-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WChu1fmAjDkERJdJBl2K9BvCOs0f6bqGgLk2u6i8WnKpmL+KV9CuDseG5aoo4Rgp 9/Vinwk3Bv641LU+PH7L4A== 0000930661-96-000884.txt : 19960802 0000930661-96-000884.hdr.sgml : 19960802 ACCESSION NUMBER: 0000930661-96-000884 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960801 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARBO CERAMICS INC CENTRAL INDEX KEY: 0001009672 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 721100013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28178 FILM NUMBER: 96602248 BUSINESS ADDRESS: STREET 1: 600 EAST LAS COLINAS BLVD STREET 2: STE 1520 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 2144010090 MAIL ADDRESS: STREET 1: 600 E LAS COLINAS BLVD STREET 2: STE 1520 CITY: IRVING STATE: TX ZIP: 75039 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 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) (214) 401-0090 (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of August 1, 1996, 14,602,000 shares of the registrant's Common Stock, par value $.01 per share, were outstanding. CARBO CERAMICS INC. INDEX TO QUARTERLY REPORT ON FORM 10-Q PART I. FINANCIAL INFORMATION PAGE - ------------------------------ Item 1. Financial Statements Balance Sheets (Unaudited) - 3 June 30, 1996 and December 31, 1995 Statements of Income 4 (Unaudited) - Three months and six months ended June 30, 1996 and 1995 Statements of Cash Flows 5 (Unaudited) - Six months ended June 30, 1996 and 1995 Notes to Financial Statements - June 30, 1996 6-8 (Unaudited) Item 2. Management's Discussion and Analysis of Financial 9-10 Condition and Results of Operations PART II. OTHER INFORMATION - --------------------------- Item 1. Legal proceedings 11 Item 2. Changes in securities 11 Item 3. Defaults upon senior securities 11 Item 4. Submission of matters to a vote of security-holders 11 Item 5. Other information 11 Item 6. Exhibits and reports on Form 8-K 11 Signatures 12 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- CARBO CERAMICS INC. BALANCE SHEETS
JUNE 30, 1996 DECEMBER 31, (UNAUDITED) 1995 ----------- ------------ ($ in thousands) ASSETS Current assets: Cash and cash equivalents $ 3,809 $ 201 Trade accounts receivable 12,539 8,783 Inventories: Finished goods 4,479 3,852 Raw materials and supplies 4,393 3,979 ------- ------- Total inventories 8,872 7,831 Prepaid expenses and other current assets 724 270 Deferred income taxes 3,750 - ------- ------- Total current assets 29,694 17,085 Property, plant and equipment: Land and land improvements 57 57 Buildings 4,536 2,759 Machinery and equipment 24,555 16,400 Construction in progress 639 8,746 ------- ------- Total 29,787 27,962 Less accumulated depreciation 6,855 5,958 ------- ------- Net property, plant and equipment 22,932 22,004 ------- ------- Total Assets $52,626 $ 39,089 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings $ - $ 2,780 Accounts payable 1,308 1,820 Accrued expenses 3,030 3,108 ------- ------- Total current liabilities 4,338 7,708 Deferred income taxes 1,267 - Shareholders' equity: Preferred stock, par value $0.01 per share, 5,000 shares authorized, none outstanding - - Common stock, par value $0.01 per share, 40,000,000 shares authorized: 14,602,000 and 12,302,000 shares issued and outstanding in 1996 and 1995, respectively 146 120 Class B nonvoting common stock, par value $0.01 per share, 4,000,000 shares authorized; 300,000 shares issued and outstanding in 1995 - 3 Additional paid-in capital 42,919 6,626 Unearned compensation - (1,316) Retained earnings 3,956 25,948 ------- ------- Total shareholders' equity 47,021 31,381 ------- ------- Total liabilities and shareholders' equity $52,626 $ 39,089 ======= =======
The accompanying notes are an integral part of these statements. 