CARBO CERAMICS INC, S-3/A, 2000-05-05

CARBO CERAMICS INC
S-3/A, 2000-05-05
ABRASIVE, ASBESTOS & MISC NONMETALLIC MINERAL PRODS

Previous: I2 TECHNOLOGIES INC, S-8, 2000-05-05

Next: JONES LOUIS R, SC 13G, 2000-05-05

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 2000

REGISTRATION NO. 333-35850
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

CARBO CERAMICS INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 72-1100013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

600 EAST LAS COLINAS BOULEVARD, SUITE 1520
IRVING, TEXAS 75039
(972) 401-0090
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

PAUL G. VITEK
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
600 EAST LAS COLINAS BOULEVARD, SUITE 1520
IRVING, TEXAS 75039
(972) 401-0090
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

<TABLE>
<S> <C>
STEPHEN H. SHALEN, ESQ. VINCENT PAGANO, JR., ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON SIMPSON THACHER & BARTLETT
ONE LIBERTY PLAZA 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10017
(212) 225-2000 (212) 455-2000
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
- ---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
- ---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]

---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER
TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.

Subject to Completion, dated May 5, 2000

PROSPECTUS

2,500,000 SHARES

[CARBO CERAMICS INC. LOGO]

COMMON STOCK

- --------------------------------------------------------------------------------

All of the shares of common stock in this offering are being sold by the selling
stockholders named in this prospectus. CARBO Ceramics will not receive any of
the proceeds from the sale of the shares.

The common stock is listed on the NASDAQ National Market under the symbol
"CRBO". The last reported sale price of the common stock on the NASDAQ National
Market on May 4, 2000 was $34.00 per share.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds to the selling stockholders........................ $ $
</TABLE>

The underwriters may purchase up to an additional 375,000 shares from one or
more of the selling stockholders to cover over-allotments. CARBO Ceramics has
agreed to pay expenses incurred by the selling stockholders in connection with
the offering, other than the underwriting discount.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Lehman Brothers, on behalf of the underwriters, expects to deliver the shares on
or about , 2000.

- --------------------------------------------------------------------------------

LEHMAN BROTHERS

THE ROBINSON-HUMPHREY COMPANY
SIMMONS & COMPANY
INTERNATIONAL

, 2000
<PAGE> 3

No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell or a solicitation of an offer to buy only the shares offered by
this prospectus, but only under circumstances and in jurisdictions where it is
lawful to do so. The information contained in this prospectus is current only as
of its date.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents By Reference............. 2
Cautionary Statement Regarding Forward-Looking Statements... 3
Prospectus Summary.......................................... 4
Risk Factors................................................ 9
Price Range of Common Stock and Dividend Policy............. 12
Use of Proceeds............................................. 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Business.................................................... 18
Selling Stockholders........................................ 25
Underwriting................................................ 26
Legal Matters............................................... 28
Experts..................................................... 28
</TABLE>

In connection with this offering, the underwriters may over-allot or effect
transactions that might stabilize or maintain the market price of the common
stock at a level above that which might otherwise prevail in the open market.
Such transactions may be effected in the over-the-counter market or otherwise.
Such stabilizing, if commenced, may be discontinued at any time.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may review the
reports and other information we have filed without charge at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may
also be obtained from the Public Reference Section of the SEC, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates or at the SEC's web site at
http://www.sec.gov. For further information on the operation of the public
reference rooms, please call 1-800-SEC-0330. You may also review these materials
at the regional offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Citigroup Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511.

We have chosen to "incorporate by reference" in this prospectus information
we file with the SEC. This means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is an important part of this prospectus, and information that we
include in this prospectus or that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below:

- Our Annual Report on Form 10-K for the year ended December 31, 1999; and

- Our Quarterly Report on Form 10-Q for the three months ended March 31,
2000.

We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), until the termination of the offering of common
stock.

2
<PAGE> 4

You may request a copy of these filings (other than exhibits to these
filings, unless the exhibits are specifically incorporated by reference) at no
cost by writing or telephoning us as follows:

600 East Las Colinas Boulevard, Suite 1520
Irving, Texas 75039
(972) 401-0090

Information contained on our internet web site will not be deemed to be a
part of this prospectus.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains or incorporates by reference "forward-looking
statements," such as statements regarding future events, anticipated financial
performance and other non-historical facts. 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. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
statements. These risks and uncertainties include, but are not limited to,
general economic and business conditions, our ability to market existing and new
products successfully, changes in the demand for oil and natural gas, the
development of alternative stimulation techniques or alternative proppants for
use in hydraulic fracturing, our potential exposure to litigation and other
risks and factors set forth in this prospectus and in our Exchange Act filings
that are incorporated by reference in this prospectus.

3
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere or incorporated by
reference in this prospectus. This summary is not intended to be a complete
description of that information and is qualified by reference to the more
detailed information and financial statements (including the notes thereto)
appearing elsewhere or incorporated by reference. References to "we," "us," "the
Company" and "CARBO Ceramics" are to CARBO Ceramics Inc.

CARBO CERAMICS INC.

CARBO Ceramics is the world's leading producer of ceramic proppants, which
are high strength, spherical pellets used in the hydraulic fracturing of natural
gas and oil wells. Hydraulic fracturing is the most widely used method of
stimulating production from oil and gas bearing formations. In the hydraulic
fracturing process, large volumes of proppant are mixed with a highly viscous
fluid to form a slurry. Using high-pressure hydraulic pumps, the slurry is
pumped into the well at pressures sufficient to create a fracture in the rock
formation that contains the gas or oil. Once the fracture is created, the
pressure is removed and the proppants remain in the fracture, creating a highly
permeable pathway through which the oil and gas can flow more readily. The end
result is increased production rates and improved economics for the operator of
the well.

The three primary proppants used worldwide are sand, resin-coated sand and
ceramics. Ceramic proppants sell at a premium price versus alternative proppants
due to their superior strength and uniform size and shape. Traditionally, the
superior strength of ceramic proppants relative to sand-based proppants has
allowed them to be used in deeper formations where increased stress is placed on
the proppant. This attribute results in ceramic proppants being used primarily
in the stimulation of natural gas wells, which tend to be deeper than oil wells.
We estimate that approximately 90% of our sales are for use in the stimulation
of natural gas wells. Additionally, the uniform size and shape of man-made
ceramic proppants generate larger pore spaces in the fracture, allowing oil and
gas to flow more freely through the formation, regardless of stress, making
ceramic proppants economically attractive in shallower reservoirs that have
historically used sand-based proppants.

Based on our internally generated market information and information
contained in the United States Geological Survey Minerals Yearbook, we estimate
total demand for proppants produced in the Western Hemisphere to be
approximately 3.8 billion pounds annually. We believe that ceramic proppants
make up approximately 14% of the total proppant market and that we supply
approximately 60% of the ceramic proppants and 8% of all proppants used
worldwide.

During 1999, we generated approximately 76% of our revenues in North
America and 24% in international markets outside of North America. North
American markets currently dominate our sales due to the greater use of
hydraulic fracturing technology and the higher utilization of natural gas in
those markets. According to a recent report by the National Petroleum Council,
natural gas demand in the United States is projected to increase by more than
30% from 1998 to 2010. This increase is expected to result from higher demand
across traditional residential, commercial and industrial sectors as well as
from the increasing use of natural gas as a source of fuel for electrical power
generation. The U.S. Department of Energy estimates that 88% of new electrical
generation capacity to be added through 2015 will use natural gas as the primary
fuel source. We believe that natural gas drilling activity, and the demand for
ceramic proppants in North America, have the potential to grow faster than the
demand for natural gas due to increasing depletion rates and the decreasing size
of remaining natural gas reservoirs. We also believe that we can benefit from
the increasing development of natural gas reserves and the increased use of
hydraulic fracturing technology in international markets.

4
<PAGE> 6

based proppants. While these new products do not have the performance
characteristics of our premium product lines, they are less costly to produce
and are also technically superior to sand-based proppants. Our current strategy
is to maintain sufficient production capacity and inventory ahead of demand, to
market aggressively the economic benefits of our products versus alternative
proppants to owners of natural gas and oil wells and to develop new markets for
our products. To maintain our leadership in the ceramic proppant market, we have
recently made a major expansion to our production capacity. We have developed a
technical marketing program to demonstrate the economic benefits of ceramic
proppants' uniform size and shape, which qualifies them for use in shallower
reservoirs that have historically been stimulated with sand-based proppants. In
an effort to develop these new markets, we have also expanded our technical
sales force to educate end users on the benefits of using ceramic proppants. We
will also continue to explore and develop alternative applications in
non-oilfield markets.

We have manufacturing facilities in New Iberia, Louisiana, Eufaula, Alabama
and McIntyre, Georgia. Despite adding capacity in Eufaula on two occasions, we
operated our facilities in New Iberia and Eufaula near full capacity from 1992
through 1997. In 1997, we began construction of our third manufacturing facility
in McIntyre. The plant was completed in 1999 and increased our total capacity by
approximately 57%, or 200 million pounds per year. Our total annual production
capacity is now 550 million pounds.

