EX-99.1 2 d50745exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(CARBO CERAMICS LOGO)
     
F I N A L   CONTACT: PAUL VITEK, CFO
    (972) 401-0090
     
    Release #07-11
CARBO CERAMICS INC. ANNOUNCES THIRD QUARTER AND YEAR-TO-DATE 2007 EARNINGS
Conference Call Scheduled for Today, 10:00 a.m. Central Time

    Third quarter revenues of $84.8 million, up 10 percent versus prior year
 
    Net income of $14.1 million, or $0.57 per diluted share, for the quarter
 
    Quarterly proppant sales volume of 226 million pounds, up 3 percent versus prior year
 
    Record revenues and operating profit from fracture and reservoir diagnostic services
Irving, Texas (October 25, 2007) — CARBO Ceramics Inc. (NYSE: CRR) today reported third quarter net income of $14.1 million, or $0.57 per diluted share, on revenues of $84.8 million for the quarter ended September 30, 2007. For the nine months ended September 30, 2007, the company reported net income of $40.2 million, or $1.64 per diluted share, on revenues of $246.7 million.
President and CEO Gary Kolstad commented on the quarter’s results stating, “We are pleased with our performance in the quarter, particularly in light of the continued pressure in the North American market caused by the depressed level of drilling and fracturing activity in Canada. While proppant sales volume declined in North America, we nearly doubled our overseas sales volume compared to last year’s third quarter due to improving sales in Russia, China, the Middle East and South America. In addition, Pinnacle Technologies generated record revenue and operating profit driven by the growing demand for fracture mapping and reservoir monitoring services in North America.”
Third quarter results
Revenues for the third quarter increased 10 percent compared to last year’s third quarter due to a 3 percent increase in the volume of proppant sold, a 1 percent increase in the average selling price of the company’s proppant, and a 58 percent increase in revenue from Pinnacle Technologies (“Pinnacle”). The increase in revenue in the company’s proppant business segment was due to increased sales in overseas markets which were partially offset by decreased sales volume in North America. Consolidated revenues for the third quarter of 2007 included $12.9 million from Pinnacle compared to $8.1 million for the third quarter of 2006. Pinnacle’s growth was driven by increased demand for fracture mapping and reservoir monitoring services, software products, and consulting services.
Worldwide proppant sales totaled 226 million pounds for the quarter. Sales volume in North America decreased 9 percent compared to the third quarter of 2006 due primarily to depressed levels of drilling activity in Canada, where the rig count decreased 30 percent from the previous year. U.S. sales decreased 3 percent from the prior year’s third quarter. While the number of rigs drilling for natural gas in the U.S. increased 5 percent from the third quarter 2006, the increased activity occurred in shale formations in which ceramic proppants currently do not have a significant market share. In Mexico, the increase in the number of rigs drilling for natural gas, combined with an increase in the company’s market share following a successful field trial earlier this year, resulted in an increase in sales volume of 140 percent in the country compared to last year’s third quarter. In overseas markets, the company saw a 92 percent increase in sales volume compared to the third quarter 2006 due to increased sales in Russia, China, the Middle East and South America.
Operating profit for the third quarter of 2007 decreased $1.3 million, or 6 percent, compared to the previous year’s third quarter. While operating profit from Pinnacle increased to record levels, this increase was offset by a reduction in operating profit in the company’s proppant business segment. Despite an increase in sales volume and revenues compared to the same period a year earlier, proppant operating profit declined due to high manufacturing costs during the start-up of the company’s


 

CARBO Ceramics 2007 Third Quarter and Year-to-Date Earnings Release
October 25, 2007
Page 2
manufacturing facility in Russia, and increased costs for high strength raw materials imported into the U.S. The impact of these cost increases was partially offset by lower natural gas costs in the company’s domestic manufacturing facilities. Selling, general and administrative expenses for the third quarter of 2007 increased $1.7 million compared to the same period last year due to increases in staffing to support higher sales activity in an expanding global market.
Net income for the third quarter of 2007 increased $0.6 million compared to the third quarter of 2006. While interest income declined $0.3 million compared to last year’s third quarter due to lower cash balances as a result of significant capital spending to add manufacturing capacity, 2007 results benefited from two non-operating items. During the third quarter of 2007, the company recorded a gain of $1.6 million on foreign currency fluctuations associated primarily with a loan outstanding to the company’s Russian subsidiary. Third quarter 2007 results were also aided by a reduction of estimated income tax expense of $0.5 million resulting from the completion and filing of 2006 tax returns.
Technology highlights
Technology highlights for the third quarter included:
    CARBOECONOPROP® lightweight ceramic proppant was successfully utilized to increase production rates while replacing sand and resin-coated sand in fracture treatments in East Texas. The results of this field trial are expected to be published by the operator at the 2007 SPE Annual Technical Conference and Exhibition in Anaheim in November.
 
    Pinnacle successfully installed their first permanent fiber optic distributed temperature sensing (DTS) system in the Rocky Mountains. This new Pinnacle product enhances the company’s established far-field monitoring capabilities by giving the customer continuous real-time information on fluid flow both inside the wellbore and in the near-wellbore region. This information is of benefit during fracturing operations and during subsequent production, and assists in identifying out of zone communication along the wellbore.
 
    Pinnacle initiated testing of a new high temperature microseismic monitoring system which will expand the number of reservoirs currently being monitored by allowing fracture mapping operations to be performed in substantially deeper reservoirs than are typically mapped.
 
