CARBO CERAMICS INC (Form: 10-Q, Received: 04/30/2013 11:28:16)

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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 March 31, 2013

¨	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		(I.R.S. Employer
incorporation or organization)		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.

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 April 24, 2013, 23,137,052 shares of the registrant’s Common Stock, par value $.01 per share, were outstanding.

CARBO CERAMICS INC.

Index to Quarterly Report on Form 10-Q


	PAGES
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements		3

Consolidated Balance Sheets - March 31, 2013 (Unaudited) and December 31, 2012		3

Consolidated Statements of Income (Unaudited) - Three months ended March 31, 2013 and 2012		4

Consolidated Statements of Comprehensive Income (Unaudited) - Three months ended March 31, 2013 and 2012		5

Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2013 and 2012		6

Notes to Consolidated Financial Statements (Unaudited)		7-9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10-12

Item 3. Quantitative and Qualitative Disclosures about Market Risk		12

Item 4. Controls and Procedures		12-13

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		14

Item 1A. Risk Factors		14

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		15

Item 3. Defaults Upon Senior Securities		15

Item 4. Mine Safety Disclosure		15

Item 5. Other Information		15

Item 6. Exhibits		15

Signatures		16

Exhibit Index		17

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CARBO CERAMICS INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)


	March 31,			December 31,
	2013			2012
	(Unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	83,797		$	90,635
Trade accounts and other receivables, net		109,036			103,258
Inventories:
Finished goods		105,586			102,625
Raw materials and supplies		41,833			38,061

Total inventories		147,419			140,686
Prepaid expenses and other current assets		4,831			4,293
Deferred income taxes		11,192			11,045

Total current assets		356,275			349,917
Property, plant and equipment:
Land and land improvements		19,762			19,700
Land-use and mineral rights		9,566			9,559
Buildings		67,836			67,866
Machinery and equipment		534,146			530,129
Construction in progress		47,295			39,564

Total		678,605			666,818
Less accumulated depreciation and amortization		250,675			240,586

Net property, plant and equipment		427,930			426,232
Goodwill		12,164			12,164
Intangible and other assets, net		19,549			20,565

Total assets	$	815,918		$	808,878

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,820		$	20,078
Accrued income taxes		7,107			727
Dividends payable		6,247			—
Other accrued expenses		22,380			30,025

Total current liabilities		54,554			50,830
Deferred income taxes		45,929			44,970
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 shares authorized; 23,137,052 and 23,092,906 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively		231			231
Additional paid-in capital		56,087			57,364
Retained earnings		661,509			657,423
Accumulated other comprehensive loss		(2,392	)		(1,940	)

Total shareholders’ equity		715,435			713,078

Total liabilities and shareholders’ equity	$	815,918		$	808,878

The accompanying notes are an integral part of these statements.

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except per share data)

(Unaudited)


	Three months ended
	March 31,
	2013			2012
Revenues	$	147,657		$	163,166
Cost of sales		105,273			99,702

Gross profit		42,384			63,464
Selling, general, and administrative, and other operating expenses		16,993			16,719

Operating profit		25,391			46,745
Other income (expense):
Interest income (expense), net		185			(44	)
Foreign currency exchange loss, net		(12	)		(435	)
Other, net		(61	)		(259	)

		112			(738	)

Income before income taxes		25,503			46,007
Income taxes		7,926			15,716

Net income	$	17,577		$	30,291

Earnings per share:
Basic	$	0.76		$	1.31

Diluted	$	0.76		$	1.31

Other information:
Dividends declared per common share (See Note 4)	$	0.54		$	0.48

The accompanying notes are an integral part of these statements.

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)


	Three months ended
	March 31,
	2013			2012
Net income	$	17,577		$	30,291
Other comprehensive (loss) income:
Foreign currency translation adjustment		(695	)		4,831
Deferred income tax benefit (expense)		243			(1,691	)

Other comprehensive (loss) income, net of tax		(452	)		3,140

Comprehensive income	$	17,125		$	33,431

The accompanying notes are an integral part of these statements.