Our products are made utilizing processes and techniques that involve a
high degree of proprietary technology, some of which are protected by patents.
The Company owns nine issued U.S. patents and 24 issued foreign patents. Our six
most important U.S. patents expire at various times in the years 2002 through
2009, with our two key product patents expiring in 2006 and 2009. We believe
that these patents have been and will continue to be important in enabling us to
compete in the market to supply proppants to the natural gas and oil industry.

We believe that the most significant factors that influence a customer's
decision to purchase our products are (i) price/performance ratio, (ii) on-time
delivery performance, (iii) technical support and (iv) proppant availability. We
believe that our products generate improved production rates for the operators
of oil and gas wells and are competitively priced relative to their performance,
and that our delivery performance is excellent. We also believe that our
development of technical performance data has enhanced our ability to market our
products by enabling us to demonstrate to operators of oil and gas wells the
economic benefits of using ceramic proppants in an increasingly broad range of
applications, thereby increasing the overall market for our products. With the
completion of our new production facility in McIntyre, Georgia in the first
quarter of 2000, we now have the ability to benefit from the growing demand for
ceramic proppants.

Our principal executive office is located at 600 East Las Colinas
Boulevard, Suite 1520, Irving, Texas 75039, and our telephone number is (972)
401-0090.

5
<PAGE> 7

THE OFFERING

Common stock offered....... 2,500,000 shares

All information in this prospectus assumes that the
underwriters' over-allotment option is not
exercised.

Common stock to be
outstanding after the
offering................. 14,634,500 shares

This number excludes 716,250 shares of common stock
reserved for issuance upon the exercise of employee
stock options exercisable at May 5, 2000.

Dividend Policy............ We paid quarterly dividends of $0.075 per share on
our common stock in 1998, 1999 and the first
quarter of 2000. Our current intention, subject to
our financial condition, the amount of funds
generated from operations and the level of capital
expenditures, is to continue to pay quarterly
dividends to holders of our common stock at the
rate of $0.075 per share.

Use of Proceeds............ We will not receive any of the proceeds from the
sale of common stock offered by this prospectus.

NASDAQ Symbol.............. CRBO

RISK FACTORS

For a discussion of risks that you should consider before buying shares of
our common stock, see "Risk Factors" beginning on page 9.

6
<PAGE> 8

SELECTED AND PRO FORMA FINANCIAL DATA

The following table sets forth selected financial data and pro forma data
of the Company, which are derived from the financial statements of the Company.
The data should be read in conjunction with the Company's audited annual
consolidated financial statements and the notes thereto incorporated by
reference in this prospectus and the Company's unaudited interim consolidated
financial statements and the notes thereto incorporated by reference in this
prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
----------------- -----------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.......................... $22,101 $20,078 $69,738 $84,095 $85,122 $65,151 $58,001
Cost of goods sold................ 15,354 10,076 41,718 41,665 42,186 34,517 29,297
Selling, general and
administrative expenses(1)...... 2,851 3,565 11,761 9,977 8,915 8,126 7,148
------- ------- ------- ------- ------- ------- -------
Operating profit.................. 3,896 6,437 16,259 32,453 34,021 22,508 21,556
Other, net........................ (47) (31) (288) 974 1,004 175 157
------- ------- ------- ------- ------- ------- -------
Income before income taxes........ 3,849 6,406 15,971 33,427 35,025 22,683 21,713
Income taxes...................... 1,387 2,307 5,459 12,719 12,936 5,883 --
------- ------- ------- ------- ------- ------- -------
Net income........................ $ 2,462 $ 4,099 $10,512 $20,708 $22,089 $16,800 $21,713
======= ======= ======= ======= ======= ======= =======
PRO FORMA DATA (UNAUDITED)(2):
Income before income taxes........ $22,683 $21,713
Income taxes...................... 8,393 8,034
------- -------
Net income........................ $14,290 $13,679
======= =======
EARNINGS PER SHARE (PRO FORMA DATA
(UNAUDITED) FOR 1996 AND 1995)(3):
Basic............................. $ 0.17 $ 0.28 $ 0.72 $ 1.42 $ 1.51 $ 0.98 $ 0.94
Diluted........................... $ 0.17 $ 0.28 $ 0.71 $ 1.40 $ 1.50 $ 0.97 $ 0.94
WEIGHTED AVERAGE SHARES OUTSTANDING
USED TO COMPUTE (PRO FORMA
(UNAUDITED) FOR 1996 AND 1995):
Basic............................. 14,602 14,602 14,602 14,602 14,602 14,602 14,602
Diluted........................... 14,720 14,603 14,712 14,771 14,771 14,673 14,602
OTHER OPERATING DATA:
EBITDA(4)......................... $ 5,553 $ 7,008 $20,900 $35,581 $37,033 $25,986 $23,274
Capital expenditures.............. 542 8,046 14,027 41,837 13,799 3,010 11,788
International revenues as a % of
total revenues.................. 31% 46% 39% 35% 37% 31% 37%
</TABLE>

<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
--------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 268
Total assets..................... 109,272
Bank borrowings.................. 1,400
Total shareholders' equity....... $ 94,767
</TABLE>

- ---------------

(1) Selling, general and administrative expenses for the three months ended
March 31, 2000 and 1999 include plant start-up costs of $27,000 and
$360,000, respectively. For the years ended December 31, 1999 and 1998,
selling, general and administrative expenses include plant start-up costs of
$1,464,000 and $451,000, respectively. In 1996, selling, general and
administrative expenses include an

7
<PAGE> 9

incremental charge of $877,225 relating to accelerated recognition of
compensation expense for the vesting of restricted stock in connection with
the Company's initial public offering.

(2) Pro forma data reflect the effects on historical income data for the years
ended December 31, 1996 and 1995 as if the Company had been treated as a C
Corporation for the entire year for income tax purposes, with an estimated
effective income tax rate of 37%. The Company terminated its S Corporation
election on April 23, 1996 prior to its initial public offering.

(3) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128, Earnings
Per Share.

(4) EBITDA represents earnings before income taxes, interest expense and
depreciation and amortization. EBITDA data are included because management
understands that such information is considered by certain investors as an
additional basis on which to evaluate our ability to pay interest, repay
debt and make capital expenditures. Because all companies do not calculate
EBITDA identically, the presentation of EBITDA herein is not necessarily
comparable to similarly entitled measures of other companies. EBITDA is not
intended to represent and should not be considered more meaningful than, or
an alternative to, measures of operating performance as determined in
accordance with generally accepted accounting principles.

8
<PAGE> 10

RISK FACTORS

An investment in our common stock involves a number of risks. You should
consider carefully the following information about these risks, together with
the other information included and incorporated by reference in this prospectus,
before buying shares of common stock.

OUR BUSINESS AND FINANCIAL PERFORMANCE DEPEND ON THE LEVEL OF ACTIVITY IN THE
NATURAL GAS AND OIL INDUSTRIES.

Our operations are materially dependent upon the levels of activity in
natural gas and, to a lesser extent, oil exploration, development and
production. These activity levels are affected by both short-term and long-term
trends in natural gas and oil prices. In recent years, natural gas and oil
prices and, therefore, the level of exploration, development and production
activity, have experienced significant fluctuations. Worldwide economic,
political and military events, including initiatives by the Organization of
Petroleum Exporting Countries, have contributed, and are likely to continue to
contribute, to price volatility. A prolonged reduction in natural gas and oil
prices would depress the level of natural gas and oil exploration, development,
production and well completions activity and result in a corresponding decline
in the demand for our products. Such a decline could have a material adverse
effect on our results of operations and financial condition.

OUR BUSINESS AND FINANCIAL PERFORMANCE COULD SUFFER IF NEW PROCESSES ARE
DEVELOPED TO REPLACE HYDRAULIC FRACTURING.

Substantially all of our products are proppants used in the completion and
recompletion of natural gas and oil wells through the process of hydraulic
fracturing. The development of new processes for the completion of natural gas
and oil wells leading to a reduction in or discontinuation of the use of the
hydraulic fracturing process could cause a decline in demand for our products
and could have a material adverse effect on our results of operations and
financial condition.

WE MAY BE ADVERSELY AFFECTED BY DECREASED DEMAND FOR CERAMIC PROPPANTS OR THE
DEVELOPMENT BY OUR COMPETITORS OF EFFECTIVE ALTERNATIVE PROPPANTS.

Ceramic proppants are a premium product capable of withstanding higher
pressure and providing more highly conductive fractures than mined sand, which
is the most commonly used proppant type. Although we believe that the use of
ceramic proppants generates higher production rates and more favorable
production economics than mined sand, a significant shift in demand from ceramic
proppants to mined sand could have a material adverse effect on our results of
operations and financial condition. The development and use of effective
alternative proppants could also cause a decline in demand for our products, and
could have a material adverse effect on our results of operations and financial
condition.

WE OPERATE IN A COMPETITIVE MARKET.

We compete with two other suppliers of ceramic proppants, as well as with
suppliers of sand and resin-coated sand for use as proppants, in the hydraulic
fracturing of natural gas and oil wells. The proppants market is highly
competitive and no one supplier is dominant.

WE RELY UPON, AND RECEIVE A SIGNIFICANT PERCENTAGE OF OUR REVENUES FROM, A
LIMITED NUMBER OF KEY CUSTOMERS.

