UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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|
|
þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2009
or
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o
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|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
.
Commission File No. 001-15903
CARBO CERAMICS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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72-1100013
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification Number)
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575 North Dairy Ashford
Suite 300
Houston, TX 77079
(Address of principal executive offices)
(281) 921-6400
(Registrants 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
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
As
of August 3, 2009, 23,046,279 shares of the registrants Common Stock,
par value $.01 per share, were outstanding.
CARBO CERAMICS INC.
Index to Quarterly Report on Form 10-Q
2
PART I. FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
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June 30,
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December 31,
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2009
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2008
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(Unaudited)
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(see Note 1)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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92,475
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$
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154,817
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Trade accounts and other receivables, net
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48,852
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65,724
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Inventories:
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Finished goods, net
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48,555
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34,886
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Raw materials and supplies
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24,106
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29,958
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Total inventories
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72,661
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64,844
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Prepaid expenses and other current assets
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3,097
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2,243
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Prepaid income taxes
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285
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Deferred income taxes
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9,287
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8,084
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Total current assets
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226,657
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295,712
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Property, plant and equipment:
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Land and land improvements
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10,710
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10,208
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Land-use and mineral rights
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6,279
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6,257
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Buildings
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41,950
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42,416
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Machinery and equipment
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284,403
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281,894
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Construction in progress
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39,472
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24,881
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Total
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382,814
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365,656
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Less accumulated depreciation
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132,308
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120,754
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Net property, plant and equipment
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250,506
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244,902
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Goodwill
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4,859
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4,859
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Intangible and other assets, net
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3,391
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3,806
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Total assets
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$
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485,413
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$
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549,279
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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5,575
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$
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15,615
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Accrued payroll and benefits
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4,455
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9,373
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Accrued freight
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2,519
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3,668
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Accrued utilities
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3,318
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4,089
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Accrued income taxes
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47,929
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Other accrued expenses
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6,937
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3,174
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Total current liabilities
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22,804
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83,848
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Deferred income taxes
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24,747
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22,897
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Shareholders equity:
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Preferred stock, par value $0.01 per share, 5,000 shares authorized,
none outstanding
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Common stock, par value $0.01 per share, 40,000,000 shares authorized;
23,047,970 and 23,637,678 shares issued and outstanding at June 30,
2009 and December 31, 2008, respectively
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230
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236
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Additional paid-in capital
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52,957
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73,460
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Retained earnings
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389,264
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371,602
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Accumulated other comprehensive loss
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(4,589
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)
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(2,764
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)
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Total shareholders equity
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437,862
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442,534
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Total liabilities and shareholders equity
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$
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485,413
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$
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549,279
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The accompanying notes are an integral part of these statements.
3
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(Unaudited)
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Three months ended
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Six months ended
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June 30,
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June 30,
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2009
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2008
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2009
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2008
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Revenues
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$
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69,322
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$
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89,285
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$
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159,964
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$
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179,660
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Cost of sales
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46,130
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62,865
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100,788
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126,196
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Gross profit
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23,192
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26,420
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59,176
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53,464
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Selling, general and administrative expenses
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8,831
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8,737
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20,263
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17,319
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Start-up costs
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231
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Loss on disposal or impairment of assets
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24
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178
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91
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110
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Operating profit
