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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM______TO______.
COMMISSION FILE NO. 0-28178
CARBO CERAMICS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1100013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 E. LAS COLINAS BOULEVARD
SUITE 1520
IRVING, TEXAS 75039
(Address of principal executive offices)
(972) 401-0090
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of November 1, 2000, 14,699,500 shares of the registrant's Common Stock,
par value $.01 per share, were outstanding.
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CARBO CERAMICS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets - 3
September 30, 2000 (Unaudited) and December 31, 1999
Consolidated Statements of Income 4
(Unaudited) - Three and nine months ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows 5
(Unaudited) - Nine months ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements 6-7
(Unaudited) - September 30, 2000
Item 2. Management's Discussion and Analysis of Financial 8-9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 10
Item 2. Changes in securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of matters to a vote of security-holders 10
Item 5. Other information 10
Item 6. Exhibits and reports on Form 8-K 10
Signatures 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
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SEPTEMBER 30, DECEMBER 31,
2000 1999
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(UNAUDITED)
($ IN THOUSANDS)
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ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 6,902 $ 193
Trade accounts receivable ................................................... 18,032 10,883
Refundable income taxes ..................................................... - 288
Inventories:
Finished goods ............................................................ 8,261 7,123
Raw materials and supplies ................................................ 5,540 4,154
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Total inventories ....................................................... 13,801 11,277
Prepaid expenses and other current assets ................................... 574 481
Deferred income taxes ....................................................... 957 687
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Total current assets ...................................................... 40,266 23,809
Property, plant and equipment:
Land and land improvements .................................................. 944 944
Buildings ................................................................... 7,391 7,378
Machinery and equipment ..................................................... 91,974 90,092
Construction in progress .................................................... 478 1,298
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Total ..................................................................... 100,787 99,712
Less accumulated depreciation ............................................... 21,607 16,541
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Net property, plant and equipment ....................................... 79,180 83,171
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Total assets ................................................................ $ 119,446 $ 106,980
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings ............................................................. $ - $ 1,809
Accounts payable ............................................................ 1,283 1,477
Accrued payroll and benefits ................................................ 1,672 1,954
Accrued freight ............................................................. 1,481 1,545
Accrued utilities ........................................................... 706 451
Accrued income taxes ........................................................ 1,376 -
Other accrued expenses ...................................................... 1,095 221
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Total current liabilities ................................................. 7,613 7,457
Deferred income taxes ........................................................... 8,779 6,123
Shareholders' equity:
Preferred Stock, par value $0.01 per share, 5,000 shares authorized:
none outstanding .......................................................... - -
Common Stock, par value $0.01 per share, 40,000,000 shares
authorized: 14,699,500 and 14,602,000 shares issued and outstanding
at September 30, 2000 and December 31, 1999, respectively ................. 147 146
Additional paid-in capital .................................................. 45,225 42,919
Retained earnings ........................................................... 57,682 50,335
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Total shareholders' equity ................................................ 103,054 93,400
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Total liabilities and shareholders' equity .................................. $ 119,446 $ 106,980
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The accompanying notes are an integral part of these statements.
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CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
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Revenues ......................................... $ 25,269 $ 16,888 $ 69,368 $ 52,370
Cost of goods sold ............................... 14,967 10,867 43,239 29,369
------------ ------------ ------------ ------------
Gross profit ..................................... 10,302 6,021 26,129 23,001
Selling, general and administrative expenses ..... 3,498 2,130 9,392 7,941
Plant start-up costs ............................. - - 27 1,082
------------ ------------ ------------ ------------
Operating profit ................................. 6,804 3,891 16,710 13,978
Other income (expense):
Interest, net ................................ 91 (87) 97 (194)
Other, net ................................... 7 (1) 1 14
------------ ------------ ------------ ------------
98 (88) 98 (180)
------------ ------------ ------------ ------------
Income before income taxes ....................... 6,902 3,803 16,808 13,798
Income taxes ..................................... 2,547 1,331 6,166 4,699
------------ ------------ ------------ ------------
Net income ....................................... $ 4,355 $ 2,472 $ 10,642 $ 9,099
============ ============ ============ ============
Earnings per share:
Basic ........................................ $ 0.30 $ 0.17 $ 0.73 $ 0.62
============ ============ ============ ============
Diluted ...................................... $ 0.29 $ 0.17 $ 0.72 $ 0.62
============ ============ ============ ============
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The accompanying notes are an integral part of these statements.
