-----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, OtljtTaVX86EvgyhAMjRpmPzJT3r2pCTwBIwt4zEN/iXq9/CjYMDJOVTZwGXfyBH MgTWf2zYnxMv7bUIqMEb5g== 0000930661-96-001494.txt : 19961106 0000930661-96-001494.hdr.sgml : 19961106 ACCESSION NUMBER: 0000930661-96-001494 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 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: 96654259 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 SEPTEMBER 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) (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 5, 1996, 14,602,000 shares of the registrant's Common Stock, par value $.01 per share, were outstanding. CARBO CERAMICS INC. INDEX TO QUARTERLY REPORT ON FORM 10-Q PART I. FINANCIAL INFORMATION PAGE - ----------------------------- Item 1. Financial Statements Balance Sheets (Unaudited) - 3 September 30, 1996 and December 31, 1995 Statements of Income 4 (Unaudited) - Three months and nine months ended September 30, 1996 and 1995 Statements of Cash Flows 5 (Unaudited) - Nine months ended September 30, 1996 and 1995 Notes to Financial Statements - September 30, 1996 6-7 (Unaudited) Item 2. Management's Discussion and Analysis of Financial 8-9 Condition and Results of Operations PART II. OTHER INFORMATION - -------------------------- Item 1. Legal proceedings 10 Item 2. Changes in securities 10 Item 3. Defaults upon senior securities 10 Item 4. Submission of matters to a vote of security-holders 10 Item 5. Other information 10 Item 6. Exhibits and reports on Form 8-K 10 Signatures 11 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- CARBO CERAMICS INC. BALANCE SHEETS
SEPTEMBER 30, 1996 DECEMBER 31, (UNAUDITED) 1995 ------------- ------------ ($ in thousands) ASSETS Current assets: Cash and cash equivalents $10,794 $ 201 Trade accounts receivable 12,250 8,783 Inventories: Finished goods 4,121 3,852 Raw materials and supplies 4,172 3 979 ------- ------- Total inventories 8,293 7,831 Prepaid expenses and other current assets 719 270 Deferred income taxes 1,521 _ ------- ------- Total current assets 33,577 17,085 Property, plant and equipment: Land and land improvements 57 57 Buildings 4,536 2,759 Machinery and equipment 25,027 16,400 Construction in progress 304 8,746 ------- ------- Total 29,924 27,962 Less accumulated depreciation 7,359 5,958 ------- ------- Net property, plant and equipment 22,565 22,004 ------- ------- Total assets $56,142 $39,089 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank borrowings $ - $ 2,780 Accounts payable 1,317 1,820 Accrued expenses 2,916 3,108 ------- ------- Total current liabilities 4,233 7,708 Deferred income taxes 1,634 - 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 7,210 25,948 ------- ------- Total shareholders' equity 50,275 31,381 ------- ------- Total liabilities and shareholders' equity $56,142 $39,089 ======= =======
The accompanying notes are an integral part of these statements. 3 CARBO CERAMICS INC. STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------ 1996 1995 1996 1995 ------------ ----------- ----------- ----------- ($ IN THOUSANDS) Sales $ 17,898 $ 15,736 $ 48,330 $ 44,191 Cost of goods sold 9,432 7,867 25,707 22,083 ----------- ----------- ----------- ----------- Gross profit 8,466 7,869 22,623 22,108 Selling, general and administrative expenses 1,585 1,761 6,321 5,306 ----------- ----------- ----------- ----------- Operating profit 6,881 6,108 16,302 16,802 Other income: Interest income 97 38 146 153 Interest expense - - (86) - Other, net (34) 27 (18) (6) ----------- ----------- ----------- ----------- 63 65 42 147 ----------- ----------- ----------- ----------- Income before taxes 6,944 6,173 16,344 16,949 Income taxes 2,595 - 3,598 - ----------- ----------- ----------- ----------- Net income S 4,349 $ 6,173 $ 12,746 $ 16,949 =========== =========== =========== =========== Pro forma data: Income before income taxes $ 6,944 $ 6,173 $ 16,344 $ 16,949 Income taxes 2,595 2,307 6,108 6,334 ----------- ----------- ----------- ----------- Net income $ 4,349 $ 3,866 $ 10,236 $ 10,615 =========== =========== =========== =========== Net income per share $ 0.30 $ 0.26 $ 0.70 $ 0.73 =========== =========== =========== =========== Weighted average number of shares 14,715,448 14,602,000 14,681,660 14,602,000 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 4 CARBO CERAMICS INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 --------- --------- ($ IN THOUSANDS) OPERATING ACTIVITIES Net income $ 12,746 $ 16,949 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,401 804 Amortization of unearned compensation 1,316 329 Deferred income taxes 3,599 - Changes in operating