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14,337
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17,505
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38,822
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35,804
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Other income (expense):
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|
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Interest income, net
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116
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22
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320
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56
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Foreign currency exchange (loss) gain, net
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(205
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)
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|
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(66
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)
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(246
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)
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1,427
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Other, net
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3
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170
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|
178
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187
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(86
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)
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|
126
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|
|
252
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1,670
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|
|
|
|
|
|
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|
|
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|
|
|
|
|
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Income before income taxes
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|
14,251
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|
17,631
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|
|
|
39,074
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37,474
|
|
Income taxes
|
|
|
4,864
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|
|
|
5,882
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|
|
|
13,259
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|
|
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12,870
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|
|
|
|
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|
|
|
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Income from continuing operations
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9,387
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|
|
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11,749
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|
|
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25,815
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24,604
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|
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|
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Income from discontinued operations, net of income
taxes
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|
|
|
|
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1,781
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|
|
|
|
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3,157
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
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Net income
|
|
$
|
9,387
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|
$
|
13,530
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$
|
25,815
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|
$
|
27,761
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|
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|
|
|
|
|
|
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|
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|
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|
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Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Income from continuing operations
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|
$
|
0.41
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|
|
$
|
0.48
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|
|
$
|
1.11
|
|
|
$
|
1.01
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|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
0.13
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|
|
|
|
|
|
|
|
|
|
|
|
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Basic earnings per share
|
|
$
|
0.41
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|
|
$
|
0.55
|
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.48
|
|
|
$
|
1.11
|
|
|
$
|
1.00
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.41
|
|
|
$
|
0.55
|
|
|
$
|
1.11
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other information:
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|
|
|
|
|
|
|
|
|
|
|
|
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Dividends declared per common share
|
|
$
|
|
|
|
$
|
0.14
|
|
|
$
|
0.34
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
4
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
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|
Six months ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,815
|
|
|
$
|
27,761
|
|
Adjustments to reconcile net income to net cash (used in) provided by
operating activities
of continuing operations:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
|
|
|
(3,157
|
)
|
Depreciation and amortization
|
|
|
12,324
|
|
|
|
12,253
|
|
Provision for doubtful accounts
|
|
|
749
|
|
|
|
56
|
|
Deferred income taxes
|
|
|
1,629
|
|
|
|
3,178
|
|
Excess tax benefits from stock based compensation
|
|
|
(66
|
)
|
|
|
(7
|
)
|
Loss on disposal or impairment of assets
|
|
|
91
|
|
|
|
110
|
|
Foreign currency transaction loss (gain), net
|
|
|
246
|
|
|
|
(1,427
|
)
|
Stock compensation expense
|
|
|
1,395
|
|
|
|
1,031
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts and other receivables
|
|
|
15,877
|
|
|
|
(13,123
|
)
|
Inventories
|
|
|
(8,696
|
)
|
|
|
(8,796
|
)
|
Prepaid expenses and other current assets
|
|
|
(930
|
)
|
|
|
(1,366
|
)
|
Long-term prepaid expenses
|
|
|
|
|
|
|
36
|
|
Accounts payable
|
|
|
(10,067
|
)
|
|
|
(5,504
|
)
|
Accrued expenses
|
|
|
(2,661
|
)
|
|
|
3,249
|
|
Accrued income taxes, net
|
|
|
(48,155
|
)
|
|
|
(2,923
|
)
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities of continuing operations
|
|
|
(12,449
|
)
|
|
|
11,371
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Capital expenditures, net
|
|
|
(19,760
|
)
|
|
|
(8,476
|
)
|
Investment in cost-method investee
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities of continuing operations
|
|
|
(19,760
|
)
|
|
|
(9,476
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds from bank borrowings
|
|
|
|
|
|
|
5,500
|
|
Repayments on bank borrowings
|
|
|
|
|
|
|
(5,500
|
)
|
Net proceeds from stock based compensation
|
|
|
602
|
|
|
|
315
|
|
Dividends paid
|
|
|
(7,988
|
)
|
|
|
(6,884
|
)
|
Purchase of common stock
|
|
|
(22,673
|
)
|
|
|
|
|
Excess tax benefits from stock based compensation
|
|
|
66
|
|
|
|
7
|
|
|
|
|
|
|
|
|
Net cash used in financing activities of continuing operations
|
|
|
(29,993
|
)
|
|
|
(6,562
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(140
|
)
|
|
|
176
|
|
Net cash provided by discontinued operations
|
|
|
|
|
|
|
1,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(62,342
|
)
|
|
|
(2,899
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
154,817
|
|
|
|
12,296
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
92,475
|
|
|
$
|
9,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
59,784
|
|
|
$
|
14,551
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
5
CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
(Unaudited)
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 notes 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. The consolidated balance sheet as of December 31, 2008 has been derived from the
audited financial statements at that date. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto for the year ended
December 31, 2008 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year
ended December 31, 2008.
The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its
operating subsidiaries (the Company). The consolidated financial statements also include a 6%
interest in a Texas-based electronic equipment manufacturing company that was acquired in March
2008 that is reported under the cost method of accounting. All significant intercompany
transactions have been eliminated.
Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The
carrying amounts reported in the balance sheet for cash equivalents
approximate fair value.
2. Sale of Assets (Discontinued Operations)
On October 10, 2008, the Company sold a substantial portion of the assets of its wholly-owned
subsidiary, Pinnacle Technologies, Inc. (Pinnacle). The sale included all of the fracture and
reservoir diagnostic business, the Pinnacle name and related trademarks (see Note 2 to the
Consolidated Financial Statements included in the Companys Form 10-K for the year ended December
31, 2008, for additional information). As a result, the operations and cash flows associated with
these assets have been classified as discontinued operations. Previously, the Pinnacle assets and
operations were presented in the Fracture and Reservoir Diagnostics segment, one of the Companys
two reportable segments. Segment information is no longer presented because the remaining
operations, which were previously reported in the Fracture and Reservoir Diagnostics segment, do
not meet the quantitative thresholds for a reportable segment. Subsequent to the sale, the
subsidiary name Pinnacle Technologies, Inc. was changed to StrataGen, Inc.
Revenues and income before income taxes from discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2008
|
|
Revenues
|
|
$
|
13,752
|
|
|
$
|
25,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
2,872
|
|
|
$
|
5,093
|
|
|
|
|
|
|
|
|
6
Cash flows from discontinued operations were as follows:
|
|
|
|
|
|
|
Six months ended
|
|
|
|
June 30, 2008
|
|
Operating activities:
|
|
|
|
|
Net income
|
|
$
|
3,157
|
|
Depreciation, amortization and other
|
|
|
3,127
|
|
Changes in operating assets and liabilities, net
|
|
|
(2,351
|
)
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,933
|
|
|
|
|
|
|
Investing activities: Capital expenditures, net
|
|
|
(2,408
|
)
|
|
|
|
|
|
Financing activities: Excess tax benefits from stock based compensation
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
$
|
1,592
|
|
|
|
|
|
3. Earnings Per Share
Effective January 1, 2009, the Company adopted Financial Accounting Standards Board Staff
Position (FSP) No. EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities
(FSP No. EITF 03-6-1). This FSP provides that
unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method. The Company has determined
that its outstanding non-vested restricted stock awards are participating securities. Accordingly,
effective January 1, 2009, earnings per common share is computed using the two-class method
prescribed by Statement of Financial Accounting Standards No. 128,
Earnings Per Share.