During 1999, our largest customers were, in alphabetical order, BJ Services
Company, Dowell and Halliburton Company, the three largest participants in the
worldwide petroleum pressure pumping industry. Although the end users of our
products are the operators of natural gas and oil wells that hire the pumping
service companies to hydraulically fracture wells, these three customers
accounted collectively for approximately 85% of our 1999 revenues. We generally
supply our pumping service industry customers with products on a just-in-time
basis, with transactions governed by individual purchase orders. Continuing
sales of product depend on our direct customers and the end user well operators
being satisfied with both
9
<PAGE> 11

past product and delivery performance. Although we believe our relations with
our customers and the major well operators are excellent, a material decline in
the level of sales to any one of our major customers due to unsatisfactory
product performance, delivery delays or any other reason could have a material
adverse effect on our results of operations and financial condition.

WE MAY BE ADVERSELY AFFECTED BY ALLEGATIONS OF ANTITRUST VIOLATIONS IN THE
PROPPANTS INDUSTRY.

In April 1999, we were served with a U.S. federal grand jury subpoena
requesting the production of documents in connection with an investigation by
the Antitrust Division of the U.S. Department of Justice of possible
anticompetitive activity in the proppants industry. We have complied with this
request. Although it is not possible at this time to predict the outcome of this
investigation, an ultimate finding by a court that the Company engaged in such
activity could have a material adverse effect on our results of operations and
financial condition. In addition, one or more private litigants could pursue
claims against us for any violation of the antitrust laws. Responding to the
Department of Justice investigation has resulted and may continue to result in
substantial cost to us.

WE RELY ON CERTAIN PATENTS.

We own nine issued United States patents and 24 issued foreign patents.
These patents generally cover the manufacture and use of our products. The
current versions of the six most important U.S. patents expire at various times
in the years 2002 through 2009, with the two key product patents expiring in
2006 and 2009. We believe that these patents have been and will continue to be
important in enabling us to compete in the market to supply proppants to the
natural gas and oil industry. There can be no assurance that our patents will
not be challenged or circumvented by competitors in the future or will provide
us with any competitive advantage, or that other companies will not be able to
market functionally similar products without violating our patent rights. We
intend to enforce and have in the past vigorously enforced our patents. We may
be involved from time to time in the future, as we have been in the past, in
litigation to determine the enforceability, scope and validity of our patent
rights. Any such litigation could result in substantial cost to us and diversion
of effort by our management and technical personnel. Furthermore, the
invalidation of our United States patent rights and the subsequent entry of
additional competitors into the market to supply ceramic proppants could have a
material adverse effect on our results of operations and financial condition.

WE DEPEND ON THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER.

We depend on the services of Jesse P. Orsini, our President and Chief
Executive Officer, who has been involved in the ceramic proppants business since
1979. The loss of the services of Mr. Orsini could have a material adverse
effect on our results of operations and financial condition. Mr. Orsini has an
employment agreement with the Company which will expire on June 30, 2001.

THE COMPANY IS CONTROLLED BY ITS PRINCIPAL SHAREHOLDERS, INCLUDING MEMBERS OF
THE BOARD OF DIRECTORS, WHOSE INTERESTS MAY DIFFER FROM THOSE OF OTHER
SHAREHOLDERS.

Following the offering, the Company's six largest shareholders will own
approximately 62.9% of the outstanding shares of common stock. Although we
believe they have no agreement to do so, if those shareholders (or certain of
them) act together they will have the ability to control the election of the
Company's directors and other matters requiring a shareholder vote.

THE MARKET PRICE OF OUR STOCK MAY DECLINE DUE TO THE LARGE NUMBER OF SHARES
ELIGIBLE FOR FUTURE SALE.

Although we cannot predict the timing or amount of future sales of common
stock or the effect that the availability of such shares will have on the market
price from time to time, sales of significant amounts of common stock in the
public market following the offering could adversely affect the market price of
the common stock. Our six largest shareholders, including certain of the selling
stockholders, who collectively will hold approximately 62.9% of the shares of
common stock that will be outstanding after the offering

10
<PAGE> 12

(60.4% of the shares if the over-allotment option is exercised in full), have
agreed not to offer to sell, sell or otherwise dispose of any shares of common
stock for a period of 90 days after the date of this prospectus, without the
prior consent of Lehman Brothers Inc. After the expiration of such period,
however, such shareholders may sell all of their shares of common stock pursuant
to Rule 144 under the Securities Act of 1933 or otherwise.

Future sales of common stock, or the perception that future sales could
occur, could adversely affect prevailing market prices for the common stock.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, OUR BYLAWS AND OF
DELAWARE LAW MAY DELAY, DETER OR PREVENT A CHANGE IN CONTROL OF THE COMPANY.

Various provisions of our organizational documents and of the law of
Delaware, where we are incorporated, may delay, deter or prevent a change in
control of the Company not approved by our board of directors. The authorization
of undesignated preferred stock makes it possible for our board of directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of the Company. There also
are a substantial number of authorized but unissued shares of common stock that
could be issued for such purpose.

Section 203 of the Delaware general corporation law imposes restrictions on
mergers and other business combinations between the Company and any holder of
15% or more of the common stock.

These provisions of our organizational documents and Delaware law, together
with the control of approximately 62.9% of the outstanding shares of common
stock by our six largest shareholders upon completion of the offering, could
discourage potential acquisition proposals and could delay, deter or prevent a
change in control of the Company. These provisions also could make it more
difficult for third parties to remove and replace the members of the board of
directors. Moreover, these provisions could diminish the opportunities for a
shareholder to participate in tender offers, including tender offers at prices
above the then-current market price of the common stock, and may also inhibit
increases in the market price of the common stock that could result from
takeover attempts or speculation.

THE MARKET PRICE OF THE COMMON STOCK WILL FLUCTUATE, AND COULD FLUCTUATE
SIGNIFICANTLY.

The market price of the common stock will fluctuate, and could fluctuate
significantly, in response to various factors and events, including the
following:

- the liquidity of the market for our common stock;

- differences between our actual financial or operating results and those
expected by investors and analysts;

- changes in analysts' recommendations or projections;

- new statutes or regulations or changes in interpretations of existing
statutes and regulations affecting our business;

- changes in general economic or market conditions; and

- broad market fluctuations.

OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM RESULTS ANTICIPATED IN
FORWARD-LOOKING STATEMENTS WE MAKE.

Some of the statements included or incorporated by reference in this
prospectus are forward-looking statements. These forward-looking statements
include statements in the "Business" section of this prospectus relating to
trends in the natural gas and oil industries, including exploration, development
and production activity and the demand for ceramic proppants. These
forward-looking statements also include statements relating to our performance
in the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business" sections of this prospectus and of our annual
report on Form 10-K for the year ended December 31, 1999. In addition, we have
made and may continue to make forward-looking statements in other filings with
the Securities and Exchange Commission, and in

11
<PAGE> 13

written material, press releases and oral statements issued by us or on our
behalf. Forward-looking statements include statements regarding the intent,
belief or current expectations of the Company or its officers. Our actual
results could differ materially from those anticipated in these forward-looking
statements. See "Cautionary Statement Regarding Forward-Looking Statements."

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock began trading on the NASDAQ National Market under the
symbol CRBO upon completion of our initial public offering on April 23, 1996.
Per share stock prices for the quarterly periods during 2000, 1999 and 1998 as
reported by NASDAQ were as follows:

<TABLE>
<CAPTION>
LOW HIGH
------- -------
<S> <C> <C>
1998
First quarter............................................. $26.625 $39.000
Second quarter............................................ 32.500 38.000
Third quarter............................................. 16.250 36.000
Fourth quarter............................................ 16.688 29.250
1999
First quarter............................................. $14.000 $22.250
Second quarter............................................ 17.750 30.438
Third quarter............................................. 20.000 32.250
Fourth quarter............................................ 19.000 30.000
2000
First quarter............................................. $20.000 $29.500
Second quarter (through May 4, 2000)...................... 28.000 34.750
</TABLE>

The Company paid quarterly cash dividends of $0.075 per share on its common
stock in 1998, 1999 and the first quarter of 2000. The Company's current
intention, subject to its financial condition, the amount of funds generated
from operations and the level of capital expenditures, is to continue to pay
quarterly dividends to shareholders of its common stock at the rate of $0.075
per share.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares of common
stock by the selling stockholders.

12
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL BUSINESS CONDITIONS

CARBO Ceramics Inc. manufactures and sells ceramic proppants for use in the
hydraulic fracturing of oil and natural gas wells. Hydraulic fracturing is the
most common technique used to stimulate production from hydrocarbon bearing
formations. The process involves pumping fluids into an oil or gas well at very
high pressure in order to fracture the rock formation that contains the
hydrocarbons. As the fracture is created, the fluids are blended with granular
materials, or proppants, which fill the fracture and prop it open after the
pressure pumping ceases. The proppant filled fracture creates a highly permeable
channel that enables the oil or gas to flow more freely from the formation,
thereby increasing production from the well.

Ceramic proppants are premium products that are sold at higher prices than
sand or resin-coated sand, the two primary alternative proppants. The principal
advantage of ceramic proppants is that they are stronger than sand-based
proppants. The higher strength of ceramic proppants results in higher production
rates in deep wells where sand or resin-coated sand may be crushed under high
closure stress. Consequently, the level of deep drilling activity (generally
defined as wells deeper than 7,500 feet) influences the Company's business.
Ceramic proppants are also more uniform in size and shape than sand-based
proppants. This uniformity can result in higher production rates than sand-based
proppants when used in wells that do not otherwise require ceramics for their
higher strength.