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

(Unaudited)


	Three months ended
	March 31,
	2013			2012
Operating activities
Net income	$	17,577		$	30,291
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,908			10,604
Provision for doubtful accounts		25			—
Deferred income taxes		1,059			2,501
Excess tax benefits from stock based compensation		(67	)		(1,257	)
(Gain) loss on disposal or impairment of assets		(2	)		5
Foreign currency transaction loss, net		12			435
Stock compensation expense		1,757			1,682
Changes in operating assets and liabilities:
Trade accounts and other receivables		(5,767	)		311
Inventories		(6,893	)		(3,781	)
Prepaid expenses and other current assets		(542	)		150
Long-term prepaid expenses		855			766
Accounts payable		(1,276	)		(10,255	)
Accrued expenses		(7,727	)		(14,881	)
Accrued income taxes, net		6,108			12,698

Net cash provided by operating activities		17,027			29,269
Investing activities
Capital expenditures		(13,752	)		(26,978	)

Net cash used in investing activities		(13,752	)		(26,978	)
Financing activities
Proceeds from bank borrowings		—			10,000
Repayments on bank borrowings		—			(10,000	)
Dividends paid		(6,256	)		(5,555	)
Purchase of common stock		(3,671	)		(7,655	)
Excess tax benefits from stock based compensation		67			1,257

Net cash used in financing activities		(9,860	)		(11,953	)
Effect of exchange rate changes on cash		(253	)		425

Net decrease in cash and cash equivalents		(6,838	)		(9,237	)
Cash and cash equivalents at beginning of period		90,635			41,270

Cash and cash equivalents at end of period	$	83,797		$	32,033

Supplemental cash flow information
Interest paid	$	1		$	7

Income taxes paid	$	761		$	517

The accompanying notes are an integral part of these statements.

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, 2012 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, 2012 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year ended December 31, 2012.

The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its operating subsidiaries (the “Company”). All significant intercompany transactions have been eliminated.

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
	March 31,
	2013			2012
Numerator for basic and diluted earnings per share:
Net income	$	17,577		$	30,291
Effect of reallocating undistributed earnings of participating securities		(117	)		(165	)

Net income available under the two-class method	$	17,460		$	30,126

Denominator:
Denominator for basic earnings per share—
weighted-average shares		22,990,048			22,973,986
Effect of dilutive securities:
Employee stock options		—			1,280

Dilutive potential common shares		—			1,280

Denominator for diluted earnings per share—
adjusted weighted-average shares		22,990,048			22,975,266

Basic earnings per share	$	0.76		$	1.31

Diluted earnings per share	$	0.76		$	1.31

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 quarter ended March 31, 2013, the Company repurchased and retired 30,000 shares at an aggregate purchase price of $2,683. As of March 31, 2013, the Company has repurchased and retired 1,907,576 shares at an aggregate purchase price of $80,984.

4. Dividends Paid

On January 22, 2013, the Board of Directors declared a cash dividend of $0.27 per common share payable to shareholders of record on February 1, 2013. The dividend was paid on February 15, 2013. On March 19, 2013, the Board of Directors declared a cash dividend of $0.27 per common share payable to shareholders of record on May 1, 2013. The dividend is payable on May 15, 2013 and is presented in Current Liabilities at March 31, 2013.

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. As of March 31, 2013, 485,035 shares were available for issuance under the Omnibus Incentive Plan.

The Company has made restricted stock awards pursuant to the Omnibus Incentive Plan. A summary of restricted stock activity and related information for the three months ended March 31, 2013 is presented below:


	Shares			Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2013		115,722		$	99.50
Granted		86,143		$	80.59
Vested		(47,607	)	$	98.20
Forfeited		—			—

Nonvested at March 31, 2013		154,258		$	89.34

As of March 31, 2013, there was $10,956 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 2.5 years. The total fair value of shares vested during the three months ended March 31, 2013 was $4,675.

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 March 31, 2013, there were 14,960 units of phantom shares granted under the Omnibus Incentive Plan, of which 6,156 have vested and 1,304 have been forfeited, with a total value of $683, 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.

7. Foreign Currencies

As of March 31, 2013, the Company’s net investment that is subject to foreign currency fluctuations totaled $92,375 and the Company has recorded a cumulative foreign currency translation loss of $2,392, net of deferred income tax benefit. This cumulative translation loss is included in and is the only component of Accumulated Other Comprehensive Loss. There were no amounts reclassified to net income during the three months ended March 31, 2013.

8. New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on reporting of amounts reclassified from accumulated other comprehensive income. The new guidance requires a company to present significant amounts reclassified from each component of other comprehensive income and the income statement line items affected by the reclassification. The Company adopted this guidance as of January 1, 2013. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles — Goodwill and Other (ASC Topic 350),” (“ASU 2012-02”). This accounting update allows entities to perform a qualitative assessment on intangible assets impairment to determine whether it is more likely than not (defined as having a likelihood of more than 50 percent) that the intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test by comparing the fair value with the carrying amount. This guidance is effective for intangible assets impairment tests performed in interim and annual periods for fiscal years beginning after September 15, 2012. The Company adopted this guidance as of January 1, 2013. 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”). 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 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”). In June 2012, the February SNDY Lawsuit and the April SDNY Lawsuit were consolidated, and will now proceed as one lawsuit. The Federal Securities Lawsuit 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. In September 2012, the Company and Messrs. Kolstad and Bautista filed a motion to dismiss this lawsuit. Response and reply briefs on this motion were filed during the fourth quarter of 2012, and a decision from the Court is pending.