    A long-term microseismic monitoring project was initiated to image active fractures during a CO2 injection process in the U.S. This monitoring will determine the location of the CO2 injection front.
Future outlook
CEO Gary Kolstad commented on the future outlook for the company stating, “Like many industry participants, we are concerned about the continued depressed activity levels in Canada and the recent downturn in the number of rigs actively drilling for natural gas in the U.S. The high levels of natural gas inventory in the U.S. and economic challenges for operators in Canada are likely to result in a difficult operating environment in North America in the fourth quarter and possibly into 2008. This slowdown in activity is coming on the heels of the completion of a second production line at our Toomsboro, Georgia manufacturing facility, and the increased depreciation from this facility may put pressure on earnings in the short term.”
Kolstad further stated, “We will be proactive in working to offset the decreasing industry activity levels in North America. In the near term we will continue to increase the number of field trials we initiate to demonstrate the value of ceramic proppant relative to alternative proppants, add marketing and sales resources to expand the market for our products outside of North America, evaluate opportunities to reduce costs in our proppant production and distribution operations, develop a proppant targeted at the growing market for slick-water fracture treatments, and add technical resources necessary to meet the growing demand for Pinnacle Technologies’ products and services. We remain optimistic about the long-term future of both of our business units based on our beliefs that worldwide energy demand will remain strong, high levels of drilling activity will be necessary to sustain production rates in North America and technology-based solutions will be key to increasing production of oil and gas worldwide.”


 

CARBO Ceramics 2007 Third Quarter and Year-to-Date Earnings Release
October 25, 2007
Page 3
As previously announced, a conference call to discuss the company’s third quarter and year-to-date results has been scheduled for today at 10:00 a.m. central time (11:00 a.m. eastern). To participate in the call, please dial 877-836-3879 and refer to the “CARBO Ceramics Conference Call.” International callers should dial 706-679-7469. The call can also be accessed live or on a delayed basis via the company’s Web site, www.carboceramics.com.
CARBO Ceramics Inc., based in Irving, Texas, is the world’s leading manufacturer of ceramic proppants and supplier of fracture diagnostic services for use in the hydraulic fracturing of natural gas and oil wells.
The statements in this news release that are not historical statements, including statements regarding our future financial and operating performance, are forward-looking statements within the meaning of the federal securities laws. All forward-looking statements are based on management’s current expectations and estimates, which involve risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, changes in demand for our products, changes in the demand for, or price of, oil and natural gas, risks of increased competition, technological, manufacturing and product development risks, loss of key customers, changes in government regulations, foreign and domestic political and legislative risks, the risks of war and international and domestic terrorism, risks associated with foreign operations and foreign currency exchange rates and controls; weather-related risks and other risks and uncertainties described in our publicly available filings with the SEC. We assume no obligation to update forward-looking statements, except as required by law.
- tables follow -
                                 
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2007     2006     2007     2006  
    (In thousands except per share data)     (In thousands except per share data)  
Revenues
  $ 84,788     $ 77,410     $ 246,677     $ 225,173  
Cost of sales
    55,318       48,545       158,809       141,552  
 
                       
Gross profit
    29,470       28,865       87,868       83,621  
Selling, general & administrative
    10,089       8,408       29,069       24,674  
Start-up costs
    204       28       1,171       449  
 
                       
Operating profit
    19,177       20,429       57,628       58,498  
Interest income, net
    72       394       424       1,318  
Other, net
    1,683       253       2,495       940  
 
                       
Income before income taxes
    20,932       21,076       60,547       60,756  
Income taxes
    6,869       7,624       20,304       21,458  
 
                       
Net income
  $ 14,063     $ 13,452     $ 40,243     $ 39,298  
 
                       
 
                               
Earnings per share:
                               
Basic
  $ 0.58     $ 0.55     $ 1.65     $ 1.62  
 
                       
Diluted
  $ 0.57     $ 0.55     $ 1.64     $ 1.61  
 
                       
 
                               
Average shares outstanding:
                               
Basic
    24,377       24,294       24,357       24,271  
 
                       
Diluted
    24,504       24,403       24,474       24,396  
 
                       
 
                               
Depreciation and amortization
  $ 6,295     $ 4,827     $ 17,562     $ 14,142  
 
                       


 

CARBO Ceramics 2007 Third Quarter and Year-to-Date Earnings Release
October 25, 2007
Page 4
Selected Balance Sheet Information
                 
    Sept. 30, 2007     Dec. 31, 2006  
    (in thousands)  
Cash, cash equivalents and short-term investments
  $ 7,449     $ 32,473  
Total other current assets
    133,409       111,452  
Property, plant and equipment, net
    271,230       231,748  
Intangible and other assets, net
    8,330       7,152  
Total assets
    443,631       404,665  
Total current liabilities
    36,346       34,246  
Deferred income taxes
    30,077       27,560  
Shareholders’ equity
    377,208       342,859  
Total liabilities and shareholders’ equity
    443,631       404,665  
Segment Information
                                 
    Three Months Ended     Nine Months Ended  
    September 30     September 30  
    2007     2006     2007     2006  
    ($ In thousands)     ($ In thousands)  
Proppant
                               
Revenues from external customers
  $ 71,921     $ 69,290     $ 212,793     $ 201,960  
Income before income taxes
    18,578       19,949       55,583       58,400  
 
                               
Fracture and Reservoir Diagnostics
                               
Revenues from external customers
  $ 12,867     $ 8,120     $ 33,884     $ 23,213  
Income before income taxes
    2,354       1,127       4,964       2,356