As deep drilling, particularly in North America, is typically focused on
the production of natural gas, the Company's business is significantly impacted
by the number of natural gas wells drilled in North America. In markets outside
North America, sales of the Company's products have historically been less
dependent on natural gas markets but are influenced by the overall level of
drilling activity. Furthermore, because the decision to use ceramic proppants is
based on the present value economics of comparing the higher cost of ceramic
proppants to the future value derived from increased production rates, the
Company's business is secondarily influenced by the price of natural gas and
oil.

From 1986 through 1996, the ceramic proppant industry had productive
capacity in excess of demand. The competitive pressure brought on by this excess
capacity made it difficult for the Company to raise prices on its products.
However, the Company continued to grow its revenues through the introduction of
new ceramic proppants aimed at increasing the use of ceramic proppants in the
fracturing of medium depth wells, which had previously been fractured with
sand-based proppants. CARBOLITE(R) was introduced in 1986 and is the Company's
most popular product in the oil-dominated export market. CARBOECONOPROP(R),
which was introduced in 1992, has been widely accepted in the industry and has
been the Company's fastest growing product line over the past five years. The
Company expects that CARBOECONOPROP(R) will continue to be the fastest growing
product line in the foreseeable future.

In the latter half of 1996, the industry began to operate near full
capacity and product availability on certain product lines was limited. In 1997,
demand for ceramic proppants continued to increase and the availability of all
ceramic products was limited. Based on the strong market demand, the Company
raised prices on its products by an average of 5%, effective in the first
quarter 1997. Drilling activity and the demand for ceramic proppants remained
strong throughout 1997 and the Company generated record earnings for the year.
The Company raised prices on its products by an average of 5%, effective in the
first quarter of 1998. Strong demand for ceramic proppants continued through the
first half of 1998, with the Company realizing record financial results for the
first three quarters of the year. However, in the second half of 1998, a rapid
decline in oil prices resulted in a significant reduction in the number of oil
and gas wells drilled and completed. The Company felt the effects of this
decline in the fourth quarter of 1998 as revenues decreased by 29% from the
previous quarter and 33% from the fourth quarter of 1997.

Oil prices remained depressed through much of the first half of 1999 and
worldwide drilling activity decreased dramatically. In 1999, the worldwide rig
count averaged 1,442, a decline of 22% from 1998 and 33% from 1997. Future
growth in the Company's revenues and net income are dependent on the future

13
<PAGE> 15

demand for ceramic proppants that is generated from the demand for natural gas
and oil worldwide and on the Company's ability to continue to penetrate the
market for sand-based proppants. Management believes that the worldwide demand
for natural gas will continue to increase due to the abundance, relatively low
cost and environmental benefits of natural gas as a source of energy. With this
in mind, the Company initiated construction of its new manufacturing facility in
McIntyre, Georgia in July 1997. The plant was completed in the first quarter of
2000 at a total cost of approximately $60 million. Initial capacity of the plant
is expected to be 200 million pounds per year, an increase of approximately 57%
over previous manufacturing capacity. The first line of the new facility was
started up in June 1999, and was running at 100% of design capacity for portions
of the fourth quarter of 1999. The second line reached full capacity in March
2000.

THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999

Operating results for the first quarter of 2000 reflect a strong recovery
in drilling activity and in the demand for ceramic proppants. However, operating
margins were depressed due to the high cost of production experienced during the
start-up of the McIntyre production facility. Management believes that the
strong demand for the Company's products in the first quarter resulted primarily
from an improvement in the domestic natural gas market.

REVENUES

Revenues for the first quarter 2000 were $22.1 million, a 10% increase from
the first quarter 1999. The increase was due to an 18% increase in sales volume,
partially offset by a decrease in the average selling price of our high-strength
products (CARBOHSP(TM) and CARBOPROP(R)).

The number of rigs drilling for natural gas in the U.S. during the first
quarter of 2000 was 43% higher than the same period a year earlier and this
increased activity resulted in a 48% increase in our domestic sales volume
versus the first quarter of 1999. Our sales in the U.S. were the highest ever
recorded for a single quarter since the formation of the Company. Sales volume
in Canada increased 36% versus the previous year, also due to strong natural gas
drilling activity. Other international markets, which have not recovered as
quickly from the depressed levels seen in the latter part of 1999, decreased 41%
versus the first quarter of 1999.

The gains attributable to the increase in volume were partially offset by a
decrease in the average selling price of our high-strength products
(CARBOHSP(TM) and CARBOPROP(R)) as compared to the same period a year ago. This
price erosion occurred during the last half of 1999 and was primarily due to a
weak industry environment and competitive pressures in the South Texas market.

GROSS PROFIT

Gross profit for the quarter was $6.7 million or 31% of sales as compared
to $10.0 million or 50% of sales for the first quarter 1999. The decrease in
gross profit was due to increased manufacturing costs associated with the
start-up of a new production facility in McIntyre, Georgia. This new facility
contains two distinct production lines. The first production line began
operation in June 1999 and demonstrated the ability to run at its full design
capacity by November 1999. At that time, the first production line was shut down
and production was initiated on the second production line. The second line
reached full capacity in March 2000. During this start-up period, each of the
Company's three production facilities operated at less than full capacity
causing production costs to increase. While this operating strategy adversely
affected the Company's operating margins, management believes it will allow the
Company to operate more efficiently in the future.

Gross profit margins for the first quarter 2000 were also negatively
impacted by the price reduction on high-strength products as compared to the
first quarter 1999 and the high cost of trucking lightweight products from the
Eufaula and McIntyre facilities to remote storage facilities in response to
product shortages.

14
<PAGE> 16

Management believes that gross profit margins will increase in the second
quarter of 2000 as the Company operates each of its production facilities at
more efficient levels.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES AND PLANT START-UP COSTS

Selling, general and administrative expenses and plant start-up costs were
$2.9 million for the first quarter of 2000 and $3.6 million for the
corresponding period of 1999. Expenses as a percentage of sales decreased from
17.8% in the first quarter 1999 to 12.9% for the same period in 2000.

Included in 1999 expenses was the write-off of $475,000, representing a
portion of the accounts receivable due from Fracmaster, LTD., a customer that
experienced financial difficulties and obtained a court order under the
Companies Creditors Arrangement Act. 1999 expenses also included $184,000 in
research and development costs related to the development of products for the
foundry industry. Areas of increased selling, general and administrative
spending during the first quarter 2000 include marketing and distribution costs
related to a higher level of sales activity and legal fees. With the completion
of the McIntyre manufacturing facility, plant start-up costs declined by
$333,000 versus the first quarter 1999.

YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

NET INCOME

<TABLE>
<CAPTION>
PERCENT PERCENT
1999 CHANGE 1998 CHANGE 1997
------- ------- ------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net Income..................................... $10,512 (49)% $20,708 (6)% $22,089
</TABLE>

We reported net income for 1999 that was 49% below the previous year. A
significant reduction in oil and gas drilling activity, combined with higher
than expected costs at our manufacturing facilities, start-up costs at our new
facility in McIntyre, Georgia, and price pressure on the high strength products
in the South Texas market were the primary causes of the decline.

Although we reported record net income through the first nine months of
1998, a dramatic reduction in oil prices and related drilling activity resulted
in a significant decline in our sales volume in the fourth quarter of 1998. As a
result, net income for 1998 declined by 6% from 1997.

Individual components of net income are discussed below.

REVENUES

<TABLE>
<CAPTION>
PERCENT PERCENT
1999 CHANGE 1998 CHANGE 1997
------- ------- ------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues....................................... $69,738 (17)% $84,095 (1)% $85,122
</TABLE>

Our 1999 revenues of $69.7 million were 17% lower than 1998 revenues. Total
sales volumes decreased by 12%, with domestic volumes down 15% and export
volumes down 7% from 1998. The decline in domestic volumes was due in large part
to a significant decline in sales of CARBOECONOPROP(R) into the south Texas
market -- the result of a dramatic drop in rig activity in that area of the
country, and a significant decrease in Alaskan activity -- the direct result of
lower oil prices. Revenues were also negatively impacted by price pressure on
high strength products in the South Texas market. The decline in export volume
was due primarily to a decrease in sales into the Pacific Rim region.

Our 1998 revenues of $84.1 million were 1% lower than revenues in 1997.
Sales volume decreased 3% from 1997, but the effect of this was offset by an
increase in the average selling price that was the result of a price increase of
approximately 5% which became effective in January 1998. Domestic sales volumes
increased 1% from 1997, while export volumes decreased 10%. The most substantial
volume decline occurred in Russia where we experienced a 76% decrease from 1997
to 1998. Despite the overall slow

15
<PAGE> 17

down in drilling activity in 1998, the volume of CARBOECONOPROP(R) products sold
increased by 20% over 1997. The largest part of this increase was represented by
sales into Mexico.

