CARBO CERAMICS INC (Form: 10-Q, Received: 07/29/2013 16:36:44)

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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 June 30, 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 July 23, 2013, 23,081,934 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


		PAGE
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Consolidated Balance Sheets - June 30, 2013 (Unaudited) and December 31, 2012		3

	Consolidated Statements of Income (Unaudited) - Three and six months ended June 30, 2013 and 2012		4

	Consolidated Statements of Comprehensive Income (Unaudited) - Three and six months ended June 30, 2013 and 2012		5

	Consolidated Statements of Cash Flows (Unaudited) - Six months ended June 30, 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		10-13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		13

Item 4.	Controls and Procedures		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		14

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)


	June 30,			December 31,
	2013			2012
	(Unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	76,023		$	90,635
Trade accounts and other receivables, net		109,828			103,258
Inventories:
Finished goods		100,274			102,625
Raw materials and supplies		42,131			38,061

Total inventories		142,405			140,686
Prepaid expenses and other current assets		7,731			4,293
Prepaid income taxes		3,049			—
Deferred income taxes		11,022			11,045

Total current assets		350,058			349,917
Property, plant and equipment:
Land and land improvements		19,758			19,700
Land-use and mineral rights		11,149			9,559
Buildings		68,856			67,866
Machinery and equipment		534,258			530,129
Construction in progress		59,593			39,564

Total		693,614			666,818
Less accumulated depreciation and amortization		260,373			240,586

Net property, plant and equipment		433,241			426,232
Goodwill		12,164			12,164
Intangible and other assets, net		18,509			20,565

Total assets	$	813,972		$	808,878

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,333		$	20,078
Accrued income taxes		—			727
Other accrued expenses		23,394			30,025

Total current liabilities		38,727			50,830
Deferred income taxes		46,582			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; 23,083,033 and 23,092,906 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		231			231
Additional paid-in capital		54,329			57,364
Retained earnings		677,816			657,423
Accumulated other comprehensive loss		(3,713	)		(1,940	)

Total shareholders’ equity		728,663			713,078

Total liabilities and shareholders’ equity	$	813,972		$	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					Six months ended
	June 30,					June 30,
	2013			2012		2013			2012
Revenues	$	153,744		$	177,614	$	301,402		$	340,780
Cost of sales		114,411			113,361		219,684			213,063

Gross profit		39,333			64,253		81,718			127,717
Selling, general, and administrative, and other operating expenses		15,457			17,003		32,451			33,722

Operating profit		23,876			47,250		49,267			93,995
Other income (expense):
Interest income (expense), net		242			9		427			(35	)
Foreign currency exchange (loss) gain, net		(19	)		579		(31	)		144
Other, net		(11	)		47		(71	)		(212	)

		212			635		325			(103	)

Income before income taxes		24,088			47,885		49,592			93,892
Income taxes		7,781			15,968		15,709			31,684

Net income	$	16,307		$	31,917	$	33,883		$	62,208

Earnings per share:
Basic	$	0.71		$	1.38	$	1.47		$	2.69

Diluted	$	0.71		$	1.38	$	1.47		$	2.69

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						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Net income	$	16,307		$	31,917		$	33,883		$	62,208
Other comprehensive loss:
Foreign currency translation adjustment		(2,033	)		(6,002	)		(2,727	)		(1,171	)
Deferred income tax benefit		712			2,101			954			410

Other comprehensive loss, net of tax		(1,321	)		(3,901	)		(1,773	)		(761	)

Comprehensive income	$	14,986		$	28,016		$	32,110		$	61,447

The accompanying notes are an integral part of these statements.

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

(Unaudited)


	Six months ended
	June 30,
	2013			2012
Operating activities
Net income	$	33,883		$	62,208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,394			21,801
Provision for doubtful accounts		28			12
Deferred income taxes		2,609			5,299
Excess tax benefits from stock based compensation		(67	)		(1,257	)
Gain on disposal or impairment of assets		(40	)		(54	)
Foreign currency transaction loss (gain), net		31			(144	)
Stock compensation expense		3,189			3,087
Changes in operating assets and liabilities:
Trade accounts and other receivables		(6,540	)		(5,525	)
Inventories		(2,372	)		1,938
Prepaid expenses and other current assets		(3,466	)		(1,451	)
Long-term prepaid expenses		1,711			766
Accounts payable		(4,845	)		(18,142	)
Accrued expenses		(6,748	)		(12,482	)
Accrued income taxes, net		(4,054	)		5,764

Net cash provided by operating activities		36,713			61,820
Investing activities
Capital expenditures		(31,169	)		(50,288	)

Net cash used in investing activities		(31,169	)		(50,288	)
Financing activities
Proceeds from bank borrowings		—			10,000
Repayments on bank borrowings		—			(10,000	)
Dividends paid		(12,503	)		(11,095	)
Purchase of common stock		(6,821	)		(7,655	)
Excess tax benefits from stock based compensation		67			1,257

