Table of Contents

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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. 001-15903

 

 

CARBO CERAMICS INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   72-1100013

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

575 North Dairy Ashford

Suite 300

Houston, TX 77079

(Address of principal executive offices)

(281) 921-6400

(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    ¨

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   x     No   ¨

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.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   x

As of July 31, 2012, 23,084,166 shares of the registrant’s Common Stock, par value $.01 per share, were outstanding.

 

 

 


Table of Contents

CARBO CERAMICS INC.

Index to Quarterly Report on Form 10-Q

 

     PAGE  

PART I. FINANCIAL INFORMATION

  

Item 1.  Financial Statements

     3   

Consolidated Balance Sheets - June 30, 2012 (Unaudited) and December 31, 2011

     3   

Consolidated Statements of Income (Unaudited) - Three and six months ended June 30, 2012 and 2011

     4   

Consolidated Statements of Comprehensive Income (Unaudited) - Three and six months ended June  30, 2012 and 2011

     5   

Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 2012 and 2011

     6   

Notes to Consolidated Financial Statements (Unaudited)

     7-10   

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

     11-14   

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

     14   

Item 4.   Controls and Procedures

     14   

PART II. OTHER INFORMATION

  

Item 1.   Legal Proceedings

     14-15   

Item 1A. Risk Factors

     15   

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

     15-16   

Item 3.   Defaults Upon Senior Securities

     16   

Item 4.   Mine Safety Disclosure

     16   

Item 5.   Other Information

     16   

Item 6.   Exhibits

     16   

Signatures

     17   

Exhibit Index

     18   

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CARBO CERAMICS INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)

 

     June 30,     December 31,  
     2012     2011  
     (Unaudited)     (Note 1)  
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 34,866      $ 41,270   

Trade accounts and other receivables, net

     117,337        112,014   

Inventories:

    

Finished goods

     101,173        105,233   

Raw materials and supplies

     28,965        26,783   
  

 

 

   

 

 

 

Total inventories

     130,138        132,016   

Prepaid expenses and other current assets

     5,488        4,023   

Prepaid income taxes

     —          3,279   

Deferred income taxes

     9,909        9,963   
  

 

 

   

 

 

 

Total current assets

     297,738        302,565   

Property, plant and equipment:

    

Land and land improvements

     14,510        14,512   

Land-use and mineral rights

     7,618        8,610   

Buildings

     70,798        67,120   

Machinery and equipment

     493,378        455,563   

Construction in progress

     55,119        48,778   
  

 

 

   

 

 

 

Total

     641,423        594,583   

Less accumulated depreciation and amortization

     220,673        201,924   
  

 

 

   

 

 

 

Net property, plant and equipment

     420,750        392,659   

Goodwill

     12,164        12,164   

Intangible and other assets, net

     32,624        33,477   
  

 

 

   

 

 

 

Total assets

   $ 763,276      $ 740,865   
  

 

 

   

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 20,101      $ 38,192   

Accrued income taxes

     1,233        —     

Other accrued expenses

     28,392        40,874   
  

 

 

   

 

 

 

Total current liabilities

     49,726        79,066   

Deferred income taxes

     36,476        31,641   

Shareholders’ equity:

    

Preferred stock, par value $0.01 per share, 5,000 shares authorized, none outstanding

     —          —     

Common stock, par value $0.01 per share, 80,000,000 and 40,000,000 shares authorized at June 30, 2012 and December 31, 2011, respectively; 23,084,828 and 23,106,358 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

     231        231   

Additional paid-in capital

     55,032        56,539   

Retained earnings

     626,437        577,253   

Accumulated other comprehensive loss

     (4,626     (3,865
  

 

 

   

 

 

 

Total shareholders’ equity

     677,074        630,158   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 763,276      $ 740,865   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

3


Table of Contents

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except per share data)

(Unaudited)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  

Revenues

   $ 177,614      $ 149,669      $ 340,780      $ 300,499   

Cost of sales

     113,361        87,551        213,063        176,325   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     64,253        62,118        127,717        124,174   

Selling, general and administrative expenses

     17,056        15,845        33,708        30,132   

Start-up costs

     6        —          68        —     

(Gain) loss on disposal or impairment of assets

     (59     (30     (54     1,649   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     47,250        46,303        93,995        92,393   

Other income (expense):

        

Interest income (expense), net

     9        56        (35     100   

Foreign currency exchange gain (loss), net

     579        (126     144        (314

Other, net

     47        (53     (212     (130
  

 

 

   

 

 

   

 

 

   

 

 

 
     635        (123     (103     (344
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     47,885        46,180        93,892        92,049   

Income taxes

     15,968        16,236        31,684        31,941   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 31,917      $ 29,944      $ 62,208      $ 60,108   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 1.38      $ 1.29      $ 2.69      $ 2.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.38      $ 1.29      $ 2.69      $ 2.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other information:

        

Dividends declared per common share (See Note 4)

   $ —        $ —        $ 0.48      $ 0.40   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

4


Table of Contents

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  

Net income

   $ 31,917      $ 29,944      $ 62,208      $ 60,108   

Other comprehensive (loss) income:

        

Foreign currency translation adjustment

     (6,002     1,436        (1,171     5,251   

Deferred income tax benefit (expense)

     2,101        (591     410        (810
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

     (3,901     845        (761     4,441   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 28,016      $ 30,789      $ 61,447      $ 64,549   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

5


Table of Contents

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

(Unaudited)

 

     Six months ended
June 30,
 
     2012     2011  

Operating activities

    

Net income

   $ 62,208      $ 60,108   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     21,801        16,487   

Provision for doubtful accounts

     12        —     

Deferred income taxes

     5,299        2,905   

Excess tax benefits from stock based compensation

     (1,257     (1,270

(Gain)/loss on disposal or impairment of assets

     (54     1,649   

Foreign currency transaction (gain) loss, net

     (144     314   

Stock compensation expense

     3,087        2,795   

Changes in operating assets and liabilities:

    

Trade accounts and other receivables

     (5,525     (14,291

Inventories

     1,938        (13,293

Prepaid expenses and other current assets

     (1,451     (2,242

Long-term prepaid expenses

     766        447   

Accounts payable

     (18,142     (2,583

Accrued expenses

     (12,482     2,689   

Accrued income taxes, net

     5,764        (1,576
  

 

 

   

 

 

 

Net cash provided by operating activities

     61,820        52,139   

Investing activities

    

Capital expenditures

     (50,288     (37,468
  

 

 

   

 

 

 

Net cash used in investing activities

     (50,288     (37,468

Financing activities

    

Proceeds from bank borrowings

     10,000        —     

Repayments on bank borrowings

     (10,000     —     

Net proceeds from stock based compensation

     —          76   

Dividends paid

     (11,095     (9,264

Purchase of common stock

     (7,655     (814

Excess tax benefits from stock based compensation

     1,257        1,270   
  

 

 

   

 

 

 

Net cash used in financing activities

     (17,493     (8,732

Effect of exchange rate changes on cash

     (443     655   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (6,404     6,594   

Cash and cash equivalents at beginning of period

     41,270        46,656   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 34,866      $ 53,250   
  

 

 

   

 

 

 

Supplemental cash flow information

    

Interest paid

   $ 72      $ —     
  

 

 

   

 

 

 

Income taxes paid

   $ 20,621      $ 30,611   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these statements.

 

6


Table of Contents

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 United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required 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, 2011 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, 2011 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year ended December 31, 2011.

The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its operating subsidiaries (the “Company”). 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.

Disposal or Impairment of Assets

During the three month period ended March 31, 2011, the Company recorded an $890 impairment of goodwill related to the Company’s geotechnical monitoring business and a $760 write-down of a 6% interest in an investment accounted for under the cost method, as a result of the sale of the business by majority shareholders.

2. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share under the two-class method:

 

     Three months ended     Six months ended  
     June 30,     June 30,  
     2012     2011     2012     2011  

Numerator for basic and diluted earnings per share:

        

Net income

   $ 31,917      $ 29,944      $ 62,208      $ 60,108   

Effect of reallocating undistributed earnings of participating securities

     (171     (174     (336     (350
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available under the two-class method

   $ 31,746      $ 29,770      $ 61,872      $ 59,758   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Denominator for basic earnings per share— weighted-average shares

     22,961,130        23,027,104        22,967,558        23,020,851   

Effect of dilutive securities:

        

Employee stock options

     1,220        1,346        1,250        1,324   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dilutive potential common shares

     1,220        1,346        1,250        1,324   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for diluted earnings per share— adjusted weighted-average shares

     22,962,350        23,028,450        22,968,808        23,022,175   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 1.38      $ 1.29      $ 2.69      $ 2.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 1.38      $ 1.29      $ 2.69      $ 2.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

7


Table of Contents

3. Common Stock Repurchase Program

On August 28, 2008, the Company’s Board of Directors authorized the repurchase of up to two million shares of the Company’s Common Stock. Shares are effectively retired at the time of purchase. During the six months ended June 30, 2012, the Company repurchased and retired 60,000 shares at an aggregate price of $5,726. As of June 30, 2012, the Company has repurchased and retired 1,877,576 shares at an aggregate price of $78,301.

4. Dividends Paid

On March 20, 2012, the Board of Directors declared a cash dividend of $0.24 per common share payable to shareholders of record on May 1, 2012. The dividend was paid on May 15, 2012. On July 17, 2012, the Board of Directors declared a cash dividend of $0.27 per common share payable to shareholders of record on August 1, 2012. This dividend is payable on August 15, 2012.