GROSS PROFIT

<TABLE>
<CAPTION>
PERCENT PERCENT
1999 CHANGE 1998 CHANGE 1997
------- ------- ------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross Profit................................... $28,020 (34)% $42,430 (1)% $42,936
Gross Profit %................................. 40% 50% 50%
</TABLE>

Our cost of goods sold consists of manufacturing costs and packaging and
transportation expenses associated with the delivery of our products to our
customers. Variable manufacturing expenses include raw materials, labor,
utilities and repair and maintenance supplies. Fixed manufacturing expenses
include depreciation, property taxes on production facilities, insurance and
factory overhead.

Gross profit for 1999 was $14,410,000 lower than 1998. Gross profit as a
percentage of sales was 40% for 1999, compared to 50% for 1998. The significant
decrease in gross profit was the result of the decrease in revenues discussed
above and an increase in production expenses. The increase in production
expenses was the direct result of management's decision to start-up the new
production facility in McIntyre, Georgia despite the weak demand experienced
through much of 1999. This decision was made to position the Company for a
recovering market in 2000 but resulted in all three of the Company's
manufacturing facilities operating at less than full capacity. In addition,
costs at the New Iberia facility were adversely affected by a six-week
maintenance shutdown in May/June to install a new kiln shell and replace the
rotation system. These increases in cost were partially offset by lower freight
costs experienced in transferring finished goods from the Eufaula manufacturing
facility to the remote storage facility in San Antonio, Texas. High freight
costs were incurred in 1998 due to rail service problems related to the merger
of the Union Pacific and Southern Pacific railway systems.

Gross profit for 1998 decreased by $506,000 from 1997. Gross profit as a
percentage of sales remained unchanged at 50% for 1998 as compared to 1997. The
positive effects of the price increase in January 1998 and lower manufacturing
costs at the New Iberia manufacturing facility were offset by an increase in the
percentage of lower-priced CARBOECONOPROP(R) sales (52% of 1998 volume compared
to 42% of 1997 volume) and an increase in freight costs incurred in transferring
material from the Eufaula, Alabama manufacturing facility to the remote storage
facility in San Antonio, Texas. The increased freight costs were the result of
rail service problems, including delays in delivery and improper routing of rail
cars following the merger of the Union Pacific and Southern Pacific railway
systems. The lower production costs achieved at New Iberia were the result of
improved efficiency due to increased production and lower maintenance spending
as compared to 1997.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES AND PLANT START-UP COSTS

<TABLE>
<CAPTION>
PERCENT PERCENT
1999 CHANGE 1998 CHANGE 1997
------- ------- ------ ------- ------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SG&A............................................. $11,761 18% $9,977 12% $8,915
SG&A as a % of revenues.......................... 16.9% 11.9% 10.5%
</TABLE>

Selling, general and administrative expenses increased by $1,784,000 in
1999 over 1998. SG&A expenses also increased as a percentage of sales to 16.9%
in 1999 from 11.9% in 1998. The single largest contributor to these increased
costs was start-up expenses related to the new manufacturing facility in
McIntyre, Georgia. These expenses totaled $1,464,000 in 1999, compared to
$451,000 during 1998. Other significant items include expenses related to
exploring the marketing and manufacturing potentials in China, New Iberia plant
trials to develop products for non-oilfield applications (charged to research
and development), legal fees related to a Department of Justice inquiry, and a
write-off of most of the receivables of one of our customers. This customer has
subsequently been acquired by one of our three major customers.

16
<PAGE> 18

Selling, general and administrative expenses increased by $1,062,000 in
1998 over 1997. SG&A expenses also increased as a percentage of sales to 11.9%
in 1998 from 10.5% in 1997. The largest increases were in marketing expenses.
Additional sales personnel were employed in anticipation of additional
manufacturing capacity and to explore new markets for our products outside the
oilfield. In addition, we have contracted with an outside consultant to provide
assistance to our marketing department in developing technical sales
presentations. An increase in depreciation expense resulted from expansions at
our Edmonton, Canada and Rock Springs, Wyoming remote storage facilities, both
of which were completed during the first half of 1998. We also incurred $451,000
of start-up costs during 1998 related to the construction of the new
manufacturing facility in McIntyre, Georgia.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $0.3 million as of March 31, 2000, an
increase of $0.1 million from December 31, 1999. The increase in cash and cash
equivalents was due to cash generated from operations of $2.1 million, net
repayments against the Company's line of credit of $0.4 million, capital
spending of $0.5 million, and cash dividends of $1.1 million.

Our current intention, subject to our financial condition, the amount of
funds generated from operations and the level of capital expenditures, is to
continue to pay quarterly dividends to shareholders of our common stock at the
rate of $0.075 per share.

The Company maintains an unsecured line of credit in the amount of $10.0
million. As of March 31, 2000, there was $1.4 million outstanding under the
credit agreement. The Company is currently engaged in negotiations to extend or
renew its line of credit beyond 2000. The Company anticipates that cash provided
by operating activities and funds available under its line of credit will be
sufficient to meet planned operating expenses, tax and dividend requirements and
capital expenditures through 2000.

IMPACT OF YEAR 2000

In prior years, we discussed the nature and progress of our plans to become
Year 2000 ready. During 1999, we completed our remediation and testing of
systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in critical information technology and
non-information technology systems and believe those systems successfully
responded to the Year 2000 date change. We expensed approximately $49,000 during
1999 in connection with remediating our systems. We are not aware of any
material problems resulting from Year 2000 issues, either with our products, our
internal systems, or the products and services of third parties. We will
continue to monitor our critical computer applications and those of our
suppliers and vendors throughout 2000 to ensure that any latent Year 2000
matters that may arise are promptly addressed.

17
<PAGE> 19

BUSINESS

GENERAL

CARBO Ceramics is the world's leading producer of ceramic proppants, which
are high-strength, spherical pellets used in the hydraulic fracturing of natural
gas and oil wells. Demand for ceramic proppants depends generally upon the
demand for natural gas and oil and on the number of natural gas and oil wells
drilled, completed or recompleted worldwide. More specifically, the demand for
ceramic proppants is dependent on the number of oil and gas wells that are
hydraulically fractured to stimulate production.

Hydraulic fracturing is the most widely used method of stimulating
production from oil and gas bearing formations. In the hydraulic fracturing
process, large volumes of proppant are mixed with a highly viscous fluid to form
a slurry. Using high-pressure hydraulic pumps, the slurry is pumped into the
well at pressures sufficient to create a fracture in the rock formation that
contains the gas or oil. Once the fracture is created, the pressure is removed
and the proppants remain in the fracture, creating a highly permeable pathway
through which the oil and gas can flow more readily. The end result is increased
production rates and improved economics for the operator of the well.

The three primary proppants used worldwide are sand, resin-coated sand and
ceramics. Ceramic proppants sell at a premium price versus alternative proppants
due to their superior strength and uniform size and shape. The superior strength
of ceramic proppants relative to sand-based proppants allows them to be used in
deeper formations where increased stress is placed on the proppant. This
attribute results in ceramic proppants being used primarily in the stimulation
of natural gas wells, which tend to be deeper than oil wells. We estimate that
approximately 90% of our sales are for use in the stimulation of natural gas
wells. The uniform size and shape of man-made ceramic proppants generate larger
pore spaces in the fracture, allowing oil and gas to flow more freely through
the formation, regardless of stress, making ceramic proppants economically
attractive in shallower reservoirs.

We believe that the worldwide demand for natural gas will continue to
increase due to the abundance, relatively low cost and environmental benefits of
natural gas as a source of energy. We also believe that natural gas drilling
activity in North America has the potential to grow faster than the demand for
natural gas due to increasing depletion rates and the decreasing size of
remaining natural gas reservoirs, and that future drilling activity will
increasingly be targeted at deeper and more complex reservoirs for which the use
of ceramic proppants is an effective method of increasing production.
Furthermore, we believe that we can benefit from the increasing development of
natural gas reserves and the increased use of hydraulic fracturing technology in
international markets.

At the time of our founding in 1978, we manufactured a single high-strength
proppant designed for use in deep oil and gas wells where alternative proppants
lacked the strength necessary to hold open the fracture. Beginning in 1982, we
pursued a strategy of manufacturing and marketing less costly and more
competitively priced ceramic proppants 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. More recently, we have developed a technical marketing program to
demonstrate the economic benefits of ceramic proppants' uniform size and shape,
which qualify them for use in shallower reservoirs that have historically been
stimulated with sand-based proppants.

Although reliable information is generally not available regarding the
worldwide demand for proppants, based on our internally generated market
information and information contained in the United States Geological Survey
Minerals Yearbook, we estimate total demand for proppants produced in the
Western Hemisphere to be approximately 3.8 billion pounds annually. We believe
that ceramic proppants make up approximately 14% of the total proppant market
and that we supply approximately 60% of the ceramic proppants and 8% of all
proppants used worldwide.

18
<PAGE> 20

OUR PRODUCTS

We manufacture four distinct ceramic proppants. CARBOHSP(TM)2000 and
CARBOPROP(R) are premium priced, high strength proppants designed primarily for
use in deep gas wells. CARBOHSP(TM)2000 was introduced in January 2000 and is an
improved version of CARBOHSP, which was introduced in 1979 as the original
ceramic proppant. CARBOHSP(TM)2000 has the highest strength of the ceramic
proppants manufactured by CARBO Ceramics and is used primarily in the fracturing
of deep gas wells. CARBOPROP(R), which we introduced in 1982, is slightly lower
in weight and strength than CARBOHSP(TM)2000 and was developed for use in deep
gas wells that do not require the strength of CARBOHSP(TM)2000.