All
previously reported earnings per common share data must be retrospectively adjusted to conform to
the new computation method. The adoption of FSP No. EITF 03-6-1 did not have a material effect on
earnings per share in any period presented.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
9,387
|
|
|
$
|
11,749
|
|
|
$
|
25,815
|
|
|
$
|
24,604
|
|
Effect of reallocating undistributed earnings
of participating securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
1,781
|
|
|
|
|
|
|
|
3,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,387
|
|
|
$
|
13,530
|
|
|
$
|
25,815
|
|
|
$
|
27,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share
weighted-average shares
|
|
|
23,086,358
|
|
|
|
24,466,485
|
|
|
|
23,272,175
|
|
|
|
24,458,834
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options (See Note 7)
|
|
|
6,987
|
|
|
|
62,561
|
|
|
|
10,331
|
|
|
|
58,144
|
|
Nonvested and deferred stock awards (See
Note 7)
|
|
|
43,282
|
|
|
|
47,669
|
|
|
|
41,528
|
|
|
|
39,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
50,269
|
|
|
|
110,230
|
|
|
|
51,859
|
|
|
|
98,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share
adjusted weighted-average shares
|
|
|
23,136,627
|
|
|
|
24,576,715
|
|
|
|
23,324,034
|
|
|
|
24,556,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.48
|
|
|
$
|
1.11
|
|
|
$
|
1.01
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.41
|
|
|
$
|
0.55
|
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.48
|
|
|
$
|
1.11
|
|
|
$
|
1.00
|
|
Income from discontinued operations, net of tax
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.41
|
|
|
$
|
0.55
|
|
|
$
|
1.11
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
4. Common Stock Repurchase Program
On August 28, 2008, the Companys Board of Directors authorized the repurchase of up to two
million shares of the Companys Common Stock. Shares are effectively retired at the time of
purchase. During the quarter ended June 30, 2009, the Company repurchased and retired 236,885
shares at an aggregate price of $8,179. As of June 30, 2009, the Company repurchased and retired a
total of 1,741,385 shares at an aggregate price of $64,658.
5. Dividends Paid
On March 17, 2009, the Board of Directors declared a cash dividend of $0.17 per common share
payable to shareholders of record on May 1, 2009. The dividend was paid on May 15, 2009. On July
21, 2009, the Board of Directors declared a cash dividend of $0.18 per common share payable to
shareholders of record on August 3, 2009. This dividend is payable on August 17, 2009.
6. Comprehensive Income
The following table sets forth the components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net income
|
|
$
|
9,387
|
|
|
$
|
13,530
|
|
|
$
|
25,815
|
|
|
$
|
27,761
|
|
Foreign currency translation adjustment
|
|
|
2,867
|
|
|
|
497
|
|
|
|
(1,825
|
)
|
|
|
1,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
12,254
|
|
|
$
|
14,027
|
|
|
$
|
23,990
|
|
|
$
|
29,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The foreign currency translation adjustment for the three months ended June 30, 2009 and 2008
is net of deferred income tax expense of $1,543 and $267, respectively. For the six months ended
June 30, 2009 and 2008, the foreign currency translation adjustment is net of deferred income tax
(benefit) expense of $(983) and $979, respectively.
7. Stock Based Compensation
On May 19, 2009, the shareholders approved the CARBO Ceramics Inc. Omnibus Incentive Plan (the
Omnibus Incentive Plan). The Omnibus Incentive Plan replaces the expired restricted stock and
stock option plans. Under the Omnibus Incentive Plan, the Company may grant cash-based awards,
stock options (both non-qualified and incentive) and other equity-based awards (including stock
appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares,
deferred share units or share-denominated performance units) to employees and non-employee
directors. The amount paid under the Omnibus Incentive Plan to any single participant in any
calendar year with respect to any cash-based award shall not exceed $2,000,000. Awards may be
granted with respect to a number of shares of the Companys Common Stock that in the aggregate does
not exceed 750,000 shares prior to the fifth anniversary of its effective date, plus (i) the number
of shares that are forfeited, cancelled or returned, and (ii) the number of shares that are
withheld from the participants to satisfy an option exercise price or minimum statutory tax
withholding obligations. No more than 50,000 shares may be granted to any single participant in
any calendar year. Equity-based awards may be subject to performance-based and/or service-based
conditions. With respect to stock options and stock appreciation rights granted, the exercise
price shall not be less than the market value of the underlying Common Stock on the date of grant.
The maximum term of an option is ten years. Restricted stock awards granted generally vest (i.e.,
transfer and forfeiture restrictions on these shares are lifted) proportionately on each of the
first three anniversaries of the grant date, but subject to certain limitations, awards may specify
other vesting periods. All unvested shares granted to an individual vest upon retirement at or
after the age of 62. As of June 30, 2009, 750,000 shares were available for issuance under the
Omnibus Incentive Plan. Although the Companys previous restricted stock and stock option plans
have expired, outstanding options and unvested shares granted under these plans remain outstanding
in accordance with their terms.
The Company also has a Director Deferred Fee Plan (the Plan) that permits non-employee
directors of the Company to elect once in December of each year to defer in the following calendar
year the receipt of cash compensation for service as a director, which would otherwise be payable
in that year, and to receive those fees
8
in the form of the Companys Common Stock on a specified later date that is on or after the
directors retirement from the Board of Directors. The number of shares reserved for an electing
director is based on the fair market value of the Companys Common Stock on the date immediately
preceding the date those fees would have been paid absent the deferral. As of June 30, 2009, a
total of 6,515 shares were reserved for future issuance in payment of $261 of deferred fees under
the Plan by electing directors.