3 CARBO CERAMICS INC. STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ ($ IN THOUSANDS) Sales $ 17,399 $ 15,197 $ 30,432 $ 28,455 Cost of goods sold 9,382 7,485 16,275 14,216 ----------- ----------- ----------- ----------- Gross profit 8,017 7,712 14,157 14,239 Selling, general and administrative expenses 2,965 1,873 4,736 3,545 ----------- ----------- ----------- ----------- Operating profit 5,052 5,839 9,421 10,694 Other income (expense): Interest income 47 48 49 115 Interest expense (66) - (86) - Other, net (8) (67) 16 (33) ----------- ----------- ----------- ----------- (27) (19) (21) 82 ----------- ----------- ----------- ----------- Income before taxes 5,025 5,820 9,400 10,776 Income taxes 1,003 - 1,003 - ----------- ----------- ----------- ----------- Net income $ 4,022 $ 5,820 $ 8,397 $ 10,776 ----------- ----------- ----------- ----------- Pro forma data: Income before income taxes $ 5,025 $ 5,820 $ 9,400 $ 10,776 Pro forma income taxes 1,910 2,212 3,572 4,095 ----------- ----------- ----------- ----------- Pro forma net income $ 3,115 $ 3,608 $ 5,828 $ 6,681 ----------- ----------- ----------- ----------- Pro forma net income per share $0.21 $0.25 $0.40 $0.46 ----------- ----------- ----------- ----------- Pro forma weighted average number of shares 14,729,863 14,602,000 14,665,932 14,602,000 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these statements. 4 CARBO CERAMICS INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ------------------ 1996 1995 -------- ------- ($ IN THOUSANDS) OPERATING ACTIVITIES Net income $ 8,397 $10,776 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 897 524 Amortization of unearned compensation 1,316 219 Deferred income taxes 1,003 Changes in operating assets and liabilities: Trade accounts receivable (3,756) (798) Inventories (1,041) (370) Prepaid expenses and other current assets (454) (114) Accounts payable (512) 745 Accrued expenses (78) 356 -------- ------- Net cash provided by operating activities 5,772 11,338 INVESTING ACTIVITIES Purchase of property, plant and equipment (1,825) (5,800) -------- ------- Net cash used in investing activities (1,825) (5,800) FINANCING ACTIVITIES Net payments on bank borrowings (2,780) - Net proceeds from initial public offering 35,285 - Dividends paid (32,844) (7,833) -------- ------- Net cash used in financing activities (339) (7,833) -------- ------- Net increase (decrease) in cash and cash equivalents 3,608 (2,295) Cash and cash equivalents at beginning of period 201 4,413 -------- ------- Cash and cash equivalents at end of period $ 3,809 $ 2,118 ======== ======= SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 86 $ - ======== =======
The accompanying notes are an integral part of these statements. 5 CARBO CERAMICS INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1996 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of Carbo Ceramics Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 1995, included in the Company's Form S-1 Registration Statement No. 333-1884 as filed with the SEC. On April 17, 1996, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware authorizing 5,000 shares of Preferred Stock with a par value of $0.01 per share, a 2,000 for 1 split of the Company's Common Stock and the conversion of all previously issued and outstanding shares of Class B common stock into voting shares of Common Stock. All capital amounts, share and per share data in the accompanying financial statements have been retroactively restated to reflect the stock split for all periods presented. 2. DIVIDENDS PAID During the six months ended June 30, 1996, the Company paid dividends totaling $32,843,937 ($2.67 per share based on 12,302,000 shares outstanding) to the shareholders of the Company prior to its initial public offering. On March 28, 1996, the Company declared a dividend of $3,383,050 ($.275 per share based on 12,302,000 shares outstanding) payable to all shareholders of record on March 28, 1996. In addition, on March 15, 1996, the Company recorded as a dividend, certain state taxes in the amount of $360,000 paid on behalf of its shareholders. On April 24, 1996, the Company terminated its S Corporation status and declared a dividend of $26,841,926, the amount of previously undistributed S Corporation earnings as of December 31, 1995, and issued notes to its shareholders in payment of the dividend. On June 24, 1996, the Company paid a final S Corporation dividend of $2,258,961 representing the remaining undistributed S Corporation earnings through the termination of the Company's S Corporation status. Dividends per share of common stock for the above distributions were $2.18 and $0.18, respectively, based on 12,302,000 shares of common stock outstanding. 