Net cash used in financing activities		(19,257	)		(17,493	)
Effect of exchange rate changes on cash		(899	)		(443	)

Net (decrease) increase in cash and cash equivalents		(14,612	)		(6,404	)
Cash and cash equivalents at beginning of period		90,635			41,270

Cash and cash equivalents at end of period	$	76,023		$	34,866

Supplemental cash flow information
Interest paid	$	3		$	72

Income taxes paid	$	17,153		$	20,621

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						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Numerator for basic and diluted earnings per share:
Net income	$	16,307		$	31,917		$	33,883		$	62,208
Effect of reallocating undistributed earnings of participating securities		(107	)		(171	)		(224	)		(336	)

Net income available under the two-class method	$	16,200		$	31,746		$	33,659		$	61,872

Denominator:
Denominator for basic earnings per share— weighted-average shares		22,953,453			22,961,130			22,971,649			22,967,558
Effect of dilutive securities:
Employee stock options		—			1,220			—			1,250

Dilutive potential common shares		—			1,220			—			1,250

Denominator for diluted earnings per share— adjusted weighted-average shares		22,953,453			22,962,350			22,971,649			22,968,808

Basic earnings per share	$	0.71		$	1.38		$	1.47		$	2.69

Diluted earnings per share	$	0.71		$	1.38		$	1.47		$	2.69

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, 2013, the Company repurchased and retired 75,000 shares at an aggregate purchase price of $5,833. As of June 30, 2013, the Company has repurchased and retired 1,952,576 shares at an aggregate purchase price of $84,134.

4.	Dividends Paid

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 was paid on May 15, 2013. On July 16, 2013, the Board of Directors declared a cash dividend of $0.30 per common share payable to shareholders of record on August 1, 2013. This dividend is payable on August 15, 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 June 30, 2013, 494,054 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 six months ended June 30, 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		(12,019	)	$	94.17

Nonvested at June 30, 2013		142,239		$	88.93

As of June 30, 2013, there was $8,804 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 2.3 years. The total fair value of shares vested during the six months ended June 30, 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 June 30, 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 $506, 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.

On July 25, 2013, the Company entered into a second amendment to this credit agreement that (i) extends the maturity date of the credit agreement to July 25, 2018, (ii) increases the size of the revolving credit facility to $50,000, and (iii) makes other administrative changes to certain covenants and provisions of the credit agreement.

7.	Foreign Currencies

As of June 30, 2013, the Company’s net investment that is subject to foreign currency fluctuations totaled $87,416 and the Company has recorded a cumulative foreign currency translation loss of $3,713, 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 and six month periods ended June 30, 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. The motion to dismiss was granted, and the Federal Securities Lawsuit was dismissed without prejudice in June 2013.

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. The lawsuit requests unspecified damages and costs, and has been further stayed while it is determined whether the plaintiffs in the Federal Securities Lawsuit will appeal the dismissal or seek leave to file a second amended complaint.

While each of the Federal Securities Lawsuit and the June Harris County Lawsuit remain in their early 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 production enhancement products and services to the oil and natural gas industry. The Company’s principal business consists of manufacturing and selling proppant products for use primarily in the hydraulic fracturing of oil and natural gas wells. These proppant products include ceramic, resin-coated ceramic, and resin-coated sand. 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 June 30, 2013

Revenues. Revenues of $153.7 million for the second quarter of 2013 decreased 13% compared to $177.6 million for the same period in 2012. The decrease is mainly attributed to two factors. First, ceramic proppant sales volumes were lower primarily as a result of lower drilling activity. In addition, the Company experienced a 15% decrease in the average proppant selling price for all proppants, as a result of price decreases in response to market conditions and a shift in product mix towards sand-based products. The average selling price per pound of all proppant was $0.303 during the second quarter of 2013 compared to $0.358 for the same period in 2012.

Worldwide proppant sales volume totaled 457 million pounds for the second quarter of 2013 compared to 454 million pounds for the same period in 2012. Ceramic proppant sales volumes decreased to 378 million pounds in the second quarter of 2013 from 440 million pounds in the same period last year. Resin-coated sand sales volumes increased to 68 million pounds in the second quarter of 2013 from 14 million pounds in the same period last year. Other Proppants (defined as raw sand sold in the course of producing substrate for resin-coating) was 11 million pounds in the second quarter of 2013. North American (defined as Canada and the U.S.) proppant sales volume increased 3% due to higher sales of resin-coated sand and Other Proppants. International (excluding Canada) sales volume decreased 13% primarily due to decreased sales volumes in Latin America, Asia, and Russia, offset by increases in the Middle East.