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CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
2000 1999
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($ IN THOUSANDS)
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OPERATING ACTIVITIES
Net income ................................................................ $ 10,642 $ 9,099
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ........................................................ 5,066 2,993
Deferred income taxes ............................................... 2,386 1,184
Changes in operating assets and liabilities:
Trade accounts receivable ......................................... (7,149) (1,909)
Inventories ....................................................... (2,524) (493)
Prepaid expenses and other current assets ......................... (93) (93)
Accounts payable .................................................. (194) 99
Accrued payroll and benefits ...................................... (282) (671)
Accrued freight ................................................... (64) 485
Accrued utilities ................................................. 255 (49)
Accrued income taxes .............................................. 2,307 523
Other accrued expenses ............................................ 874 (633)
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Net cash provided by operating activities ................................. 11,224 10,535
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................ (1,075) (13,181)
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Net cash used in investing activities ..................................... (1,075) (13,181)
FINANCING ACTIVITIES
Proceeds from bank borrowings ............................................. 5,273 15,059
Repayments on bank borrowings ............................................. (7,082) (9,750)
Proceeds from issuance of common stock for exercise of stock options ...... 1,664 -
Dividends paid ............................................................ (3,295) (3,285)
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Net cash provided by (used in) financing activities ....................... (3,440) 2,024
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Net increase in cash and cash equivalents ................................. 6,709 (622)
Cash and cash equivalents at beginning of period .......................... 193 622
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Cash and cash equivalents at end of period ................................ $ 6,902 $ -
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid ............................................................. $ 38 $ 198
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Income taxes paid ......................................................... $ 1,473 $ 2,992
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The accompanying notes are an integral part of these statements.
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CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of CARBO
Ceramics Inc. have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a
fair presentation have been included. The results of the interim periods
presented herein are not necessarily indicative of the results to be expected
for any other interim period or the full year. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended December 31, 1999 included in the Company's
Form 10-K Annual Report for the year ended December 31, 1999.
The consolidated financial statements include the accounts of CARBO
Ceramics Inc. and its wholly owned subsidiaries, CARBO Ceramics Sales
Corporation and CARBO Ceramics (UK) Limited. CARBO Ceramics Sales Corporation
was formed on July 31, 1996 under the laws of Barbados. CARBO Ceramics (UK)
Limited was formed on December 19, 1997 under the laws of Scotland. All
significant intercompany transactions have been eliminated.
2. DIVIDENDS PAID
On July 11, 2000, the Board of Directors declared a cash dividend of
$0.075 per common share payable to shareholders of record on July 31, 2000.
The dividend was paid on August 15, 2000.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share ($ in thousands, except per share data):
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Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
2000 1999 2000 1999
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Numerator for basic and diluted earnings per share:
Net income ............................................ $ 4,355 $ 2,472 $ 10,642 $ 9,099
Denominator:
Denominator for basic earnings per share--
weighted-average shares ............................. 14,689,935 14,602,000 14,640,965 14,602,000
Effect of dilutive securities:
Employee stock options .............................. 205,084 149,929 173,356 87,748
------------ ------------ ------------ ------------
Dilutive potential common shares ...................... 205,084 149,929 173,356 87,748
------------ ------------ ------------ ------------
Denominator for diluted earnings per share--
adjusted weighted-average shares .................... 14,895,019 14,751,929 14,814,321 14,689,748
============ ============ ============ ============
Basic earnings per share ................................. $ 0.30 $ 0.17 $ 0.73 $ 0.62
============ ============ ============ ============
Diluted earnings per share ............................... $ 0.29 $ 0.17 $ 0.72 $ 0.62
============ ============ ============ ============
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During the nine-months ended September 30, 2000, employees exercised
stock options to acquire 97,500 shares at a weighted-average exercise price of
$17.07 per share. A $642,000 tax benefit associated with the exercise of
stock options was credited directly to shareholders' equity.
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4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
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September 30, December 31,
2000 1999
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Deferred tax assets: ($ in thousands)
Employee benefits .......................................... $ 288 $ 200
Inventories ................................................ 523 457
Other ...................................................... 146 30
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Total deferred tax assets 957 687
Deferred tax liabilities:
Depreciation ............................................... 8,663 6,007
Other ...................................................... 116 116
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Total deferred tax liabilities ............................. 8,779 6,123
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Net deferred liabilities ................................... $ 7,822 $ 5,436
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5. RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities," which the Company is required
to adopt effective January 1, 2001. SFAS 133, as amended, establishes
standards for recognition and measurement of derivatives and hedging
activities. The Company does not expect adoption of SFAS 133 to have a
material impact on its consolidated financial position or results of
operations.
In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
(SAB 101), "Revenue Recognition in Financial Statements," which the Company is
required to adopt effective October 1, 2000. SAB 101 does not change any of
the existing rules on revenue recognition. Rather, it explains how the SEC
staff believes existing rules should be applied or analogized to transactions
not addressed by existing rules. The Company does not expect the adoption of
SAB 101 to have a material impact on its consolidated financial position or
results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000
Operating results for the third quarter of 2000 reflected the continued solid
growth in domestic drilling activity that began in the first quarter of the
year, in addition to an increase in international shipments. The increase in
domestic activity continues to be driven by strong natural gas drilling
activity, while the increased international business is due to improvements in
both oil and gas drilling. Sales volume and revenue for the quarter increased
substantially from the third quarter of 1999, while improvements in operating
margins versus the same period last year were less dramatic due to
increased SG&A expenses.