5. Stock Based Compensation

The CARBO Ceramics Inc. Omnibus Incentive Plan (the “Omnibus Incentive Plan”) provides for granting of 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. Awards may be granted with respect to a number of shares of the Company’s 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) in equal annual installments over a three-year period but subject to certain limitations, awards may specify other vesting periods. As of June 30, 2012, 569,091 shares were available for issuance under the Omnibus Incentive Plan. Although the Company’s previous stock option plan has expired, outstanding options under the plan remain outstanding in accordance with their terms.

As of June 30, 2012, all compensation cost related to stock options granted under the expired stock option plan has been recognized. There were no stock options exercised during the six months ended June 30, 2012. The weighted-average remaining contractual term of the 2,425 options outstanding at June 30, 2012 was approximately 3 months.

A summary of restricted stock activity and related information for the six months ended June 30, 2012 is presented below:

 

     Shares     Weighted-
Average
Grant-Date

Fair Value
 

Nonvested at January 1, 2012

     129,082      $ 75.00   

Granted

     55,652      $ 119.22   

Vested

     (58,461   $ 66.15   

Forfeited

     (3,946   $ 93.80   
  

 

 

   

Nonvested at June 30, 2012

     122,327      $ 98.75   
  

 

 

   

As of June 30, 2012, there was $7,944 of total unrecognized compensation cost, net of estimated forfeitures, related to restricted shares granted under the Omnibus Incentive Plan. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested during the six months ended June 30, 2012 was $3,867.

 

8


Table of Contents

The Company has made phantom stock awards to key international employees pursuant to the Omnibus Incentive Plan. The units subject to an award vest and cease to be forfeitable in equal annual installments over a three-year period. 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 with regard to outstanding phantom shares. As of June 30, 2012, there were 10,105 units of phantom shares granted under the Omnibus Incentive Plan, of which 3,429 have vested and 1,076 have been forfeited, with a total value of $430, a portion of which is accrued as a liability within Other Accrued Expenses.

6. Bank Borrowings

The Company has an unsecured revolving credit agreement with a bank. On March 5, 2012, the Company entered into a first amendment to this credit agreement to (i) extend its maturity date from January 29, 2013 to July 29, 2013, (ii) increase the size from $10,000 to $25,000, and (iii) make other administrative changes to certain covenants and provisions. The Company has the option of choosing either the bank’s fluctuating Base Rate or LIBOR Fixed Rate, plus an Applicable Margin, all as defined in the credit agreement. The terms of the credit agreement provide for certain affirmative and negative covenants and require the Company to maintain certain financial ratios. Commitment fees are payable quarterly at the annual rate of 0.50% of the unused line of credit. During the six-month period ended June 30, 2012, the Company borrowed and repaid $10,000 under the line of credit.

7. Foreign Currencies

As of June 30, 2012, the Company’s net investment that is subject to foreign currency fluctuations totaled $86,816 and the Company has recorded cumulative foreign currency translation loss of $4,626, net of deferred income tax benefit. This cumulative translation loss is included in Accumulated Other Comprehensive Loss.

8. New Accounting Pronouncements

In December 2010, the FASB issued authoritative guidance on application of the goodwill impairment model when a reporting unit has a zero or negative carrying amount. When a reporting unit has a zero or negative carrying value, Step 2 of the goodwill impairment test should be performed if qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The guidance is effective for the Company beginning in the first quarter of fiscal 2012. The Company adopted this guidance as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.

In December 2010, the FASB issued authoritative guidance on disclosure of supplementary pro forma information for business combinations. The new guidance requires that pro forma financial information should be prepared as if the business combination occurred as of the beginning of the prior annual period. The guidance is effective for the Company for business combinations with acquisition dates occurring in and from the first quarter of fiscal 2012. The Company adopted this guidance as of January 1, 2012. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.

9. 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 Company’s consolidated financial position, results of operations, or cash flows.

On February 9, 2012, the Company and two of its officers, Gary A. Kolstad and Ernesto Bautista III, were named as defendants in a purported class-action lawsuit filed in the United States District Court for the Southern District of New York (the “February SDNY Lawsuit”), brought on behalf of shareholders who purchased the Company’s Common Stock between October 27, 2011 and January 26, 2012 (the “Relevant Time Period”). The suit alleges violations of the federal securities laws arising from statements concerning the Company’s business operations and business prospects that were made during the Relevant Time Period and requests unspecified damages and costs. On April 10, 2012, a second purported class-action lawsuit was filed against the same defendants in the United States District Court for the Southern District of New York, brought

 

9


Table of Contents

on behalf of shareholders who purchased or sold CARBO Ceramics Inc. option contracts during the Relevant Time Period (the “April SDNY Lawsuit, and collectively with the February SDNY Lawsuit, the “Federal Securities Lawsuit”), which alleges substantially similar claims as the February SDNY Lawsuit and requests unspecified damages and costs. In June 2012, the February SNDY Lawsuit and the April SDNY Lawsuit were consolidated, and will now proceed as one lawsuit.