The CARBOLITE(R) and CARBOECONOPROP(R) products are lightweight,
intermediate strength proppants designed for use in gas wells of moderate depth
and shallower oil wells. The products are manufactured and sold to compete
directly with sand-based proppants. CARBOLITE(R), introduced in 1984, is used in
medium depth oil and gas wells, where the additional strength of ceramic
proppants may not be essential, but where higher production rates can be
achieved due to the product's roundness and uniform grain size.

CARBOECONOPROP(R), introduced in 1992 to compete directly with sand-based
proppants, is our lowest priced and fastest growing product. The introduction of
CARBOECONOPROP(R) has resulted in ceramics being used in many new markets by end
users that had not previously used ceramic proppants. We believe that many of
the users of CARBOECONOPROP(R) had previously used sand or resin-coated sand.

OUR STRATEGY

Our strategy consists of the following key components:

Maintain sufficient production capacity and inventory ahead of demand. In
the past, our opportunities for growth have been limited by our production
capacity. The new McIntyre, Georgia plant, which was completed in early 2000,
increases our production capacity by 200 million pounds per year and positions
us to take advantage of the anticipated recovery in drilling activity. The
McIntyre facility was designed to be expanded to 400 million pounds of annual
capacity and we plan to continue to expand our production capabilities as
industry demand dictates. Furthermore, we will continue to supply our customers
with just-in-time inventory which eliminates their need to maintain inventory.
We believe our worldwide distribution network is the most extensive in the
proppant industry and allows us to maintain on-time delivery performance and
product availability, which are important factors in differentiating us from our
competitors. We will continue to invest in distribution facilities to service
growing geographic markets.

Aggressively market our products to direct customers and end users. We
recognize the importance of a technical marketing program when selling a product
that offers financial benefits over time but is initially more costly than
alternative products. We market our products both to our direct customers and to
owners and operators of natural gas and oil wells, who are the end users of our
products. Beginning in 1999, we increased our marketing efforts to production
companies in an attempt to increase the "pull through" demand of our products.
We intend to expand our technical sales force in 2000 and to continue to
increase our efforts to educate end users on the benefits of using ceramic
proppants. We currently provide a variety of technical support services and we
have developed computer software that models the cost/benefit advantages of
using ceramic proppants in the fracture stimulation of natural gas and oil
wells.

Increase our penetration into traditionally sand proppant markets. Although
ceramic proppants have traditionally been used in the stimulation of deep gas
wells where closure stress is high and proppant strength is critical, new
technical data show that the uniform shape of ceramic proppants can generate
greater conductivity and higher production rates in shallower oil wells that
would not otherwise require the strength of ceramic proppants. In 1999, we
introduced a new technical marketing strategy that uses this data to support the
use of ceramic proppants in shallower wells. In 2000, we intend to use an
expanded technical sales staff to educate end users on the benefits of using
ceramic proppants in shallower wells. We

19
<PAGE> 21

expect this initiative to increase our penetration into market segments that
have historically been dominated by sand-based proppants.

Continue to explore and develop alternative applications in non-oilfield
markets. We will continue to pursue non-oilfield markets for our products and
have developed finer products for use in the foundry market and increased our
distribution channels to that market. We have also made modest sales in the
grinding media market and begun studies in the catalyst and filtration markets.

CUSTOMERS AND MARKETING

Our largest customers are, 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 85% of our 1999 revenues and approximately 88% of our 1998
revenues. However, the end users of our products are the operators of natural
gas and oil wells that hire the pressure pumping service companies to
hydraulically fracture wells. We have historically worked with the pressure
pumping service companies to present the advantages of using ceramic proppants
to the operators of natural gas and oil wells. We generally supply our customers
with products on a just-in-time basis, with transactions governed by individual
purchase orders. Continuing sales of product depend on our direct customers and
the well operators being satisfied with both product quality and delivery
performance.

We recognize the importance of a technical marketing program when selling a
product that offers financial benefits over time but is initially more costly
than alternative products. We must market our products both to our direct
customers and to owners and operators of natural gas and oil wells. Our 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. Beginning in 1999, we increased
our marketing efforts to production companies. We intend to expand our technical
sales force in 2000 and continue to increase our efforts to educate end users on
the benefits of using ceramic proppants. We currently provide a variety of
technical support services and have developed computer software that models the
return on investment achievable by using our 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 and Technology coordinates
worldwide sales and marketing activities. The Company's export marketing efforts
in 1999 were conducted through its sales office in Aberdeen, Scotland and
through commissioned sales agents located in South America, China 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 39%, 35% and 37% of the Company's sales for 1999, 1998 and 1997,
respectively.

The distribution of the Company's export and domestic revenues is shown
below, based upon the region in which the customer used the proppants:

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
($ IN MILLIONS)
<S> <C> <C> <C>
LOCATION
United States............................................. $42.3 $54.3 $53.3
International............................................. 27.4 29.8 31.8
----- ----- -----
Total............................................. $69.7 $84.1 $85.1
===== ===== =====
</TABLE>

COMPETITION AND MARKET SHARE

Our chief worldwide competitor is Norton-Alcoa Proppants ("Norton-Alcoa").
Norton-Alcoa is a joint venture of Compagnie de Saint-Gobain, a French glass and
materials company, and Aluminum

20
<PAGE> 22

Company of America. Norton-Alcoa manufactures ceramic proppants that directly
compete with each of our products. In addition, Mineraco Curimbaba
("Curimbaba"), based in Brazil, manufactures a sintered bauxite product similar
to our CARBOHSP(TM)2000, which is marketed in the United States under the name
"Sinterball". We believe 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 us and Norton-Alcoa. We believe that we supply approximately
60% of the ceramic proppants and approximately 8% of all proppants used by the
oilfield services companies that perform fracturing services worldwide.

Competition for CARBOHSP(TM)2000 and CARBOPROP(R) includes ceramic
proppants manufactured by Norton-Alcoa and Curimbaba. The Company's CARBOLITE(R)
and CARBOECONOPROP(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., Fairmount Minerals Limited, Inc. and
Ogelbay-Norton Company. The leading suppliers of resin-coated sand are Borden
Proppants Corp. and Santrol, a subsidiary of Fairmount Minerals.

Prior to 1997, we had generally maintained sufficient inventory to satisfy
demand for our products. However, beginning in 1997 and continuing through the
first half of 1998, it became obvious to our management that previous capacity
additions were insufficient to satisfy demand in an improving market. We
addressed this issue through the construction of a new manufacturing facility in
McIntyre, Georgia, which was completed and began limited production in June
1999. With the completion of our new production facility in McIntyre, Georgia in
the first part of 2000, we have increased our production capacity by
approximately 57% and now have the ability to benefit from the growing demand
for ceramic proppants.

We continually conduct testing and development activities with respect to
alternative raw materials to be used in our existing production methods and
alternative production methods. We are not aware of the development of
alternative products for use as proppants in the hydraulic fracturing process.
We believe that the main barriers to entry for additional competitors are the
patent rights held by the Company and certain of our current competitors and the
capital costs involved in building production facilities of sufficient size to
be operated efficiently.

DISTRIBUTION

We maintain finished goods inventories at our plants in New Iberia,
Louisiana, Eufaula, Alabama, and McIntyre, Georgia, and at seven remote stocking
facilities located in: Rock Springs, Wyoming; Oklahoma City, Oklahoma; San
Antonio, Texas; Fairbanks, Alaska; Edmonton, Alberta, Canada; Rotterdam, The
Netherlands; and Tianjin, China. The North American remote stocking facilities
consist of bulk storage silos with truck trailer loading facilities. We own the
facilities in San Antonio, Rock Springs and Edmonton and subcontract the
operation of the facilities and transportation to a local trucking company in
each location. 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 sites in the Netherlands and China are supplied by
container ship. In total, we lease 123 rail cars for use in the distribution of
our products. The price of our 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.

21
<PAGE> 23

RAW MATERIALS

Ceramic proppants are made from alumina-bearing ores (commonly referred to
as bauxite, bauxitic clay or kaolin, depending on the alumina content), that are
readily available on the world market. Bauxite is largely used in the production
of aluminum metal, refractory material and abrasives. The main deposits of
alumina-bearing ores in the United States are in Arkansas, Alabama and Georgia;
other economically mineable deposits are located in Australia, China, Jamaica,
Russia and Surinam.

For the production of CARBOHSP(TM)2000, the Company uses calcined,
abrasive-grade bauxite imported from Australia. The Company has entered into an
agreement with a sole supplier to supply its anticipated need for this ore in
2000. For the production of CARBOPROP(R), the Company uses bauxitic clay mined
in Arkansas. The Company has entered into a contract for the processing and
supply of Arkansas bauxitic clay. The Company believes that this agreement,
which stipulates a fixed price for the ore, subject to annual upward adjustments
in accordance with a producer price index, will provide a sufficient supply of
bauxite and bauxitic clay to meet its anticipated requirement through 2001.