A summary of stock option activity and related information for the six months ended June 30,
2009 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
Intrinsic
|
|
|
Options
|
|
Exercise Price
|
|
Value
|
Outstanding at January 1, 2009
|
|
|
53,675
|
|
|
$
|
23.85
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(27,875
|
)
|
|
$
|
21.60
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2009
|
|
|
25,800
|
|
|
$
|
26.27
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2009
|
|
|
25,800
|
|
|
$
|
26.27
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009, all compensation cost related to stock options granted under the expired
stock option plans has been recognized. The weighted-average remaining contractual term of options
outstanding at June 30, 2009 was 3.6 years. The total intrinsic value of options exercised during
the six months ended June 30, 2009 was $469.
A summary of restricted stock activity and related information for the six months ended June
30, 2009 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
Shares
|
|
Fair Value
|
Nonvested at January 1, 2009
|
|
|
103,850
|
|
|
$
|
40.29
|
|
Granted
|
|
|
77,155
|
|
|
$
|
35.03
|
|
Vested
|
|
|
(40,550
|
)
|
|
$
|
43.36
|
|
Forfeited
|
|
|
(11,445
|
)
|
|
$
|
36.51
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2009
|
|
|
129,010
|
|
|
$
|
36.51
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009, there was $3,317 of total unrecognized compensation cost, net of
estimated forfeitures, related to restricted shares granted under the expired restricted stock
plan. That cost is expected to be recognized over a weighted-average period of 2.1 years. The
total fair value of shares vested during the six months ended June 30, 2009 was $1,758.
The Company also has an International Long-Term Incentive Plan that provides for granting
units of stock appreciation rights (SARs) or phantom shares to key international employees.
One-third of the units subject to an award vest and cease to be forfeitable on each of the first
three anniversaries of the grant date. Participants awarded units of SARs have the right to
receive an amount, in cash, equal to the excess of the fair market value of a share of Common Stock
as of the vesting date, or in some cases on a later exercise date chosen by the participant, over
the exercise price. Participants awarded units of phantom shares are entitled to a lump sum cash
payment equal to the fair market value of a share of Common Stock on the vesting date. In no event
will Common Stock of the Company be issued under the International Long-Term Incentive Plan. As of
June 30, 2009, there were 11,615 units of phantom shares granted under the plan, of which 2,348
have vested and 325 have been forfeited, with a total value of $306, the vested portion of which is
recorded as a liability within Other Accrued Expenses.
8. Foreign Currencies
As of June 30, 2009, the Companys net investment that is subject to foreign currency
fluctuations totaled $74,459 and the Company has recorded a cumulative foreign currency translation
loss of $4,589, net of deferred income tax benefit. This cumulative translation loss is included
in Accumulated Other Comprehensive Loss. Also, the Companys subsidiary in Russia previously
borrowed up to $40,845 from another subsidiary of the Company to fund construction of a
manufacturing plant in Russia. This indebtedness, while eliminated in
9
consolidation of the financial statements, is subject to exchange rate fluctuations between
the local reporting currency and the currency in which the debt is denominated. Currency exchange
rate fluctuations associated with this indebtedness result in gains and losses that impact net
income. The gains and losses are presented in Other Income (Expense). During the third quarter of
2008, this indebtedness was significantly reduced, and was further reduced to $155 at June 30,
2009.
9. New Accounting Pronouncements
In July 2009, the Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168,
FASB Accounting Standards Codification
(SFAS
168), as the single source of authoritative nongovernmental U.S. generally accepted accounting
principles. The Codification is effective for interim and annual periods ending after September
15, 2009. All existing accounting standards are superseded as described in SFAS 168. All other
accounting literature not included in the Codification is nonauthoritative. Management is
currently evaluating the impact of the adoption of SFAS 168 but does not expect the adoption of
SFAS 168 to impact the Companys results of operations, financial position or cash flows.
In May 2009, the FASB issued SFAS No. 165,
Subsequent Events
(SFAS 165), which establishes
(i) the period after the balance sheet date during which management shall evaluate events or
transactions that may occur for potential recognition or disclosure in the financial statements;
(ii) the circumstances under which an entity shall recognize events or transactions occurring after
the balance sheet date in its financial statements; and (iii) the disclosures that an entity shall
make about events or transactions that occurred after the balance sheet date. SFAS 165 is
effective for interim or fiscal periods ending after June 15, 2009. The Company adopted SFAS 165
as of April 1, 2009. The adoption did not have a material impact on the Companys financial
position, results of operations or cash flows.
Effective 1 April 2009, the Company adopted FASB Staff Position (FSP) FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments. This FSP extends the disclosure
requirements under SFAS No. 107,
Disclosures about Fair Value of Financial Instruments,
to
interim financial statements. It also amends APB Opinion No. 28,
Interim Financial Reporting,
to
require those disclosures in summarized financial information at interim reporting periods. This
FSP only requires additional disclosure and did not have an impact on the Companys consolidated
financial statements.