On April 19, 2012, a third purported class-action lawsuit was filed against the same defendants in the United States District Court for the Southern District of Texas, which was also brought on behalf of shareholders who purchased shares during the Relevant Time Period. This lawsuit alleged substantially similar claims as the February SDNY Lawsuit and requested unspecified damages and costs. In June 2012, this lawsuit was dismissed without prejudice.

On March 1, 2012, the Directors of the Company and Mr. Bautista were named as defendants in a purported derivative action lawsuit brought on behalf of the Company by a stockholder in District Court in Harris County, Texas (the “March Harris County Lawsuit”). The suit alleges various breaches of fiduciary duty and other duties by the defendants that generally are related to the February SDNY Lawsuit, and requests unspecified damages and costs. The parties to this lawsuit have entered into an agreement to stay further proceedings pending the outcome of a motion to dismiss the Federal Securities Lawsuit.

On June 13, 2012, the Directors of the Company and Mr. Bautista were named as defendants in a second purported derivative action lawsuit brought on behalf of the Company by a stockholder in District Court in Harris County, Texas (this lawsuit collectively with the March Harris County Lawsuit, the “Harris County Lawsuits”). This lawsuit alleges substantially similar claims as the March Harris County Lawsuit as well as a breach of duty against certain defendants in connection with stock sales. This lawsuit also requests unspecified damages and costs. The parties to this lawsuit have also entered into an agreement to stay further proceedings pending the outcome of a motion to dismiss the Federal Securities Lawsuit.

While each of the Federal Securities Lawsuit and the Harris County Lawsuits are in their preliminary stages, the Company does not believe they have merit, and plans to vigorously contest and defend against them.

The Company cannot predict the ultimate outcome or duration of these lawsuits.

 

10


Table of Contents

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business

The Company generates revenue primarily through the sale of products and services to the oil and natural gas industry. The Company’s principal business consists of manufacturing and selling ceramic proppant and resin-coated sand for use primarily in the hydraulic fracturing of oil and natural gas wells. The Company also provides the industry’s most popular hydraulic fracture simulation software FracPro ® , as well as hydraulic fracture design and consulting services. In addition, the Company provides a broad range of technologies for spill prevention, containment and countermeasures, along with geotechnical monitoring.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with United States generally accepted accounting principles, 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, 2011). The Company believes that some of its accounting policies involve a higher degree of judgment and complexity than others. As of December 31, 2011, critical accounting policies for the Company included revenue recognition, estimating the recoverability of accounts receivable, inventory valuation, accounting for income taxes and accounting for long-lived assets. These critical accounting policies are discussed more fully in the Company’s annual report on Form 10-K for the year ended December 31, 2011. There have been no changes in the Company’s evaluation of its critical accounting policies since December 31, 2011.

Results of Operations

Three Months Ended June 30, 2012

Revenues. Revenues of $177.6 million for the quarter ended June 30, 2012 increased 19% compared to $149.7 million in revenues for the same period in 2011. The increase is mainly attributed to a 17% increase in proppant sales volume and an increase in revenues of some of the Company’s other business units. Worldwide proppant sales volume totaled 454 million pounds for the second quarter of 2012 compared to 387 million pounds for the second quarter of 2011. North American (defined as Canada and the U.S.) sales volume increased 17% largely driven by an increase in the oil rig count in the U.S. as well as acceptance of the Company’s products in oily, liquids-rich basins. International (excluding Canada) sales volume increased 20% primarily due to increased sales volumes in Mexico and Russia. Other Proppants (resin-coated sand and ceramic proppant manufactured on an outsourced basis) represented 51 million pounds of the Company’s worldwide sales volumes in the second quarter of 2012, as compared to 23 million pounds in the second quarter of 2011. The average selling price per pound of all proppant remained relatively flat at $0.358 during the second quarter of 2012 compared to $0.356 for the same period in 2011.

Gross Profit. Gross profit for the second quarter of 2012 was $64.3 million, or 36% of revenues, compared to $62.1 million, or 42% of revenues, for the second quarter of 2011. The increase in gross profit was primarily the result of higher proppant sales volumes and a greater contribution from some of the Company’s other business units, partially offset by an increase in freight and logistics costs. Gross profit as a percentage of revenues decreased primarily as a result of higher freight and logistics costs and a change in the mix of products sold.

Selling, General and Administrative (SG&A). SG&A expenses totaled $17.1 million for the second quarter of 2012 compared to $15.8 million for the same period in 2011. As a percentage of revenues, SG&A expenses decreased to 9.6% compared to 10.6% for the second quarter of 2011.