Revenues. Revenues for the third quarter 2000 were $25.3 million, an increase
of 50 percent from the third quarter 1999. The increase was due to a 47
percent increase in sales volume and a June 2000 price increase on our
CARBOECONOPROP-TM- product. The average selling price for the quarter was
$.244 per pound, an increase of 2 percent from the same period a year earlier.
Domestic sales volume increased by 45 percent from third quarter 1999, with
the largest increase occurring in the important south Texas market. The
number of rigs drilling for natural gas in the U.S. during the third quarter
of 2000 was 48 percent higher than the same period a year earlier, while the
average market price for natural gas increased by approximately 77 percent.
These factors directly affect the activity in our domestic markets. Export
sales volume increased by 49 percent, with the increase broadly distributed to
eastern and western Europe, South America, the Middle East and the Asia/Pacific
region.
Gross Profit. Gross profit for the quarter was $10.3 million or 41 percent of
revenues as compared to $6.0 million or 36 percent of revenues for the third
quarter 1999. The increase in gross profit was driven primarily by the
significant increase in sales volume. Improvements in gross profit margins
were the result of increased production rates at the New Iberia and McIntyre
facilities, which translated into lower production costs. At New Iberia, an
increase in screening capacity has resulted in an increase in throughput and
reduced variable cost per pound. At the McIntyre facility, efforts to resolve
some of the initial equipment problems during the second half of 1999 and
early 2000 (the facility started production in June 1999) have led to
significant improvement in production rates. The positive effect of these
improvements was partially offset by an increase in the cost of natural gas at
all three manufacturing facilities.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $3.5
million for the third quarter 2000 and $2.1 million for the corresponding
period of 1999. Expenses as a percentage of sales increased from 13 percent
in the third quarter 1999 to 14 percent for the same period in 2000.
Increased expenses in 2000 were the result of increased distribution,
marketing, and management incentive expenses - which resulted from higher
activity levels, in addition to New York Stock Exchange listing fees and
increased legal expenses.
Nine Months Ended September 30, 2000
Revenues. Revenues for the nine months ended September 30, 2000 were $69.4
million, an increase of 32 percent from the same period in 1999. The increase
was due to a 36 percent increase in sales volume and a price increase in our
CARBOECONOPROP-TM- product. The average selling price of $.238 per pound for
the nine-months ended September 30, 2000 declined 2 percent versus the same
period a year earlier due to a reduction in pricing on high-strength products
and an unfavorable change in the product mix. Domestic sales volume increased
by 48 percent and export volume by 17 percent compared to the first nine
months of 1999.
Gross Profit. Gross profit for the nine months ended September 30, 2000 was
$26.1 million or 38 percent of revenues compared to $23.0 million or 44
percent for the same period of 1999. The decrease was due to high first
quarter manufacturing costs associated with the start-up of the new production
facility in McIntyre, Georgia, and the high cost of trucking lightweight
products from the Eufaula and McIntyre facilities to remote storage facilities
during the first half of this year.
Selling, General and Administrative Expenses (SG&A). SG&A expenses were $9.4
million or 14 percent of revenues for the first nine months of 2000 compared
to $7.9 million or 15 percent of revenues for the same period of 1999.
Included in the 1999 total were $1.1 million of start-up costs for the
McIntyre facility. Increased costs in 2000 are those that relate directly to
higher activity levels - distribution, marketing, and management incentive
expenses, in addition to New York Stock Exchange listing fees and increased
legal expenses.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $6.9 million as of September 30, 2000 - an
increase of $6.7 million from December 31, 1999. The increase in cash and
cash equivalents was due to cash generated from operations of $11.2 million
and proceeds from the issuance of Common Stock of $1.7 million (exercise of
stock options), net of repayment of debt against the Company's line of credit
of $1.8 million, capital spending of $1.1 million and cash dividends of $3.3
million. There were no borrowings against the Company's line of credit as of
September 30, 2000.
The Company believes existing cash balances and cash generated from operations
will be sufficient to fund its operations, anticipated dividends and capital
spending requirements for 2000.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This Form 10-Q, the Company's Form 10-K and
Annual Report to Shareholders, any other Form 10-Q or any Form 8-K of the
Company or any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from such statements. This
document contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 concerning, among other things, the
Company's prospects, developments and business strategies for its operations,
all of which are subject to certain risks, uncertainties and assumptions.
These risks and uncertainties include, but are not limited to, changes in the
demand for oil and natural gas, the development of alternative stimulation
techniques and the development of alternative proppants for use in hydraulic
fracturing. The words "believe", "expect", "anticipate", "project" and
similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
each of which speaks only as of the date the statement was made. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. There were no reports filed on Form 8-K during the three months ended
September 30, 2000.
b. Exhibits
27.1 Financial Data Schedule for the interim year to date period
ended September 30, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARBO CERAMICS INC.
/s/ JESSE P. ORSINI
-------------------------
Jesse P. Orsini
President
& Chief Executive Officer
/s/ PAUL G. VITEK
-------------------------
Paul G. Vitek
Vice President, Finance
Date: November 1, 2000
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EXHIBIT INDEX
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Exhibit Method of Filing
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27.1 Financial Data Schedule ............ Filed herewith electronically
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