Effective January 1, 2009, the Company adopted SFAS No. 141(R),
Business Combinations
(SFAS
141(R)), which replaces SFAS No. 141. The statement retains the purchase method of accounting for
acquisitions, but requires a number of changes, including changes in the way assets and liabilities
are recognized in purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of in-process research
and development at fair value, and requires the expensing of acquisition-related costs as incurred.
The guidance in SFAS 141(R) is applied prospectively to business combinations completed on or
after January 1, 2009, and as a result has not had any impact to the Company.
10. Legal Proceedings
The Company is subject to legal proceedings, claims and litigation arising in the ordinary
course of business. While the outcome of these matters is currently not determinable, management
does not expect that the ultimate costs to resolve these matters will have a material adverse
effect on the Companys consolidated financial position, results of operations, or cash flows.
On January 26, 2007, following self-disclosure of certain air pollution emissions, the Company
received a Notice of Violation (NOV) from the State of Georgia Environmental Protection Division
(EPD) regarding appropriate permitting for emissions of two specific substances from its
Toomsboro, Georgia facility. On May 22, 2007, a second NOV was issued for the McIntyre plant for
alleged violations similar to those in the January NOV related to the Toomsboro facility.
In May 2009, the Company entered into a consent order with the EPD to resolve the
Toomsboro and McIntyre NOVs. Pursuant to the consent order, the Company has paid the EPD a fine of
$258. In addition, the Company must pay the EPD a further fine of $112 within approximately one
year from the date of the consent order, less certain amounts that the Company can demonstrate have been spent in
order to implement emission reductions at these facilities. Finally, the consent order requires
the Company to pay any unpaid permit fees from certain
10
prior years that would have been payable on account of the Companys actual emissions at the
time. While the amount of these further permit fees are not determinable at this time, the
Company presently estimates the amount of such fees to be less than approximately $100.
11. Subsequent Events
In
July 2009, the Company idled ceramic proppant manufacturing
operations at its New Iberia,
Louisiana facility.
This facility will continue to function as a distribution center and
the Company is planning to build a resin coating plant within the
existing manufacturing infrastructure of the facility. The resin
coating plant will be utilized to coat ceramic proppant and is
expected to be completed during the fourth quarter of 2009.
The
Company has evaluated subsequent events through August 5, 2009, the date the consolidated
financial statements were issued, and has determined there were no
other subsequent events to recognize
or disclose in these financial statements.
11
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Business
The Company manufactures ceramic proppant and provides services that are used in the hydraulic
fracturing of natural gas and oil wells.
On October 10, 2008, the Company sold a substantial portion of the assets of its wholly-owned
subsidiary, Pinnacle Technologies, Inc. (Pinnacle). The sale included all of the fracture and
reservoir diagnostic business, the Pinnacle name and related trademarks (see Note 2 to the
Consolidated Financial Statements included in the Companys Form 10-K for the year ended December
31, 2008, for additional information). As a result, operations and cash flows associated with
these assets have been classified as discontinued operations. Previously, the Pinnacle assets and
operations were presented in the Fracture and Reservoir Diagnostics segment, one of the Companys
two reportable segments. Segment information is no longer presented because the remaining
operations, which were previously reported in the Fracture and Reservoir Diagnostics segment, do
not meet the quantitative thresholds for a reportable segment. Subsequent to the sale, the
subsidiary name Pinnacle Technologies, Inc. was changed to StrataGen, Inc.
Critical Accounting Policies
The consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require the Company to make estimates and
assumptions (see Note 1 to the consolidated financial statements included in the annual report on
Form 10-K for the year ended December 31, 2008). The Company believes that some of its accounting
policies involve a higher degree of judgment and complexity than others. Critical accounting
policies for the Company include revenue recognition, estimating the recoverability of accounts
receivable, inventory valuation, accounting for income taxes, accounting for long-lived assets and
accounting for legal contingencies. Critical accounting policies are discussed more fully in the
Companys annual report on Form 10-K for the year ended December 31, 2008 and there have been no
changes in the Companys evaluation of its critical accounting policies since the preparation of
that report.
Results of Operations
Three Months Ended June 30, 2009
Revenues.
Revenues of $69.3 million for the quarter ended June 30, 2009 decreased 22% compared to
$89.3 million in revenues for the same period in 2008. The decrease is mainly attributed to a 23%
decrease in proppant sales volume resulting from a decline in the number of rigs drilling for oil
and natural gas worldwide. Worldwide proppant sales volume totaled 216 million pounds for the
second quarter of 2009 compared to 281 million pounds for the second quarter of 2008. Despite an
approximate 50% decrease in the drilling rig count in the U.S. and Canada, sales volume in that
region decreased by only 18%. Sales volume decreases for most of the Companys products in the
U.S. and Canada were partially offset by greater demand for CARBO
PROP
®
and
CARBO
HYDROPROP
®
in shale formations. International (excluding Canada) sales volume
decreased 41% primarily due to decreases in Russia and North Africa partially offset by increases
in Mexico.
Gross Profit.
Gross profit for the second quarter of 2009 was $23.2 million, or 33% of revenues,
compared to $26.4 million, or 30% of revenues, for the second quarter of 2008. Despite lower gross
profit from decreased sales volume, gross profit as a percentage of sales increased primarily as a
result of a change in the mix of products sold, price increases for certain products and lower
freight costs.
Selling, General and Administrative (SG&A) and Other Operating Expenses.