Other Income (Expense). Other income for the second quarter of 2012 increased $0.8 million compared to the same period in 2011. This increase is mainly attributed to gains resulting from changes in exchange rates between the functional currency and the foreign currency in which the effective transactions were denominated.

Income Tax Expense . Income tax expense was $16.0 million, or 33.3% of pretax income, for the second quarter of 2012 compared to $16.2 million, or 35.2% of pretax income, for the same period last year. The lower effective tax rate is primarily due to additional tax benefits relating to mining depletion deductions.

 

11


Table of Contents

Six Months Ended June 30, 2012

Revenues . Revenues of $340.8 million for the six months ended June 30, 2012 increased 13% compared to $300.5 million in revenues for the same period in 2011. Revenues increased primarily due to a 9% increase in proppant sales volume, a 3% increase in the average proppant selling price and an increase in revenues for some of the Company’s other business units. Worldwide proppant sales volume totaled 857 million pounds in the first six months of 2012 compared to 785 million pounds for the same period in 2011. North American (defined as Canada and the U.S.) sales volume increased 7% due primarily to an increase in the oil rig count in the U.S. as well as acceptance of the Company’s products in oily, liquids-rich basins. International (excluding Canada) sales volume increased 21% primarily due to increased sales volumes in Mexico, Russia and China. Other Proppants (resin-coated sand and ceramic proppant manufactured on an outsourced basis) represented 92 million pounds of the Company’s worldwide sales volumes in the first six months of 2012, as compared to 46 million pounds for the same period in 2011. The average selling price per pound of all proppant was $0.364 during the six months ended June 30, 2012 compared to $0.353 for the same period in 2011.

Gross Profit. Gross profit for the six months ended June 30, 2012 was $127.7 million, or 37% of revenues, compared to $124.2 million, or 41% of revenues, for the same period in 2011. The increase in gross profit was primarily the result of higher proppant sales volumes, an increase in the average proppant selling price and a greater contribution from some of the Company’s other business units, partially offset by an increase in freight and logistics costs. Gross profit as a percentage of revenues decreased primarily as a result of higher freight and logistics costs and a change in the mix of products sold.

Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A expenses totaled $33.7 million for the six months ended June 30, 2012 compared to $30.1 million for the same period in 2011. As a percentage of revenues, SG&A expenses remained relatively flat at 9.9% for the six months ended June 30, 2012 compared to 10.0% for the same period in 2011. The increase in SG&A expenses primarily resulted from higher marketing, research and development, and administrative spending. Start-up costs of $0.1 million in 2012 related to the start-up of the second resin-coating line at the Company’s New Iberia, Louisiana facility. Loss on disposal or impairment of assets of $1.6 million in 2011 consists primarily of a $0.9 million impairment of goodwill related to the Company’s geotechnical monitoring business and a $0.8 million write-down of a 6% interest in an investment accounted for under the cost method as a result of the sale of the business by majority shareholders.

Other Income (Expense). Other expense for the six months ended June 30, 2012 decreased $0.2 million compared to the same period in 2011 due primarily to changes in exchange rates between the functional currency and the foreign currency in which the effective transactions were denominated.

Income Tax Expense . Income tax expense was $31.7 million, or 33.7% of pretax income, for the six months ended June 30, 2012 compared to $31.9 million, or 34.7% of pretax income for the same period last year. The lower effective tax rate is due primarily to additional tax benefits in 2012 relating to mining depletion deductions.

Outlook

The Company believes its operating results for the remainder of 2012 will continue to be influenced by the level of oil and natural gas drilling in North America. A severe decline in natural gas prices in the U.S. in late 2011 led businesses engaged in the exploration and production of oil and natural gas to reduce drilling activity and capital spending in natural gas basins, including shale plays, and to increase capital spending towards oily, liquids-rich basins.

The continuing shift in oilfield activity by the Company’s clients to oily, liquids-rich plays remains encouraging. However, the combination of a low natural gas price, volatility in oil and natural gas liquids markets, and the over-supply of imported Chinese ceramic proppant is causing disruptions within the industry, and the Company believes these disruptions will place pressure on proppant pricing, volumes and margins for the remainder of the year. In addition, the increased amount of activity in infrastructure-limited, liquids-rich basins introduced supply chain challenges to the industry. These challenges resulted in higher supply chain costs in the first half of 2012 for the Company. The Company expects that a portion of these costs will likely continue for the balance of the year.

 

12


Table of Contents

The Company expects to support near-term demand with its current ceramic production capacity of 1.7 billion pounds per year, along with existing inventories of ceramic proppant that meets API/ISO standards manufactured on an outsourced basis. With respect to resin-coating capacity expansion, the second production line in New Iberia, Louisiana was completed during the first quarter of 2012 and increased the Company’s annual resin-coating capacity to 400 million pounds. Near the end of the second quarter of 2012, the Company began to utilize its own northern white sand in its sand processing facility in Marshfield, Wisconsin. With respect to the resin-coating expansion in Marshfield, the Company has deferred further construction at this time. The Company will consider resuming construction when warranted by market conditions. Additionally, the Company has been issued an Air Quality Permit for its proposed ceramic proppant manufacturing plant in Millen, Georgia. The Company is moving forward with construction of the first 250 million pound line and anticipates the Millen plant could commence operation before the end of 2013.