Gross Profit. Gross profit for the second quarter of 2013 was $39.3 million, or 26% of revenues, compared to $64.3 million, or 36% of revenues, for the second quarter of 2012. The decrease in gross profit was primarily the result of a decrease in average selling price, higher ceramic proppant unit costs resulting from lower plant utilization, and a change in product sales mix resulting from volume gains of the Company’s sand-based products. Given current market conditions, the Company experienced difficulties in achieving acceptable margins on the sale of sand-based products. In addition, gross profit was reduced as a result of continued spending to bring the Company’s new proppant technology to a commercial state. The commercial launch of this new proppant is anticipated in the second half of 2013.

Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A and other operating expenses totaled $15.5 million for the second quarter of 2013 compared to $17.0 million for the same period in 2012. As a percentage of revenues, SG&A and other operating expenses increased to 10.1% compared to 9.6% for the second quarter of 2012, driven by the decline in revenues.

Other Income (Expense). Other income (expense) for the second quarter of 2013 decreased $0.4 million compared to the same period in 2012. This decrease is primarily due to changes in exchange rates between the functional currency and the foreign currency in which the effective transactions were denominated, offset by an increase in interest income.

Income Tax Expense . Income tax expense was $7.8 million, or 32.3% of pretax income, for the second quarter of 2013 compared to $16.0 million, or 33.3% of pretax income, for the same period last year. The $8.2 million decrease is primarily due to lower pre-tax income.

Six Months Ended June 30, 2013

Revenues . Revenues of $301.4 million for the six months ended June 30, 2013 decreased 12% compared to $340.8 million for the same period in 2012. The decrease is mainly attributed to a 17% 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 in response to market conditions and a shift in product mix towards sand-based products. The average selling price per pound of all proppant was $0.303 during the six months ended June 30, 2013 compared to $0.364 for the same period in 2012.

Worldwide proppant sales volume totaled 902 million pounds for the six months ended June 30, 2013 compared to 857 million pounds for the same period in 2012. Ceramic proppant sales volumes decreased to 776 million pounds in the six months ended June 30, 2013 from 833 million pounds in the same period last year. Resin-coated sand increased to 93 million pounds in the six months ended June 30, 2013 from 24 million pounds in the same period last year. Other Proppants was 33 million pounds in the six months ended June 30, 2013. North American (defined as Canada and the U.S.) proppant sales volume increased 8% due to higher sales of resin-coated sand and Other Proppants. International (excluding Canada) sales volume decreased 8%.

Gross Profit. Gross profit for the six months ended June 30, 2013 was $81.7 million, or 27% of revenues, compared to $127.7 million, or 37% of revenues, for the same period in 2012. The decrease in gross profit was primarily the result of a decrease in average selling price, a change in the product sales mix resulting from volume gains of the Company’s sand-based products, and spending to bring the Company’s new proppant technology to a commercial state.

Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A expenses totaled $32.5 million for the six months ended June 30, 2013 compared to $33.7 million for the same period in 2012. As a percentage of revenues, SG&A expenses increased to 10.8% for the six months ended June 30, 2012 compared to 9.9% for the same period in 2012, driven by the decline in revenues.

Other Income (Expense). Other income (expense) for the six months ended June 30, 2013 increased $0.4 million compared to the same period in 2012 primarily due to an increase in interest income.

Income Tax Expense . Income tax expense was $15.7 million, or 31.7% of pretax income, for the six months ended June 30, 2013 compared to $31.7 million, or 33.7% of pretax income for the same period last year. The $16.0 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, as well as additional tax benefits from mining depletion deductions.

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 expects activity over the short-term will be variable and driven by a focus on reduction of well costs and a continued over-supply in the proppant market. However, the Company believes the inventories of Chinese ceramic proppant appear to be shrinking in North America. As a result, the Company believes the operating environment may have the potential for ceramic proppant sales volume growth during the second half of 2013. Seasonality negatively affected ceramic sales volumes for the second quarter of 2013 due to the Canadian spring break-up.

The Company expects to see continued pricing pressures until market conditions improve; but increased ceramic proppant sales volumes, coupled with successful execution on cost reduction initiatives, could lead to improved sequential margins.

Resin-coated sand products are unlikely to realize large, near-term price increases, given the current low natural gas activity and industry oversupply. The Company is focused on improving margins through efficient plant utilization and lowering certain manufacturing costs.

The Company expects to support near-term demand with its current ceramic proppant 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 six months of 2013. The Company is addressing distribution costs with a number of ongoing initiatives. A critical initiative is rationalizing its rail fleet to reduce reliance on the fleet as a form of storage. Other initiatives include reducing transportation costs. The Company anticipates completing a majority of these initiatives in the second half of 2013, with the resulting benefits seen in 2014.