SG&A expenses of $8.8
million for the second quarter of 2009 were essentially flat compared to SG&A expenses of $8.7
million for the same period in 2008. As a percentage of revenues, SG&A expenses increased to 12.7%
compared to 9.8% for second quarter of 2008 due to the fixed nature of these costs relative to
lower revenues. Other operating expenses of $0.2 million for the second quarter of 2008 consisted
primarily of a loss related to equipment disposals.
Other Income (Expense).
Other income for the second quarter of 2009 declined $0.2 million compared
to the same period in 2008. This decline is mainly attributable to an increase in foreign currency
exchange losses.
12
Income Tax Expense
. Income tax expense was $4.9 million, or 34.1% of pretax income, for the second
quarter of 2009 compared to $5.9 million, or 33.4% of pretax income, for the same period last year.
The $1.0 million decrease is due to lower pre-tax income partially offset by a higher effective
tax rate primarily associated with a tax refund in the second quarter of 2008 resulting from the
filing of an amended prior year state tax return.
Income from Discontinued Operations, Net of Income Taxes
. Income from discontinued operations for
the second quarter of 2008 was $1.8 million and includes gross profit of $6.1 million offset by
selling, general, and administrative expenses of $3.2 million. Income taxes related to
discontinued operations for the second quarter of 2008 was $1.1 million. The sale of the
discontinued operations was completed on October 10, 2008.
Six Months Ended June 30, 2009
Revenues
. Revenues of $160.0 million for the six months ended June 30, 2009 decreased 11% compared
to $179.7 million in revenues for the same period in 2008. Revenues decreased primarily due to a
17% decrease in sales volume partially offset by an 8% increase in the average proppant selling
price. Worldwide proppant sales volume totaled 469 million pounds in the first six months of 2009
compared to 563 million pounds for the same period in 2008. Despite an approximate 38% decrease in
the drilling rig count in the U.S. and Canada, sales volume in that region decreased by only 13%.
Sales volume decreases for most of the Companys products in the U.S. and Canada were partially
offset by greater demand for CARBO
PROP
®
and CARBO
HYDROPROP
®
in shale
formations. International (excluding Canada) sales volume decreased 30% primarily attributable to
decreases in Russia and North Africa partially offset by increase in Mexico. The higher average
selling price was primarily attributed to price increases introduced in the second half of 2008
that were partially offset by price reductions instituted during the second quarter of 2009.
Gross Profit.
Gross profit for the six months ended June 30, 2009 was $59.2 million, or 37% of
revenues, compared to $53.5 million, or 30% of revenues, for the same period in 2008. Gross
profit, as well as gross profit as a percentage of revenues, for the first half of 2009 increased
compared to the first half of 2008 in spite of decreased sales volume. This was primarily the
result of a change in the mix of products sold, price increases introduced during the second half
of 2008 that were partially offset by price reductions instituted during the second quarter of
2009, and lower freight costs.
Selling, General and Administrative (SG&A) and Other Operating Expenses.
SG&A expenses totaled
$20.3 million for the six months ended June 30, 2009 compared to $17.3 million for the same period
in 2008. As a percentage of revenues, SG&A expenses increased to 12.7% compared to 9.6% for second
quarter of 2008. Increases primarily resulted from higher administrative expenses necessary to
support the infrastructure for an enterprise information system implemented during the second
quarter of 2008, additional allowances for the collection of doubtful accounts, and costs
associated with the relocation of certain Company offices. Other operating expenses decreased $0.2
million as a result of costs incurred in early 2008 associated with the start-up of the second
production line at the Companys Toomsboro facility.
Other Income (Expense).
Other income for the six months ended June 30, 2009 declined $1.4 million
compared to the same period in 2008. This decline is mainly attributed to a $1.7 million decrease
in foreign currency exchange gains recognized during the first six months of 2008 that did not
recur in 2009 primarily as a result of the reduction in intercompany liabilities that were subject
to exchange rate fluctuations.
Income Tax Expense
. Income tax expense was $13.3 million, or 33.9% of pretax income, for the six
months ended June 30, 2009 compared to $12.9 million, or 34.3% of pretax income for the same period
last year. The $0.4 million increase is due to higher pre-tax income partially offset by a lower
effective tax rate primarily associated with mining depletion deductions that the Company began
claiming in the third quarter of 2008.
Income from Discontinued Operations, Net of Income Taxes
. Income from discontinued operations for
the six months ended June 30, 2008 was $3.2 million and includes gross profit of $10.9 million
offset by selling, general, and administrative expenses of $5.8 million. Income taxes related to
discontinued operations for the six months ended June 30, 2008 was $1.9 million. The sale of the
discontinued operations was completed on October 10, 2008.
13
Liquidity and Capital Resources
At June 30, 2009, the Company had cash and cash equivalents of $92.5 million compared to cash and
cash equivalents of $154.8 million at December 31, 2008. For the six months ended June 30, 2009,
the Company used $12.4 million of cash in operating activities of continuing operations, which
included $59.8 million of income tax payments associated with the sale of discontinued operations
on October 10, 2008, third and fourth quarter 2008 estimated tax payments that were deferred to
2009 as a result of hurricane Gustav tax relief, and 2009 taxable income. The Company also used
$19.7 million for capital expenditures, $8.0 million for the payment of cash dividends, $22.7
million for repurchases of the Companys Common Stock, and $0.1 million from the effect of exchange
rate changes on cash. Increases in cash included $0.6 million from employee exercises of stock
options.