Liquidity and Capital Resources

At June 30, 2012, the Company had cash and cash equivalents of $34.9 million compared to cash and cash equivalents of $41.3 million at December 31, 2011. For the six months ended June 30, 2012, the Company generated $61.8 million of cash from operating activities and $1.3 million from excess tax benefits relating to stock based compensation. Uses of cash included $50.3 million of capital spending, $11.1 million of cash dividends, $7.7 million for the repurchases of the Company’s Common Stock and $0.4 million for the effect of exchange rate changes on cash. In addition, during the first six months of 2012, the Company borrowed and fully repaid a total of $10.0 million on its credit facility.

Subject to the Company’s financial condition, the amount of funds generated from operations and the level of capital expenditures, the Company’s current intention is to continue to pay quarterly dividends to holders of its common stock. On July 17, 2012, the Board of Directors declared a cash dividend of $0.27 per common share payable to shareholders of record on August 1, 2012. This dividend is payable on August 15, 2012. The Company estimates its total capital expenditures for the remainder of 2012 will be between $45.0 million and $55.0 million. Capital expenditures for the remainder of 2012 are expected to include costs associated with expansion of the Company’s distribution infrastructure and the construction of the new manufacturing facility in the Millen, Georgia area.

The Company maintains a $25.0 million unsecured line of credit with Wells Fargo Bank, N.A. As of June 30, 2012, 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. Based on these assumptions, the Company believes that its fixed costs could be met even with a moderate decrease in demand for the Company’s products.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of June 30, 2012.

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 management’s 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:

 

   

changes in overall economic conditions,

 

   

changes in the cost of raw materials and natural gas used in manufacturing our products,

 

   

changes in demand and prices charged 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 foreign and domestic government regulations, including environmental restrictions on operations and regulation of hydraulic fracturing,

 

   

changes in foreign and domestic political and legislative risks,

 

13


Table of Contents
   

the risks of war and international and domestic terrorism,

 

   

risks associated with foreign operations and foreign currency exchange rates and controls, and

 

   

weather-related risks and other risks and uncertainties.

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 annual report on Form 10-K for the fiscal year ended December 31, 2011 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 Company’s major market risk exposure is to foreign currency fluctuations that could impact its investments in China and Russia. As of June 30, 2012, the Company’s net investment that is subject to foreign currency fluctuations totaled $86.8 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. From time to time, 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, 2012.

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 SEC’s 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, 2012, 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 Company’s 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 Company’s 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 SEC’s 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 Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

( b) Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2012, that materially affected, or are reasonably likely to materially affect, those controls.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 9, 2012, the Company, Gary A. Kolstad and Ernesto Bautista III, were named as defendants in a purported class-action lawsuit filed in the United States District Court for the Southern District of New York (the “February SDNY Lawsuit”), brought on behalf of shareholders who purchased the Company’s Common Stock between October 27, 2011 and January 26, 2012 (the “Relevant Time Period”). The suit alleges violations of the federal securities laws arising from statements concerning the Company’s business operations and business prospects that were made

 

14


Table of Contents

during the class period and requests unspecified damages and costs. On April 10, 2012, a second purported class-action lawsuit was filed against the same defendants in the United States District Court for the Southern District of New York, brought on behalf of investors who purchased or sold CARBO Ceramics Inc. option contracts during the Relevant Time Period (the “April SDNY Lawsuit,” and collectively with the February SDNY Lawsuit, the “Federal Securities Lawsuit”), which alleges substantially similar claims as the February SDNY Lawsuit and requests unspecified damages and costs. In June 2012, the February SNDY Lawsuit and the April SDNY Lawsuit were consolidated, and will now proceed as one lawsuit.

On April 19, 2012, a third purported class-action lawsuit was filed against the same defendants in the United States District Court for the Southern District of Texas, which was also brought on behalf of shareholders who purchased shares during the Relevant Time Period. This lawsuit alleged substantially similar claims as the February SDNY Lawsuit and requested unspecified damages and costs. In June 2012, this lawsuit was dismissed without prejudice.

On March 1, 2012, the Directors of the Company and Mr. Bautista were named as defendants in a purported derivative action lawsuit brought on behalf of the Company by a stockholder in District Court in Harris County, Texas (the “March Harris County Lawsuit”). The suit alleges various breaches of fiduciary duty and other duties by the defendants that generally are related to the February SDNY Lawsuit, and requests unspecified damages and costs. The parties to this lawsuit have entered into an agreement to stay further proceedings pending the outcome of a motion to dismiss the Federal Securities Lawsuit.

