report for the year ended December
31, 1999.
The consolidated financial statements include the accounts of CARBO
Ceramics Inc. and its wholly owned subsidiaries, CARBO Ceramics Sales
Corporation and CARBO Ceramics (UK) Limited. CARBO Ceramics Sales Corporation
was formed on July 31, 1996 under the laws of Barbados. CARBO Ceramics (UK)
Limited was formed on December 19, 1997 under the laws of Scotland. All
significant intercompany transactions have been eliminated.
2. DIVIDENDS PAID
On April 11, 2000, the Board of Directors declared a cash dividend of
$0.075 per common share payable to shareholders of record on April 28, 2000. The
dividend was paid on May 15, 2000.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share ($ in thousands, except per share data):
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income ............................................ $ 3,825 $ 2,528 $ 6,287 $ 6,627
Denominator:
Denominator for basic earnings per share--
weighted-average shares ............................. 14,631,062 14,602,000 14,616,212 14,602,000
Effect of dilutive securities:
Employee stock options .............................. 197,450 112,209 157,493 56,658
------------ ------------ ------------ ------------
Dilutive potential common shares ...................... 197,450 112,209 157,493 56,658
------------ ------------ ------------ ------------
Denominator for diluted earnings per share--
adjusted weighted-average shares .................... 14,828,512 14,714,209 14,773,705 14,658,658
============ ============ ============ ============
Basic earnings per share ................................ $ 0.26 $ 0.17 $ 0.43 $ 0.45
============ ============ ============ ============
Diluted earnings per share .............................. $ 0.26 $ 0.17 $ 0.43 $ 0.45
============ ============ ============ ============
</TABLE>
During the second quarter of 2000, employees exercised stock options to
acquire 42,500 shares at a weighted-average exercise price of $17.15 per share.
A $240,000 tax benefit associated with the exercise of stock options was
credited directly to shareholders' equity.
6
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4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
($ in thousands)
<S> <C> <C>
Deferred tax assets:
Employee benefits .......................................... $ 254 $ 200
Inventories ................................................ 523 457
Other ...................................................... 107 30
------------ ------------
Total deferred tax assets .................................. 884 687
Deferred tax liabilities:
Depreciation ............................................... 7,706 6,007
Other ...................................................... 116 116
------------ ------------
Total deferred tax liabilities ............................. 7,822 6,123
------------ ------------
Net deferred liabilities ................................... $ 6,938 $ 5,436
============ ============
</TABLE>
5. BANK BORROWINGS
The Company borrowed against its Secured Revolving Credit Agreement during
the second quarter of 2000 at a weighted-average interest rate of 8.82%. There
were no borrowings outstanding at June 30, 2000.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000
Operating results for the second quarter of 2000 reflected the continuation of a
strong recovery in domestic drilling activity that began in the first quarter of
the year. Sales volume and revenue for the quarter increased substantially from
the second quarter of 1999 and operating margins improved markedly versus the
same period.
Revenues. Revenues for the second quarter 2000 were $22.0 million, a 43%
increase from the second quarter 1999. The increase was due to a 46% increase in
sales volume, which was partially offset by a modest decline in the price of
high strength products. Domestic sales volume increased by 51%, with the largest
impact being in the important South Texas market. The number of rigs drilling
for natural gas in the U.S. during the second quarter of 2000 was 63% higher
than the same period a year earlier, while the average price paid per MMBTU was
about 65% higher. These factors affect directly the activity in our domestic
markets. Export sales volume increased by 37%, with the largest gains in Canada,
China, and Russia.
Gross Profit. Gross profit for the quarter was $9.1 million or 41% of sales,
compared to $7.0 million or 45% of sales for the second quarter 1999. The
increase in gross profit was driven primarily by the significant increase in
sales volume. The lower gross profit margins versus the previous year were
primarily due to the increase in fixed costs associated with operating the
McIntyre production facility. The McIntyre facility started production in June
1999. Depreciation for the plant totaled $215,000 for the second quarter 1999
and $1.0 million for the second quarter 2000. The experience gained in running
this facility during the past year has resulted in much higher production rates
and production costs have fallen steadily since the initial startup.
Management believes that the positive effect on gross profit margins resulting
from production rate improvements and other efficiencies at the manufacturing
facilities will be somewhat reduced by increased natural gas prices at each of
the plants in the remainder of 2000.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $3.1
million for the second quarter 2000 and $3.3 million for the corresponding
period of 1999. Expenses as a percentage of sales decreased from 22% in the
second quarter of 1999 to 14% for the same period in 2000. Included in 1999
expenses was $0.7 million in plant start-up costs for the McIntyre facility.
Excluding the start-up costs, second quarter 2000 expenses increased by $0.5
million over the same period of 1999. Increased expenses in 2000 were the result
of professional and legal fees associated with a secondary stock offering
completed in May.
Six Months Ended June 30, 2000
Revenues. Revenues for the six months ended June 30, 2000 were $44.1 million, an
increase of 24% from the same period in 1999. The increase was due to a 30%
increase in sales volume. Domestic sales volume increased by 49% and export
volume by 2% compared to the comparable period in 1999.
Gross Profit. Gross profit for the six months ended June 30, 2000 was $15.8
million or 36% of revenues compared to $17.0 million or 48% of revenues for the
same period in 1999. The decrease was due to decreased selling prices, higher
first quarter manufacturing costs associated with the start-up of a new
production facility in McIntyre, Georgia and the high cost of trucking
lightweight products from the Eufaula and McIntyre facilities to remote storage
facilities during the first quarter.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $5.9
million or 13.4% of revenues for the first six months of 2000 compared to $6.9
million or 19.4% of revenues for the same period of 1999. Included in the 1999
total were $1.1 million of start-up costs for the McIntyre facility.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1.6 million as of June 30, 2000 an increase
of $1.4 million from December 31, 1999. The increase in cash and cash
equivalents was due to cash generated from operations of $5.6 million,
8
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and proceeds from issuance of common stock of $0.7 million (exercise of stock
options), net of repayment of debt against the Company's line of credit of $1.8
million, capital spending of $0.9 million, and cash dividends of $2.2 million.
There were no borrowings against the Company's line of credit as of June 30,
2000.
The Company believes the existing cash balances and cash generated from
operations will be sufficient to fund its operations, dividend and capital
spending requirements for 2000.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This Form 10-Q, the Company's Form 10-K and
Annual Report to Shareholders, any other 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
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, each of which speaks 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.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The Annual Meeting of Shareholders of Carbo Ceramics Inc. was held on
April 11, 2000.
b. The following matters were submitted to a vote at the meeting:
(1) the election of the following nominees as directors of Carbo
Ceramics Inc. The vote with respect to each nominee was as
follows:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Dr. Claude E. Cooke, Jr. 14,326,041 7,700
William C. Morris 14,326,041 7,700
John J. Murphy 14,325,041 8,700
Jesse P. Orsini 14,326,041 7,700
Robert S. Rubin 14,326,041 7,700
</TABLE>
(2) a recommendation of the Board of Directors that the
shareholders appoint the firm of Ernst & Young LLP as
independent accountants to audit the consolidated financial
statements of Carbo Ceramics Inc. for the year 2000. The vote
on this matter was as follows:
<TABLE>
<CAPTION>
For Against Abstentions
--- ------- -----------
<S> <C> <C>
14,325,541 200 8,000
</TABLE>
ITEM 5. OTHER INFORMATION
None
10
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. There were no reports filed on Form 8-K during the three months ended
June 30, 2000.
b. Exhibits
27.1 Financial Data Schedule for the interim year to date period
ended June 30, 2000
11
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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: August 11, 2000
12
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