The Company believes its operating results for the remainder of 2009 will continue to be influenced
by the decline in the level of drilling in North America. As a result of increased economic
pressures from the decline in rig counts fueled by low natural gas and oil prices and continued
weakness in the U.S. credit markets, the Company instituted in April 2009 certain price reductions
for its products in an effort to mitigate sales volume erosion. These price reductions will likely
continue to lower gross profit margins throughout the remainder of 2009. However, the Company
expects its ability to demonstrate the value of ceramic proppant relative to alternatives should
allow it to continue to generate sales opportunities. While the contraction in drilling activity
has recently slowed, the Company believes the levels of natural gas inventories in North America
and the current credit market are likely to prevent any notable recovery in drilling activity until
2010. Eventually, the Company expects that the steep decline curves in the resource plays
providing much of the incremental natural gas supply in North America will help in bringing supply
and demand more into balance. However, the Company is unable to determine how detrimental of an
effect the U.S. economic crisis will have on overall natural gas demand.
Subject to the Companys financial condition, the amount of funds generated from operations and the
level of capital expenditures, the Companys current intention is to continue to pay quarterly
dividends to holders of its common stock. On July 21, 2009, the Board of Directors declared a cash
dividend of $0.18 per common share, an increase of 6% from the dividend paid in May 2009. This
increased dividend is payable on August 17, 2009, to shareholders of record on August 3, 2009. The
Company estimates its total capital expenditures for the remainder of 2009 will be between $30.0
million and $35.0 million, which includes costs associated with the previously announced
construction of the Companys third production line at its Toomsboro, Georgia facility. However,
the project has been delayed, as certain permits needed to proceed with construction have not been
received as expected. The Company currently anticipates that the project will be completed in the
second half of 2010.
The Company maintains an unsecured line of credit of $10.0 million. As of June 30, 2009, there was
no outstanding debt under the credit agreement. The Company anticipates that cash on hand, cash
provided by operating activities and funds available under its line of credit will be sufficient to
meet planned operating expenses, tax obligations, capital expenditures and other cash needs for the
next 12 months. The Company also believes that it could acquire additional debt financing, if
needed. Based on these assumptions, the Company believes that its fixed costs could be met even
with a moderate decrease in demand for the Companys products.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of June 30, 2009.
Forward-Looking Information
The statements in this Form 10-Q that are not historical statements, including statements regarding
our future financial and operating performance and liquidity and capital resources, are
forward-looking statements within the meaning of the federal securities laws. All forward-looking
statements are based on managements current expectations and estimates, which involve risks and
uncertainties that could cause actual results to differ materially from those expressed in the
forward-looking statements. Among these factors are:
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changes in overall economic conditions,
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changes in the cost of raw materials and natural gas used in manufacturing our
products,
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changes in demand and prices charged for our products,
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changes in the demand for, or price of, oil and natural gas,
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14
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risks of increased competition,
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technological, manufacturing and product development risks,
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loss of key customers,
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changes in foreign and domestic government regulations,
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changes in foreign and domestic political and legislative risks,
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the risks of war and international and domestic terrorism,
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risks associated with foreign operations and foreign currency exchange rates and
controls, and
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weather-related risks and other risks and uncertainties.
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Additional factors that could affect our future results or events are described from time to time
in our reports filed with the Securities and Exchange Commission (the SEC). See in particular
our Form 10-K for the fiscal year ended December 31, 2008 under the caption Risk Factors and
similar disclosures in subsequently filed reports with the SEC. We assume no obligation to update
forward-looking statements, except as required by law.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys major market risk exposure is to foreign currency fluctuations that could impact its
investments in China and Russia. As of June 30, 2009, the Companys net investment that is subject
to foreign currency fluctuations totaled $74.5 million and the Company has recorded a cumulative
foreign currency translation loss of $4.6 million, net of deferred income tax benefit. This
cumulative translation loss is included in Accumulated Other Comprehensive Loss. Also, the
Companys subsidiary in Russia previously borrowed up to $40.8 million from another subsidiary of
the Company to fund construction of a manufacturing plant in Russia. During the third quarter of
2008, this indebtedness was significantly reduced and subsequently further reduced to $0.2 million
as of June 30, 2009. This indebtedness, while eliminated in consolidation of the financial
statements, is subject to exchange rate fluctuations between the local reporting currency and the
currency in which the debt is denominated. Currency exchange rate fluctuations associated with
this indebtedness result in gains and losses that impact net income. The gains and losses are
presented in Other Income (Expense). When necessary, the Company may enter into forward foreign
exchange contracts to hedge the impact of foreign currency fluctuations. There were no such
foreign exchange contracts outstanding at June 30, 2009.
ITEM 4.
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed
in the reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is
recorded, processed, summarized and reported, within the time periods specified in the SECs rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the reports filed under the
Exchange Act is accumulated and communicated to management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
As of June 30, 2009, management carried out an evaluation, under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure controls and procedures. There are inherent
limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly,
even effective disclosure controls and procedures can only provide reasonable assurances of
achieving their control objectives. Based upon and as of the date of that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls
and procedures were effective to ensure that information required to be disclosed by the Company in
the reports it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SECs rules and forms, and to ensure that
information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the Companys management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
15
(b) Changes in Internal Control over Financial Reporting
There were no changes in the Companys internal control over financial reporting during the quarter
ended June 30, 2009, that materially affected, or are reasonably likely to materially affect, those
controls.