On June 13, 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. This lawsuit alleges various breaches of fiduciary duty and other duties by the defendants that generally are related to the Federal Securities Lawsuit, as well as a breach of duty by certain defendants in connection with stock sales. This lawsuit requests unspecified damages and costs, and has been stayed pending the outcome of a motion to dismiss the Federal Securities Lawsuit.

While each of the Federal Securities Lawsuit and the June Harris County Lawsuit 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.

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 widely used 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.

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, 2012). The Company believes that some of its accounting policies involve a higher degree of judgment and complexity than others. As of December 31, 2012, 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, 2012. There have been no changes in the Company’s evaluation of its critical accounting policies since December 31, 2012.

Results of Operations

Three Months Ended March 31, 2013

Revenues. Revenues of $147.7 million for the first quarter of 2013 decreased 10% compared to $163.2 million for the same period in 2012. The decrease is mainly attributed to a 19% decrease in the average proppant selling price, partially offset by an increase in proppant sales volume. The decrease in average selling price is the result of price decreases and a shift in product mix towards sand-based products. Worldwide proppant sales volume totaled 445 million pounds in the first three months of 2013 compared to 404 million pounds for the same period in 2012. Other Proppants (defined as resin-coated sand, ceramic proppant manufactured on an outsourced basis, and raw sand sold in the course of producing substrate for the resin-coated sand business) increased to 56 million pounds in the first quarter of 2013 from 42 million pounds in the same period last year, driven by a shift towards sand-based products. North American (defined as Canada and the U.S.) sales volume increased 13% due to a 10% increase in Company-produced ceramic proppant volumes, despite an 11% decrease in the drilling rig count, and higher sales of Other Proppants. International (excluding Canada) sales volume decreased 3%. The average selling price per pound of all proppant was $0.302 during the first quarter of 2013 compared to $0.372 for the same period in 2012.

Gross Profit. Gross profit for the first quarter of 2013 was $42.4 million, or 29% of revenues, compared to $63.5 million, or 39% of revenues, for the first quarter of 2012. The decrease in gross profit was primarily the result of a decrease in the average proppant selling price, a change in the mix of products sold, higher distribution costs and accelerated spending on the Company’s new proppant technology product, partially offset by an increase in the sales volume.

Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A and other operating expenses totaled $17.0 million for the first quarter of 2013 compared to $16.7 million for the first quarter of 2012. As a percentage of revenues, SG&A and other operating expenses increased to 11.5% in 2013 compared to 10.2% for the first quarter of 2012, driven by the decline in revenues.

Other Income (Expense). Other income (expense) for the first quarter of 2013 increased $0.9 million compared to the same period in 2012. This increase is mainly attributed to changes in exchange rates between the functional currency and the foreign currency in which the effective transactions were denominated and an increase in interest income.

Income Tax Expense. Income tax expense was $7.9 million, or 31.1% of pretax income, for the first quarter of 2013 compared to $15.7 million, or 34.2% of pretax income, for the same period last year. The $7.8 million decrease is primarily due to lower pre-tax income. In addition, the Company realized $0.4 million in R&D tax credits as a result of legislation enacted in the first quarter of 2013.

Outlook

Given the cyclical nature of the industry, the Company believes that market conditions will improve, however it is difficult to pinpoint the exact timing. The Company believes activity over the short-term will be driven by a focus on reduction of well costs and a continued over-supply in the proppant market. As a result, the Company believes the operating environment will remain variable during the remainder of 2013. Seasonality will likely affect sales volumes for the second quarter of 2013 due to the Canadian spring break-up and associated weather in the Bakken region.

Although pricing on certain Chinese ceramic proppant has reached historic lows, the Company is also witnessing the emergence of aggressive pricing by other ceramic proppant importers. As such, the Company expects to see continued pricing pressures until market conditions improve.

The Company expects to support near-term demand with its current ceramic production capacity of 1.75 billion pounds per year, along with existing inventories of ceramic proppant. The Company is moving forward with construction of the first 250 million pound line at its Millen, Georgia facility, which it anticipates could commence operation near the end of the second quarter of 2014.