3. INITIAL PUBLIC OFFERING The Company completed an initial public offering (the "Offering") of its Common Stock on April 26, 1996, pursuant to which the Company sold 2,300,000 shares of Common Stock at an initial public offering price of $17.00 per share. Net proceeds from the Offering (after deducting the underwriting discount of $2,737,000 and expenses of $1,078,050 incurred in connection with the Offering) were $35,284,950. Of the net proceeds received from the Offering, the Company has used (i) $26,841,926 to prepay the principal of notes issued by the Company 6 to the original shareholders in payment of an S Corporation dividend, (ii) $2,258,961 to pay a final S Corporation dividend and (iii) $3,615,000 to repay borrowings on its revolving line of credit. 4. PRO FORMA INFORMATION Pro Forma Net Income: Pro forma net income reflects a provision for income taxes at an effective rate of 38% to illustrate how historical net income might have been affected if the Company had not been a Subchapter S Corporation for income tax purposes. The Company elected to be treated as an S Corporation pursuant to the Internal Revenue Code from June 23, 1987 through April 23, 1996, immediately after which it terminated its S Corporation election in conjunction with the initial public offering. As a result, the Company was not subject to federal income taxes during this period. By election of the shareholders, S Corporation status was also applicable to the state jurisdictions where the Company had significant operations during this period. Pro Forma Net Income Per Share: Pro forma net income per share is based on 14,602,000 shares of common stock outstanding, including 2,300,000 shares issued in the Company's initial public offering. For the three and six months ended June 30, 1996, the weighted average number of shares outstanding also included 127,863 and 63,932 average common stock equivalent shares, respectively, for the assumed exercise of options for the purchase of 700,000 shares of Common Stock at an exercise price of $17.00 per share using the treasury stock method at the average market prices during the respective periods. For the three and six months ended June 30, 1995, pro forma net income per share is based on (i) 12,302,000 shares of Common Stock outstanding during the periods and (ii) the assumed issuance of 2,300,000 shares of Common Stock to pay S Corporation dividends of $29,100,887. 5. INCOME TAXES (FAS 109) Effective April 24, 1996, the Company terminated its S Corporation status and recorded deferred income taxes as required by FASB Statement No. 109, Accounting for Income Taxes. The deferred tax effects of the change in tax status have increased net income by $883,503 in the second quarter of 1996. The Company also recorded a deferred tax asset of $3,486,196 with a corresponding increase in additional paid-in capital in the second quarter of 1996 related to the vesting of 800,000 restricted shares of common stock upon the occurrence of the initial public offering. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of June 30, 1996, are as follows: 7
DEFERRED TAX ASSETS: Compensation related to restricted stock.. $3,025,636 Employee benefits......................... 268,872 Inventories............................... 399,674 Other..................................... 77,255 ---------- Total deferred tax assets................. 3,771,437 DEFERRED TAX LIABILITIES: Depreciation.............................. 1,267,106 Other..................................... 21,425 ---------- Total deferred tax liabilities............ 1,288,531 ---------- Net deferred assets....................... $2,482,906 ==========
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS Result of Operations Three Months and Six Months Ended June 30, 1996, Compared to Three Months and Six Months Ended June 30, 1995 Revenues for the three months ended June 30, 1996, increased 14% over the same period in 1995 to $17.4 million. The increase in revenues was due to a 20% increase in sales volume which was attributable to increased drilling activity in the U.S. where natural gas prices averaged $.74/MMBtu higher than the second quarter 1995 and $1.06/MMBtu higher than the year to date 1995. The average selling price of the Company's products declined by 5% during the second quarter when compared to the same period in 1995 as much of the increase in sales volume was generated by sales of CARBOECONOPROP/(R)/. CARBOECONOPROP/(R)/ is the Company's lowest priced ceramic proppant, designed for use in areas where ceramic proppants were not previously used. The growth of this product line is consistent with the plans and expectations of the Company. Gross profit for the three months ended June 30, 1996, was $8.0 million versus $7.7 million during the second quarter 1995. For