Our Eufaula facility exclusively employs locally mined uncalcined kaolin
for the production of CARBOLITE(R) and CARBOECONOPROP(R). We have entered into a
contract that requires a supplier to sell to us up to 200,000 net tons of kaolin
per year and requires us 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.

The new production facility in McIntyre, Georgia, uses the imported
calcined bauxite and domestic bauxitic clays discussed above for the production
of CARBOHSP(TM)2000 and CARBOPROP(R) and uses locally mined uncalcined kaolin
for the production of CARBOLITE(R) and CARBOECONOPROP(R). The Company has
entered into a long-term supply agreement for kaolin that stipulates a fixed
price subject to annual adjustments for changes in the producer price index and
fuel costs. The agreement requires the Company to purchase at least 80% of the
McIntyre facility's annual kaolin requirement from the supplier. The supply
contract provides for a twenty-year supply of 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(LOGO)F to 3,000(LOGO)F in a rotary kiln.

We use two different methods to produce ceramic proppants. Our plants in
New Iberia, Louisiana, and McIntyre, Georgia, use a dry process (the "Dry
Process") which starts with bauxite, bauxitic clay or kaolin that has been dried
to remove both free water and water which was chemically bound within the ore.
This drying process is referred to as calcining. For the production of
CARBOHSP(TM)2000 and CARBOPROP(R), calcined ores are received at the plant and
ground into a dry powder. For the production of CARBOLITE(R) and
CARBOECONOPROP(R) at the McIntyre plant, ores are calcined at the plant before
being ground into a powder. Pellets are formed by combining the powder with
water and binders and introducing the mixture into high-shear mixers. The
process is completed once the green pellets are sintered in a rotary kiln. Our
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 into a dryer that causes the slurry to harden into green
pellets. These green pellets are then sintered in rotary kilns. The Company
believes that the Wet Process is unique to its plant in Eufaula, Alabama.

PATENT PROTECTION

Our ceramic proppants are made utilizing processes and techniques that
involve a high degree of proprietary technology, some of which are protected by
patents. The Company owns nine issued U.S. patents and 24 issued foreign
patents.

22
<PAGE> 24

Our six most important U.S. patents expire at various times in the years
2002 through 2009, with our two key product patents expiring in 2006 and 2009.
We believe that these patents have been and will continue to be important in
enabling us to compete in the market to supply proppants to the natural gas and
oil industry. We intend to enforce and have in the past vigorously enforced our
patents. We may be involved from time to time in the future, as we have been in
the past, in litigation to determine the enforceability, scope and validity of
our 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 has 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.

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. 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 170 million pounds per year, in
response to the increasing demand for the Company's CARBOLITE(R) and
CARBOECONOPROP(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)2000 and CARBOPROP(R). In February
1996, the Company commenced operation of its second 80 million-pound per year
expansion of the Eufaula plant. Total annual capacity is currently 100 million
pounds at the New Iberia facility and 250 million pounds at the Eufaula
facility.

In June 1999, we substantially completed construction of a new
manufacturing facility in McIntyre, Georgia. Design capacity of the plant is 200
million pounds per year and the total cost of the plant was approximately $60
million. Initial cost estimates for the plant were approximately $40 million.
However, the size and complexity of the plant increased during the completion of
engineering, causing completion costs to increase. The plant consists of two
distinct production lines housed in a single building. Initial production was
generated from the first production line in June 1999 and full design throughput
was achieved on that line in November 1999. Initial production from the second
production line began in December 1999 and that line reached full capacity in
March 2000. The plant will be capable of producing all of our product lines and
has been designed to be expandable to a capacity of 400 million pounds per year.

23
<PAGE> 25

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
Plant 1 1979 20 CARBOHSP(TM)2000 and
CARBOPROP(R)
Plant 2 1981 40 CARBOHSP(TM)2000 and
CARBOPROP(R)
1995 Expansion 1995 40 CARBOHSP(TM)2000 and
CARBOPROP(R)
---
Total 100
===
EUFAULA, ALABAMA
1983 90 CARBOLITE(R) and
CARBOECONOPROP(R)
1993 Expansion 1993 80 CARBOLITE(R) and
CARBOECONOPROP(R)
1996 Expansion 1996 80 CARBOLITE(R) and
CARBOECONOPROP(R)
---
Total 250
===
MCINTYRE, GEORGIA
1999 200 CARBOLITE(R),
=== CARBOECONOPROP(R),
CARBOHSP(TM)2000 and
CARBOPROP(R)
</TABLE>

ORDER BACKLOG

We generally supply our customers with products on a just-in-time basis and
operate 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.

EMPLOYEES

At March 31, 2000, the Company had 153 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 that have
resulted in the loss of production or production delays. The Company believes
its relations with its employees are satisfactory.

PROPERTIES

We maintain our corporate headquarters (approximately 2,700 square feet of
leased office space) in Irving, Texas, own our manufacturing facilities, land
and substantially all of the related production equipment in New Iberia,
Louisiana, and Eufaula, Alabama, and lease our McIntyre, Georgia, facility
through 2009 at which time title will be conveyed to us.

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). We also own 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).

24
<PAGE> 26

The facility in McIntyre, Georgia includes real property, consisting of
approximately 36 acres, plant and equipment that we lease from the Development
Authority of Wilkinson County. The term of the lease commenced on September 1,
1997 and terminates on January 1, 2009. At the termination of the lease, title
to all of the real property, plant and equipment will be conveyed to us in
exchange for nominal consideration. We have the right to purchase the property,
plant and equipment at any time during the term of the lease for an agreed upon
price.

The Company's customer service and distribution operations are located at
the New Iberia facility, while its quality control, testing and development
functions operate at the New Iberia, Eufaula and McIntyre facilities. The
Company owns distribution facilities in San Antonio, Texas, Rock Springs,
Wyoming and Edmonton, Alberta, Canada.

LEGAL PROCEEDINGS

On April 26, 1999, the Company was served with a U.S. federal grand jury
subpoena requesting the production of documents in connection with an
investigation by the Antitrust Division of the U.S. Department of Justice of
possible anticompetitive activity in the proppants industry. The Company has
complied with this request. It is not possible at this time to predict how this
investigation will proceed or the effect, if any, of its ultimate outcome on the
Company.

SELLING STOCKHOLDERS

The following table sets forth the name of each selling stockholder and
information regarding the beneficial ownership of the common stock and options
to purchase common stock by the selling stockholders as of the date hereof, and
as adjusted to reflect the sale of shares of common stock in the offering. The
information in the table below has been calculated in accordance with Rule 13d-3
under the Securities Exchange Act of 1934. Except as described below, the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable. Messrs. Morris, Orsini and Rubin are
directors of the Company; Mr. Morris is the Company's Chairman of the Board, and
Mr. Orsini is the Company's President and Chief Executive Officer.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
--------------------------------- ---------------------------------
OPTIONS OPTIONS
EXERCISABLE SHARES EXERCISABLE
WITHIN BEING WITHIN
SHARES 60 DAYS PERCENT OFFERED SHARES 60 DAYS PERCENT
--------- ----------- ------- --------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Lewis L. Glucksman(1)........ 1,800,000 -- 12.3% 350,000 1,450,000 -- 9.9%
Evelyn Griffin............... 850,000 -- 5.8% 300,000 550,000 -- 3.8%
William C. Morris............ 4,964,000 -- 33.9% 1,100,000 3,864,000 -- 26.4%
Susan F. Morris.............. 700,000 -- 4.8% 200,000 500,000 -- 3.4%
Jesse P. Orsini(2)........... 640,000 250,000 6.0% 140,000 500,000 250,000 5.0%
Orsini Family Trusts......... 60,000 -- (3) 60,000 -- -- --
Robert S. Rubin(1)........... 1,700,000 -- 11.6% 350,000 1,350,000 -- 9.2%
</TABLE>

- ---------------

(1) It is anticipated that the shares shown as being offered for sale by Mr.
Rubin and a portion of the shares shown as being offered for sale by Mr.
Glucksman will be donated to charitable organizations prior to consummation
of the offering and will be sold in the offering by those organizations.

(2) Shares shown as beneficially owned by Mr. Orsini include 6,000 shares of
common stock owned by trusts of which Mr. Orsini and his wife are trustees
(all of which shares are being sold in the offering).

(3) Less than 1%.

25
<PAGE> 27

UNDERWRITING

Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each of the underwriters
named below, for whom Lehman Brothers Inc., The Robinson-Humphrey Company, LLC
and Simmons & Company International are acting as representatives, have
severally agreed to purchase from the selling stockholders the respective number
of shares of common stock set forth opposite their names below.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Lehman Brothers Inc. .....................................
The Robinson-Humphrey Company, LLC........................
Simmons & Company International...........................
Total........................................... 2,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus depend on the satisfaction of the conditions set
forth in the underwriting agreement and that if any of the shares are purchased
by the underwriters pursuant to the underwriting agreement, then all of the
shares of common stock which the underwriters have agreed to purchase pursuant
to the underwriting agreement must be purchased, other than those shares covered
by the over-allotment option described below.

The underwriters propose to offer the shares of common stock in part
directly to the public at the public offering price set forth on the cover page
of this prospectus and in part to certain dealers, who may include the
underwriters, at the same price less a selling concession not in excess of
$ per share. The underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share. After the offering of the common
stock, the underwriters may change the public offering price and other selling
terms.