The increased amount of activity in infrastructure-limited, liquids-rich basins introduced supply chain challenges to the industry and resulted in higher distribution costs during 2012 and the first quarter of 2013. Although the Company expects these costs will continue at current levels for the next few quarters, it is making capital investments in certain of these challenged regions to facilitate a reduction of these costs and promote further customer service.

Liquidity and Capital Resources

At March 31, 2013, the Company had cash and cash equivalents of $83.8 million compared to cash and cash equivalents of $90.6 million at December 31, 2012. During the first quarter of 2013, the Company generated $17.0 million of cash from operating activities. Uses of cash included $13.8 million for capital expenditures, $6.3 million for the payment of cash dividends and $3.7 million for repurchases of the Company’s common stock.

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 March 19, 2013, the Board of Directors declared a cash dividend of $0.27 per common share, or $6.2 million in the aggregate, to shareholders of record on May 1, 2013. That dividend is payable on May 15, 2013. The Company estimates its total capital expenditures for the remainder of 2013 will be between $95 million and $105 million. Capital expenditures for the remainder of 2013 are expected to include costs associated with the construction of the new manufacturing facility in Millen, Georgia and expansion of the Company’s distribution infrastructure.

The Company maintains a $25.0 million unsecured line of credit with Wells Fargo Bank, N.A. As of March 31, 2013, 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 March 31, 2013.

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 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,

•

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, 2012 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 March 31, 2013, the Company’s net investment that is subject to foreign currency fluctuations totaled $92.4 million and the Company has recorded cumulative foreign currency translation loss of $2.4 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 March 31, 2013.

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, as amended (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 March 31, 2013, 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 March 31, 2013 that materially affected, or are reasonably likely to materially affect, those controls.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

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, 2012.

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 March 31, 2013:

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(1)		Maximum Number of Shares that May Yet be Purchased Under the Plan(1)
01/01/13 to 01/31/13		8,789		$	80.50		—		122,424
02/01/13 to 02/28/13		33,059		$	89.24		30,000		92,424
03/01/13 to 03/31/13		149		$	91.88		—		92,424

Total		41,997	(2)				30,000

(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.

(2)	Includes 11,997 shares of stock withheld for the payment of withholding taxes upon the vesting of restricted 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:

10.1

Description of Modification to Annual Non-Employee Director Stock Grants.

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.

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

Mine Safety Disclosure

101

The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.

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: April 30, 2013

EXHIBIT INDEX


EXHIBIT		DESCRIPTION

10.1		Description of Modification to Annual Non-Employee Director Stock Grants.

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 March 31, 2013, 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.

Exhibit 10.1

Description of Modification to

Annual Non-Employee Director Stock Grants

In March 2013, the Compensation Committee of the Board of Directors of CARBO Ceramics Inc. (the “Company”) approved an increase in the number of shares of the Company’s common stock to be made each year on the first business day after the date of the Company’s Annual Meeting of Stockholders to each non-employee Director of the Company serving as such on such date (each, an “Annual Director Stock Grant”) from 400 shares to 500 shares. All other terms of the Annual Director Stock Grants, as established in May 2010, remain unchanged.

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: April 30, 2013

/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.;

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: April 30, 2013

/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 March 31, 2013 (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: April 30, 2013

/s/ Gary A. Kolstad

Name: Gary A. Kolstad

Title: Chief Executive Officer

Dated: April 30, 2013

/s/ Ernesto Bautista III

Name: Ernesto Bautista III

Title: Chief Financial Officer

Exhibit 95

MINE SAFETY DISCLOSURES

For the fiscal quarter ended March 31, 2013, 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 Toomsboro, Georgia processing facility, and the Marshfield, Wisconsin 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 (#)		Aggregate Legal Actions Initiated During Period (#)		Aggregate Legal Actions Resolved During Period (#)
Eufaula Facility MSHA ID 0102687 Eufaula, Alabama		0		0		0		0		0	$	200		0		No		No		0		0		0
McIntyre Facility MSHA ID 0901108 McIntyre, Georgia		0		0		0		0		0	$	0		0		No		No		0		0		0
Toomsboro Facility MSHA ID 0901164 Toomsboro, Georgia		0		0		0		0		0	$	200		0		No		No		0		0		0
Marshfield Facility MSHA ID 4073636 Marshfield, Wisconsin		0		0		0		0		0	$	100		0		No		No		0		0		0
Totals		0		0		0		0		0	$	500		0						0		0		0

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

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