On June 13, 2012, the Directors of the Company and Mr. Bautista were named as defendants in a second purported derivative action lawsuit brought on behalf of the Company by a stockholder in District Court in Harris County, Texas (this lawsuit collectively with the March Harris County Lawsuit, the “Harris County Lawsuits”). This lawsuit alleges substantially similar claims as the March Harris County Lawsuit as well as a breach of duty against certain defendants in connection with stock sales. This lawsuit also requests unspecified damages and costs. The parties to this lawsuit have entered into an agreement to stay further proceedings pending the outcome of a motion to dismiss the Federal Securities Lawsuit.

While each of the Federal Securities Lawsuit and the Harris County Lawsuits are in their preliminary stages, the Company does not believe they have merit, and plans to vigorously contest and defend against them.

Additionally, from time to time, the Company is the subject of legal proceedings arising in the ordinary course of business. The Company does not believe that any of these proceedings will have a material effect on its business or its results of operations.

The Company cannot predict the ultimate outcome or duration of any lawsuit described in this report.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about the Company’s repurchases of Common Stock during the quarter ended June 30, 2012:

 

15


Table of Contents

ISSUER PURCHASES OF EQUITY SECURITIES

 

Period

   Total Number
of Shares
Purchased
     Average
Price Paid
per Share
     Total Number of
Shares Purchased
as Part of Publicly
Announced Plan
     Maximum
Number of
Shares that May
Yet be Purchased
Under the
Plan(1)
 

04/01/12 to 04/30/12

     —         $ —           —           122,424   

05/01/12 to 05/31/12

     —         $ —           —           122,424   

06/01/12 to 06/30/12

     —         $ —           —           122,424   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —              —        
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURE

Our U.S. manufacturing facilities process mined minerals, and therefore are viewed as mine operations subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the recently proposed Item 106 of Regulation S-K (17 CFR 229.106) is included in Exhibit 95 to this quarterly report.

ITEM 5. OTHER INFORMATION

Not applicable

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q:

 

  3.1 Restated Certificate of Incorporation

 

  31.1 Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad.

 

  31.2 Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III.

 

  32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

  95 Mine Safety Disclosure

 

  101 The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

 

16


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

CARBO CERAMICS INC.

/s/ Gary A. Kolstad

Gary A. Kolstad

President and Chief Executive Officer

/s/ Ernesto Bautista III

Ernesto Bautista III

Chief Financial Officer

Date: August 1, 2012

 

17


Table of Contents

EXHIBIT INDEX

 

EXHIBIT

 

DESCRIPTION

3.1   Restated Certificate of Incorporation
31.1   Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad.
31.2   Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III.
32   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
95   Mine Safety Disclosure
101   The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

 

18

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

CARBO CERAMICS INC.

* * * * *

The undersigned, for the purpose of restating and integrating the provisions of the Certificate of Incorporation of CARBO Ceramics Inc., a corporation organized under the laws of the State of Delaware, into this single instrument, does hereby certify that:

1. The name of the corporation is CARBO Ceramics Inc.

2. The corporation’s original Certificate of Incorporation was filed with the Secretary of State on June 23, 1987, was amended by the Certificate of Amendment of the Certificate of Incorporation filed with the Secretary of State on February 25, 1991, was amended and restated by the Amended and Restated Certificate of Incorporation filed with the Secretary of State on April 17, 1996, and was amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation filed with the Secretary of State on June 12, 2012.

3. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the corporation’s Certificate of Incorporation as theretofore amended or supplemented and there is no discrepancy between the provisions of the Certificate of Incorporation as theretofore amended and supplemented and the provisions of this restated certificate.

4. The text of the Certificate of Incorporation is hereby integrated and restated to read as hereinafter set forth in full:

FIRST: The name of the corporation is CARBO CERAMICS INC.

SECOND: The registered office of the corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company.

THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.

FOURTH: The total number of shares of all classes of stock which the corporation is authorized to issue is 80,005,000, consisting of 80,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”), and 5,000 shares of Preferred Stock, par value $.01 per share (“Preferred Stock”). All of the corporation’s issued stock, exclusive of treasury shares, shall be represented by certificates.


The relative rights, preferences and limitations of each class of stock are as follows:

Common Stock

Each share of the Common Stock shall have one vote on all matters to be voted on by the holders of the Common Stock, and shall be entitled to participate equally in all dividends payable with respect to the Common Stock and to share ratably, subject to the rights and preferences of any Preferred Stock, in all assets of the corporation in the event of any dissolution of, or upon any distribution of the assets of, the corporation.