the year to date, gross profit was $14.1 million in 1996 and $14.2 million in 1995. Gross profit as a percentage of sales fell from 51% in the second quarter 1995 to 46% in the second quarter 1996, and from 50% for the year to date 1995 to 47% for the year to date 1996. These decreases were due to the decline in the average selling price and a temporary increase in manufacturing costs at the Company's New Iberia manufacturing facility due to unexpected maintenance costs. Manufacturing costs are expected to return to historical levels for the remainder of the year. Selling, general and administrative expenses were $3.0 million for the three months ended June 30, 1996. While this represents an increase of $1.1 million from the second quarter 1995, the increase is entirely attributable to a non- recurring, non-cash charge incurred in connection with the vesting of restricted stock at the time of the Company's initial public offering. Excluding this non- recurring charge, selling, general and administrative expenses were unchanged from the same period last year and declined from 12% of sales to 11% of sales. For the six months ended June 30, 1996, selling, general and administrative expenses were $4.8 million, an increase of $1.2 million from the same period a year earlier. The provision for income taxes was $1.0 million for the three months and six months ended June 30, 1996. This provision represents an effective tax rate of 20% for the three months ended June 30, 1996, and 11% for the six months ended June 30, 1996. These low effective tax rates are due to the fact that the Company's earnings through April 23, 1996, were not taxable because of the Company's S Corporation status and the fact that the Company reduced its tax provision by $.9 million during the period due to the cumulative effects of adopting FASB Statement 109 in connection with the termination of its S Corporation election. The Company expects that its effective tax rate in the future will be approximately 38%. Liquidity and Capital Resources On April 26, 1996, the Company completed an initial public offering of its common stock in which it sold 2.3 million shares of stock for net proceeds of $35.3 million. Proceeds of the offering were used to repay notes issued to the S Corporation shareholders of $26.8 million, pay a final S Corporation dividend of $2.3 million, and repay borrowings under the company's revolving line of credit in the amount of $3.6 million. 9 The Company increased its investment in working capital by $5.8 million during the six month period ended June 30, 1996. Trade accounts receivable increased by $3.8 million due to an increase in revenues during the second quarter 1996. Inventories increased by $1.0 million as both raw material and finished goods inventories increased in order to properly service the increasing demand for the Company's products. Additionally, the Company recognized a current deferred income tax benefit of $5.4 million and a deferred tax liability of $1.0 million in connection with the vesting of restricted stock upon the occurrence of its initial public offering and the termination of its S Corporation election. Total capital expenditures for the six months ended June 30, 1996, were $1.8 million of which $1.1 million was spent on completing the expansion of the Eufaula manufacturing facility. The Company anticipates that it will generate additional cash balances in the remainder of 1996 in light of its tax benefits and the low level of capital spending expected for the balance of the year. The Company is currently evaluating the possible construction of a new production facility which is expected to cost approximately $25 million and could begin construction in 1997. Financing for such a facility is expected to come from cash provided by operations. The Company believes that it has the ability to obtain additional borrowing capacity to incur debt to finance a portion of a new manufacturing facility should it be necessary. 10 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARBO CERAMICS INC. By: /S/Paul G. Vitek ----------------------- Paul G. Vitek Vice President, Finance Date: August 1, 1996 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JUN-30-1996 3,809 0 12,539 0 8,872 29,694 29,787 (6,855) 52,626 4,338 0 0 0 146 46,875 52,626 17,399 17,446 9,382 12,347 8 0 66 5,025 1,003 4,022 0 0 0 4,022 .21 .21
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