assets and liabilities: Trade accounts receivable (3,467) (356) Inventories (462) (2,025) Prepaid expenses and other current assets (449) (213) Accounts payable (503) 1,166 Accrued expenses (192) 519 -------- -------- Net cash provided by operating activities 13,989 17,173 INVESTING ACTIVITIES Purchase of property, plant and equipment (1,962) (9,140) -------- -------- Net cash used in investing activities (1,962) (9,140) FINANCING ACTIVITIES Net payments on bank borrowings (2,780) - Net proceeds from initial public offering 35,285 - Dividends paid (33,939) (12,139) -------- -------- Net cash used in financing activities (1,434) (12,139) -------- -------- Net increase (decrease) in cash and cash equivalents 10,593 (4,106) Cash and cash equivalents at beginning of period 201 4,413 -------- -------- Cash and cash equivalents at end of period $ 10,794 $ 307 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 92 $ - ======== ========
The accompanying notes are an integral part of these statements. 5 CARBO CERAMICS INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 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 1O-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 On July 9, 1996, the Board of Directors declared a cash dividend of $0.075 per common share payable to stockholders of record on July 19, 1996. The dividend was paid on July 31, 1996. 3. PRO FORMA INFORMATION Pro Forma Net Income: Pro forma net income reflects a provision for income taxes at an effective rate of approximately 37% 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 nine months ended September 30, 1996, the weighted average number of shares outstanding also included 113,448 and 79,660 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. 6 For the three and nine months ended September 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. 4. INCOME TAXES (FAS 109) 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 September 30, 1996 are as follows:
DEFERRED TAX ASSETS: Compensation related to restricted stock................... $ 721,405 Employee benefits.......................................... 283,854 Inventories................................................ 413,662 Other...................................................... 102,250 ---------- Total deferred tax assets.................................. 1,521,171 DEFERRED TAX LIABILITIES: Depreciation............................................... 1,603,645 Other...................................................... 29,678 ---------- Total deferred tax liabilities............................. 1,633,323 ---------- Net deferred liabilities................................... $ (112,152) ==========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended September 30, 1996 - ------------------------------------- Revenues. Revenues for the third quarter 1996 were a record $17.9 million, an - -------- increase of 14% over the third quarter 1995. The increase was due to a 12% increase in sales volume and an increase in the average selling price due to a change in the mix of products sold. Demand was particularly strong for CarboProp and CarboHSP, the Company's premium products. Revenues from these two products established a new quarterly high, exceeding the previous quarterly high, established in the third quarter 1995, by 36%. Much of this demand was due to an increase in deep natural gas drilling activity in the United States where the number of rigs drilling for natural gas averaged 493 for the quarter and exceeded 500 rigs for most of September. The Company believes that a portion of the sales increase for these products may have been due to production problems encountered by its primary competitor. For the quarter, domestic revenues increased by 23% versus the same period in 1995 while export activity declined 5% versus the previous year. Gross Profit. Gross profit for the quarter was $8.5 million or 47% of sales as - ------------ compared to $7.9 million and 50% of sales for the third quarter 1995. The reduction in the gross profit percentage was primarily due to higher manufacturing costs at the Company's New Iberia plant. Manufacturing costs at the New Iberia plant increased due to the increase in demand for CarboHSP which uses a higher cost raw material and generates lower throughput rates than CarboProp, the second product manufactured at the New Iberia facility. Gross profit margins were also impacted by higher depreciation expense recorded subsequent to the completion of the Eufaula expansion in 1996. Selling, General and Administrative Expenses (SG&A). SG&A was $1.6 million for - --------------------------------------------------- the