Preferred Stock

Preferred Stock shall be issued from time to time in one or more series of such number of shares with such distinctive serial designations and (a) may have such voting powers, full or limited, or may be without voting powers; (b) may be subject to redemption at such time or times and at such prices; (c) may be entitled to received dividends (which may be cumulative or non-cumulative) at such rate or rates, on such conditions, and at such times and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of shares; (d) may have such rights upon the dissolution of, or upon any distribution of the assets of, the corporation; (e) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of shares of the corporation, at such price or prices or at such rates of exchange, and with such adjustments; and (f) may have such other relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the issue of each such series of Preferred Stock from time to time adopted by the Board of Directors pursuant to authority so to do which is hereby expressly vested in the Board of Directors.

FIFTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and for further definition, limitation and regulation of the powers of the corporation and of its directors and stockholders:

 

2


(1) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in, the By-Laws. Election of directors need not be by ballot unless the By-Laws so provide.

(2) The Board of Directors shall have powers without the assent or vote of the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the corporation; to determine the use and disposition of any surplus or net profits; and to fix the times for the declaration and payment of dividends.

(3) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate, and to any by-laws from time to time made by the stockholders; provided, however, that no by-laws so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.

SIXTH: The corporation shall, to the fullest extent permitted by section 145 of the Delaware General Corporation Law, as the same exists or may hereafter be amended, indemnify persons whom it may indemnify pursuant thereto.

SEVENTH: To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.

EIGHTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the state of Delaware, may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a

 

3


majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.

NINTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power.

5. The Restated Certificate of Incorporation as hereinabove set forth was duly adopted pursuant to Section 245 of the Delaware General Corporation Law at a meeting of the Board of Directors of the corporation on July 17, 2012.

IN WITNESS WHEREOF, said CARBO CERAMICS INC. has caused this Certificate to be executed by its duly authorized officer, on this 18th day of July, 2012.

 

CARBO Ceramics Inc.

By:

  /s/ R. Sean Elliott

Name:

  R. Sean Elliott

Title:

  Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer

 

4

Exhibit 31.1

Quarterly Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Gary A. Kolstad, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CARBO Ceramics Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2012

 

/s/ Gary A. Kolstad

Gary A. Kolstad

President & CEO

Exhibit 31.2

Quarterly Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Ernesto Bautista III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CARBO Ceramics Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 1, 2012

 

        /s/ Ernesto Bautista III

Ernesto Bautista III

Chief Financial Officer

Exhibit 32

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of CARBO Ceramics Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (the “Form 10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-Q.

 

Dated: August 1, 2012

        /s/ Gary A. Kolstad

Name: Gary A. Kolstad

Title: Chief Executive Officer

Dated: August 1, 2012

        /s/ Ernesto Bautista III

Name: Ernesto Bautista III

Title: Chief Financial Officer

Exhibit 95

MINE SAFETY DISCLOSURES

For the fiscal quarter ended June 30, 2012, the Company has the following mine safety information to report in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, in connection with the Eufaula, Alabama processing facility, the McIntyre, Georgia processing facility, the Marshfield, Wisconsin processing facility, and the Toomsboro, Georgia processing facility.

 

Mine or

Operating

Name/MSHA

Identification

Number

   Section
104 S&S
Citations
(#)
     Section
104(b)
Orders
(#)
     Section
104(d)
Citations
and
Orders
(#)
     Section
110(b)(2)
Violations
(#)
     Section
107(a)
Orders
(#)
     Total Dollar
Value  of
MSHA
Assessments
Proposed
($) (1)
     Total
Number
of Mining
Related
Fatalities
(#)
     Received
Notice of
Pattern of
Violations
Under
Section
104(e)
(yes/no)
     Received
Notice of
Potential
to Have
Pattern
Under
Section
104(e)
(yes/no)
     Legal
Actions
Pending
as of
Last Day
of Period
(#) (2)
     Aggregate
Legal
Actions
Initiated
During
Period (#)
     Aggregate
Legal
Actions
Resolved
During
Period (#)
 

Eufaula Facility

MSHA ID 0102687

Eufaula, Alabama

     0         0         0         0         0       $ 100         0         No         No         1         0         0   

McIntyre Facility

MSHA ID 0901108

McIntyre, Georgia

     1         0         0         0         0       $ 0         0         No         No         0         0         3   

Toomsboro Facility

MSHA ID 0901164

Toomsboro, Georgia

     0         0         0         0         0       $ 0         0         No         No         0         0         0   

Marshfield Facility

MSHA ID 4073636

Marshfield, Wisconsin

     0         0         0         0         0       $ 0         0         No         No         0         0         0   

Totals

     1         0         0         0         0       $ 100         0               1         0         3   

 

(1) Amounts represent the total dollar value of proposed assessments received.

(2) These legal actions, pending before the Federal Mine Safety and Health Review Commission as of June 30, 2012, relate to contests filed by the Company of proposed penalties, as referenced in Subpart C of 29 CFR part 2700.