PART II. OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS
|
On January 26, 2007, following self-disclosure of certain air pollution emissions, the Company
received a Notice of Violation (NOV) from the State of Georgia Environmental Protection Division
(EPD) regarding appropriate permitting for emissions of two specific substances from its
Toomsboro, Georgia facility. On May 22, 2007, a second NOV was issued for the McIntyre plant for
alleged violations similar to those in the January NOV related to the Toomsboro facility.
In May 2009, the Company entered into a consent order with the EPD to resolve the
Toomsboro and McIntyre NOVs. Pursuant to the consent order, the Company has paid the EPD a fine of
$258,000. In addition, the Company must pay the EPD a further fine of $112,000 within
approximately one year from the date of the consent order, less certain amounts that the Company can demonstrate
have been spent in order to implement emission reductions at these facilities. Finally, the
consent order requires the Company to pay any unpaid permit fees from certain prior years that
would have been payable on account of the Companys actual emissions at the time. While the
amount of these further permit fees are not determinable at this time, the Company presently
estimates the amount of such fees to be less than approximately $100,000.
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
The following table provides information about the Companys repurchases of Common Stock during the
quarter ended June 30, 2009:
ISSUER PURCHASES OF EQUITY SECURITIES
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Maximum
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Total Number of
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Number of
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Shares Purchased
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Shares that May
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Total Number
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Average
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as Part of Publicly
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Yet be Purchased
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of Shares
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Price Paid
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Announced
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Under the
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Period
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Purchased
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per Share(1)
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Plan(2)(3)
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Plan(4)
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04/01/09 to 04/30/09
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$
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495,500
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05/01/09 to 05/31/09
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38,576
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$
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35.25
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38,576
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456,924
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06/01/09 to 06/30/09
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198,563
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(5)
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$
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34.39
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198,309
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258,615
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Total
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237,139
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236,885
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(1)
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Average price paid excludes commissions
.
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(2)
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On August 28, 2008, the Company announced the authorization by its Board of Directors
for the repurchase of up to two million shares of its Common Stock.
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(3)
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Selected repurchases were made under a Written Plan for the Repurchase of Securities
with an agent that complies with the requirements of Rule 10b5-1 of the Securities
Exchange Act (the 10b5-1 Agreement). The agent repurchased a number of shares of our
Common Stock determined under the terms of the 10b5-1 Agreement each trading day based on
the trading price of the stock on that day. Shares were repurchased by the agent at the
prevailing market prices in open market transactions, which complied with Rule 10b-18 of
the Exchange Act.
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16
(4)
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Represents the maximum number of shares that may be repurchased under the previously
announced authorization as of period end. As of August 3, 2009, a maximum of 256,924
shares may be repurchased under the previously announced authorization.
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(5)
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Includes 254 shares of restricted stock withheld for the payment of withholding taxes
upon the vesting of restricted stock.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES
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ITEM 4.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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a.
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The Annual Meeting of Shareholders of Carbo Ceramics Inc. was held on May 19, 2009.
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b.
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The following matters were submitted to a vote at the meeting:
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(1)
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The election of the following nominees as directors of CARBO Ceramics Inc.
Votes representing 20,996,233 shares of Common Stock were cast. The vote with
respect to each nominee was as follows:
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Nominee
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For
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Withheld
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Chad C. Deaton
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20,528,819
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467,414
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James B. Jennings
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20,641,683
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354,550
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Gary A. Kolstad
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20,616,845
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379,388
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H. E. Lentz, Jr.
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20,528,771
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467,462
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Randy L. Limbacher
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20,641,479
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354,754
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William C. Morris
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20,443,244
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552,989
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Robert S. Rubin
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15,133,936
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5,862,297
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(2)
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The ratification of the CARBO Ceramics Inc. Omnibus Incentive Plan. Votes
representing 19,669,753 shares of Common Stock were cast. Results of the vote were
as follows: 18,525,768 for, 12,531 against, and 1,131,454 abstained.
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(3)
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The ratification of the appointment of Ernst & Young LLP as independent
registered public accounting firm to audit the consolidated financial statements of
CARBO Ceramics Inc. for the year 2009. Votes representing 20,996,233 shares of
Common Stock were cast. Results of the vote were as follows: 20,408,058 for, 3,278
against, and 584,897 abstained.
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ITEM 5.
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OTHER INFORMATION
|
Not applicable
The following exhibits are filed as part of, or incorporated by reference into, this
Quarterly Report on Form 10-Q:
10.1
|
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Form of Amended and Restated Officer Restricted Stock Award Agreement.
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10.2
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Form of Relocation Policy
|
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31.1
|
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Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad.
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31.2
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Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III.
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32
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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17
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.
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CARBO CERAMICS INC.
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/s/ Gary A. Kolstad
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Gary A. Kolstad
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President and Chief Executive Officer
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/s/ Ernesto Bautista III
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Ernesto Bautista III
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Chief Financial Officer
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Date:
August 5, 2009
18
EXHIBIT INDEX
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EXHIBIT
|
|
DESCRIPTION
|
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|
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10.1
|
|
Form of Amended and Restated Officer Restricted Stock Award Agreement.
|
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10.2
|
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Form of Relocation Policy
|
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31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad.
|
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31.2
|
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Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III.
|
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32
|
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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19
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