third quarter 1996 and $1.8 million for the corresponding period in 1995. Expenses incurred for consulting fees and the amortization of unearned compensation decreased from 1995 while expenses incurred in connection with distribution operations increased with the higher sales volumes experienced in 1996. Distribution expenses as a percentage of sales were unchanged from the third quarter 1995. Nine Months Ended September 30, 1996 - ------------------------------------ Revenues. Revenues for the nine months ended September 30, 1996, were $48.3 - -------- million, up 9% from the same period in 1995. Domestic sales increased 21% from a year earlier as CarboEconoProp continued to penetrate the market for sand and resin coated sand, while an increase in natural gas drilling fueled demand for the Company's high strength proppants. Gross Profit. Gross profit as a percentage of sales for the nine months ended - ------------ September 30, 1996, was 47% as compared to 50% for the same period a year earlier. Gross profit margins declined due to the continued growth in lower margin CarboEconoProp sales, increased depreciation and overhead costs attributable to the expansion of the Eufaula plant and higher costs incurred at the New Iberia plant due to increased production of CarboHSP. Selling, General and Administrative Expenses (SG&A). SG&A expenses were $6.3 - --------------------------------------------------- million for the year to date 1996 as compared to $5.3 million for the same period in 1995. In connection with the vesting of restricted stock which occurred at the time of the initial public offering of Carbo Ceramics' common stock in April 1996, the Company accelerated the recognition of unearned compensation expense. For the year to date 1996, the total expense recognized was $1.3 million. During the nine months ended September 30, 1995, the Company recognized a total of $.3 million in unearned compensation expense. Excluding this incremental charge, SG&A for the year to date was unchanged versus the same period in 1995. 8 Net Income. Pro forma net income for the nine months ended September 30, 1996, - ---------- was $10.2 million, a decrease of 4% versus the same period a year earlier. The primary reason for the decline in net income is the accelerated recognition of unearned compensation expense as discussed above in the analysis of SG&A. Excluding the effect of this incremental charge, pro forma net income for the nine months ended 1996 increased by 2% from the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $10.8 million as of September 30, 1996, an increase of $10.6 million from December 31, 1995. The increase in cash and cash equivalents was due to cash generated from operations of $14.0 million. In April 1996, the Company generated $35.3 million from the sale of shares in the initial public offering of its common stock. Proceeds from this offering were used to repay notes and to pay a final dividend of previously taxed, undistributed earnings to the original shareholders of the Company. Since the time of the initial public offering of the Company's stock, the Company has benefited from a significant tax deduction resulting from compensation expense recognized in connection with the lapsing of restrictions on stock previously issued to its President. The benefit from this deduction is expected to be fully realized during the fourth quarter 1996 at which time the Company expects to begin to pay tax on its income. The Company anticipates that it will continue to generate cash from operations and increase its cash balance through the remainder of 1996. The Company is currently evaluating the possible construction of a new production facility which is expected to cost $30-$35 million and could begin construction in 1997. The Company expects to fund a substantial portion of the expansion from existing cash balances and cash generated from operations. The Company believes that it has the ability to obtain sufficient debt financing to complete the expansion project, if necessary. 9 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARBO CERAMICS INC. By: /S/ Jesse P. Orsini --------------------------------------- Jesse P. Orsini President & Chief Executive Officer By: /S/ Paul G. Vitek --------------------------------------- Paul G. Vitek Vice President, Finance & Chief Financial Officer Date: November 5, 1996 11 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 SEP-30-1996 10,794 0 12,250 0 8,293 33,577 29,924 (7,359) 56,142 4,233 0 0 0 146 50,129 56,142 17,898 17,898 9,432 11,017 34 0 0 6,944 2,595 4,349 0 0 0 4,349 .30 .30
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