Certain selling stockholders have granted to the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase, from
time to time, in whole or in part, up to an aggregate of 375,000 additional
shares of common stock at the public offering price less underwriting discounts
and commissions. The underwriters may exercise this option solely to cover
over-allotments, if any, made in connection with the offering. To the extent
that the underwriters exercise this option, each underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
these additional shares based on the underwriter's percentage underwriting
commitment in the offering as indicated in the preceding table.

The following table provides the per share and total underwriting discounts
and commissions to be paid to the underwriters by the selling stockholders in
connection with this offering. These amounts are shown assuming both no exercise
and full exercise of the underwriters' overallotment option. The underwriting
fee is the difference between the initial price to the public and the amount the
underwriters pay to the selling stockholders for the shares.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share............................................
Total................................................
</TABLE>

The Company and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make in respect of these liabilities.

The Company has agreed to pay expenses incurred by the selling stockholders
in connection with the offering, other than the underwriting discounts and
commissions. The Company estimates that the expenses that it will bear in
connection with the offering will total approximately $200,000.

Fidelity Capital Markets, a division of National Financial Services
Corporation is acting as an underwriter of this offering and will be
facilitating electronic distribution through the Internet.

26
<PAGE> 28

The Company, and its executive officers, directors and certain shareholders
have agreed not to directly or indirectly do any of the following, whether any
transaction described in clause (1) or (2) below is to be settled by delivery of
common stock or other securities, in cash or otherwise, in each case without the
prior written consent of Lehman Brothers Inc., on behalf of the underwriters,
for a period of 90 days after the date of this prospectus:

(1) offer for sale, sell or otherwise dispose of, or enter into any
transaction or device which is designed to, or could be expected to,
result in the disposition at any time in the future of, any shares of
common stock or securities convertible into or exchangeable for common
stock or substantially similar securities, other than any of the
following

- the common stock sold under this prospectus;

- in the case of the Company, shares of common stock and other
securities issuable under employee benefit plans, stock option plans
or other employee compensation plans existing on the date of this
prospectus or under currently outstanding options, warrants or
rights; and

- certain other transfers and dispositions, provided that the
recipient remains subject to the lock-up restrictions for the
remainder of the 90-day period; or

(2) sell or grant options, rights or warrants with respect to any shares of
our common stock or securities convertible into or exchangeable for our
common stock or substantially similar securities, other than the grant
of options under option plans existing on the date of this prospectus.

Other than in the United States, no action has been taken by the Company,
the selling stockholders or the underwriters that would permit a public offering
of the shares of common stock offered by this prospectus in any jurisdiction
where action for that purpose is required. The shares of common stock offered by
this prospectus may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisements in connection with
the offer and sale of any such shares of common stock be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that jurisdiction.
Persons into whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the offering and
the distribution of this prospectus. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any shares of common stock
offered by this prospectus in any jurisdiction in which such an offer or a
solicitation is unlawful.

Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the underwriters are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the common stock.

The underwriters may create a short position in the common stock in
connection with this offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create a
short position, then they may reduce that short position by purchasing common
stock in the open market. The underwriters also may elect to reduce any short
position by exercising all or a part of the over-allotment option.

The underwriters may also impose a penalty bid on selling stockholders.
This means that if the underwriters purchase shares of common stock in the open
market to reduce their short position or stabilize the price of the common
stock, they may reclaim the amount of the selling concession from the selling
stockholders who sold shares as part of this offering.

In general, purchases of a security for the purpose of stabilization or to
reduce syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those

27
<PAGE> 29

purchases. The imposition of a penalty bid might have an effect on the price of
a security to the extent that it were to discourage resales of the security by
purchasers in this offering.

In connection with the offering, certain underwriters and selling group
members may engage in passive market making transactions in our common stock on
the NASDAQ National Market in accordance with Regulation M under the Exchange
Act during a period before the commencement of offers or sales of the common
stock in the offering.

Neither the Company nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
the Company nor any of the underwriters makes any representation that the
representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

This prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of shares of the common stock in Canada or
any province or territory thereof. Any offer or sale of shares of the common
stock in Canada will be made only under an exemption from the requirements to
file a prospectus and an exemption from the dealer registration requirement in
the relevant province or territory of Canada in which such sale is made.

Certain of the underwriters and their affiliates have provided from time to
time, and expect to provide in the future, investment banking, financial
advisory and other services to the Company for which they have received and will
receive customary fees and commissions. Mr. Robert S. Rubin, a director of the
Company and a selling stockholder, is a managing director of Salomon Smith
Barney, which owns The Robinson-Humphrey Company, LLC.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for the Company by Cleary, Gottlieb, Steen & Hamilton, New York,
New York. Certain legal matters in connection with the offering will be passed
upon for the underwriters by Simpson Thacher & Bartlett, New York, New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
audited financial statements are incorporated by reference in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.

28
<PAGE> 30

2,500,000 SHARES

[CARBO CERAMICS LOGO]

COMMON STOCK

----------------------------

PROSPECTUS

[ ], 2000

----------------------------

LEHMAN BROTHERS

THE ROBINSON-HUMPHREY COMPANY

SIMMONS & COMPANY
INTERNATIONAL

LOGO
<PAGE> 31

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses in connection with
the issuance and distribution of the common stock being registered, other than
underwriting discounts and commissions.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 23,956
National Association of Securities Dealers, Inc. filing
fee....................................................... 9,575
Legal fees and expenses..................................... 75,000
Accounting fees and expenses................................ 35,000
Printing expenses........................................... 45,000
Miscellaneous............................................... 11,469
Total............................................. $200,000
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified

II-1
<PAGE> 32

against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the corporation deems
appropriate.

(f) The indemnification and advancement of expenses provided by, or granted
under, the other subsections of this section shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.

(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.

(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have respect to such constituent corporation if
its separate existence had continued.

(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "servicing at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.

(j) The indemnification and advancement of expense proved by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be
II-2
<PAGE> 33

a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).

Reference is made to the Registrant's Certificate of Incorporation and
Bylaws which require the Company to indemnify the persons whom it may indemnify
under Section 145 of the Delaware General Corporation Law. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors, to the fullest extent permitted by Delaware law, for
monetary damages for breach of fiduciary duty as a director. This provision does
not affect the availability of equitable remedies such as injunctive relief or
rescission. Further, such limitation of liability also does not affect a
director's standard of conduct or responsibilities under any other laws,
including the Federal securities laws.

The Registrant also carries liability insurance covering officers and
directors.

In the underwriting agreement filed as an exhibit hereto, the underwriters
agree to indemnify, under certain conditions, the Registrant, its directors,
officers and employees and persons who control the Registrant within the meaning
of the Securities Act of 1933.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement.*
4.1 -- Specimen Certificate of Common Stock of the Company
(incorporated by reference from Exhibit 4.1 to the
Registration Statement on Form S-1 (File No. 333-1884)
filed by the Company).**
5.1 -- Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to
the Company, as to the legality of the shares of Common
Stock being registered.**
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Cleary, Gottlieb, Steen & Hamilton (included
in opinion filed as Exhibit 5.1).**
24.1 -- Powers of Attorney (included on signature pages).**
</TABLE>

- ---------------

* To be filed by Amendment

** Previously filed

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(a) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange

II-3
<PAGE> 34

Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(c) (1) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) That for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-4
<PAGE> 35

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to its Registration Statement on Form S-3
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York on May 5, 2000.

CARBO CERAMICS INC.

By: /s/ JESSE P. ORSINI
-------------------------------------
Name: Jesse P. Orsini
Title: President and Chief Executive
Officer

By: /s/ PAUL G. VITEK
-------------------------------------
Name: Paul G. Vitek
Title: Vice-President, Finance

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM C. MORRIS* Chairman of the Board May 5, 2000
- -----------------------------------------------------
William C. Morris

/s/ JESSE P. ORSINI* President, Chief Executive May 5, 2000
- ----------------------------------------------------- Officer and Director
Jesse P. Orsini (Principal Executive
Officer)

/s/ PAUL G. VITEK Vice President, Finance and May 5, 2000
- ----------------------------------------------------- Chief Financial Officer
Paul G. Vitek (Principal Financial and
Accounting Officer)

/s/ CLAUDE E. COOKE, JR.* Director May 5, 2000
- -----------------------------------------------------
Claude E. Cooke, Jr.

/s/ JOHN J. MURPHY* Director May 5, 2000
- -----------------------------------------------------
John J. Murphy

/s/ ROBERT S. RUBIN* Director May 5, 2000
- -----------------------------------------------------
Robert S. Rubin

*By: /s/ PAUL G. VITEK
-------------------------------------------------
Paul G. Vitek, as Attorney-in-fact
</TABLE>

<PAGE> 36

EXHIBIT INDEX

- ---------------

* To be filed by amendment

** Previously filed

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in this
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-35850), and
related Prospectus of CARBO Ceramics Inc. for the registration of 2,875,000
shares of its common stock and to the incorporation by reference therein of our
report dated January 28, 2000, with respect to the consolidated financial
statements of CARBO Ceramics Inc. included in its Form 10-K for the year ended
December 31, 1999, filed with the Securities and Exchange Commission.

Ernst & Young LLP

New Orleans, Louisiana

May 4, 2000