Liquidity and Capital Resources

At June 30, 2013, the Company had cash and cash equivalents of $76.0 million compared to cash and cash equivalents of $90.6 million at December 31, 2012. During the six months ended June 30, 2013, the Company generated $36.7 million of cash from operating activities. Uses of cash included $31.2 million for capital expenditures, $12.5 million for the payment of cash dividends and $6.8 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 July 16, 2013, the Board of Directors declared a cash dividend of $0.30 per common share payable to shareholders of record on August 1, 2013. This dividend is payable on August 15, 2013. The Company estimates its total capital expenditures for the remainder of 2013 will be between $60.0 million and $70.0 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 an unsecured line of credit with Wells Fargo Bank, N.A. On July 25, 2013, this line of credit was increased from $25.0 million to $50.0 million, and the expiration date of the facility was extended to 2018. As of June 30, 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 June 30, 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 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,

•

ability to manage distribution costs effectively,

•

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 June 30, 2013, the Company’s net investment that is subject to foreign currency fluctuations totaled $87.4 million and the Company has recorded a cumulative foreign currency translation loss of $3.7 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, 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 (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, 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 June 30, 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 June 30, 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)
04/01/13 to 04/30/13		45,000	$	70.00		45,000		47,424
05/01/13 to 05/31/13		—	$	—		—		47,424
06/01/13 to 06/30/13		—	$	—		—		47,424

Total		45,000				45,000

(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.

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

On July 25, 2013, the Company entered into a second amendment (“Amendment No. 2”) to its Credit Agreement, dated January 29, 2010 (as so amended, the “Credit Agreement”), with Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the financial institutions party thereto.

In summary, Amendment No. 2 (i) extends the maturity date of the Credit Agreement from July 29, 2013 to July 25, 2018, (ii) increases the size of the Company’s revolving credit facility from $25 million to $50 million and (iii) makes other administrative changes to certain covenants and provisions of the Credit Agreement.

The foregoing description of Amendment No. 2 is a summary and is qualified in its entirety by reference to Amendment No. 2, a copy of which is filed as Exhibit to this report.

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		Amendment No. 2 to Credit Agreement, dated as of July 25, 2013, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein.

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, 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: July 29, 2013

EXHIBIT INDEX


EXHIBIT		DESCRIPTION

10.1		Amendment No. 2 to Credit Agreement, dated as of July 25, 2013, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein.

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, 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

AMENDMENT NO. 2

This AMENDMENT NO. 2 (the “ Amendment ”) dated as of July 25, 2013 (the “ Effective Date ”) is among CARBO Ceramics Inc., a Delaware corporation (the “ Borrower ”), the Lenders (as defined below) and Wells Fargo Bank, National Association, as administrative agent (in such capacity, the “ Administrative Agent ”), as swing line lender (the “ Swing Line Lender ”), and as issuing lender (in such capacity, the “ Issuing Lender ”) for such Lenders.

RECITALS

A. The Borrower is party to that certain Credit Agreement dated as of January 29, 2010, among the Borrower, the lenders party thereto from time to time (the “ Lenders ”), the Administrative Agent, the Swing Line Lender, and the Issuing Lender (as may be amended, restated or otherwise modified from time to time, the “ Credit Agreement ”).

B. The Borrower, the Lenders, the Administrative Agent, the Swing Line Lender, and the Issuing Lender wish to, subject to the terms and conditions of this Amendment, amend the Credit Agreement as provided herein.

THEREFORE, the Borrower, the Lenders, the Administrative Agent, the Swing Line Lender, and the Issuing Lender hereby agree as follows:

Section 1. Defined Terms . As used in this Amendment, each of the terms defined in the opening paragraph and the Recitals above shall have the meanings assigned to such terms therein. Each term defined in the Credit Agreement and used herein without definition shall have the meaning assigned to such term in the Credit Agreement, unless expressly provided to the contrary.

Section 2. Other Definitional Provisions . Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Amendment, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The words “hereof,” “herein,” and “hereunder” and words of similar import when used in this Amendment shall refer to this Amendment as a whole and not to any particular provision of this Amendment. The term “including” means “including, without limitation.” Paragraph headings have been inserted in this Amendment as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Amendment and shall not be used in the interpretation of any provision of this Amendment.

Section 3. Amendments to Credit Agreement .

(a) Section 1.1 of the Credit Agreement is hereby amended by adding the following new definitions:

“ Amendment No. 2 Effective Date ” means July 25, 2013.

“ Jenkins Bonds ” means the Taxable Industrial Development Revenue Bond (CARBO Ceramics Inc. Project), Series 2012, having a maximum principal amount not to exceed $255,000,000, issued by the Development Authority of Jenkins County.

“ Jenkins Capital Lease Obligations ” means the Debt under the Capital Lease described in Schedule 6.1.

(b) Section 1.1 of the Credit Agreement is hereby amended by restating the definitions of “Letter of Credit Maximum Amount,” “Maturity Date” “Net Income,” and “Swing Line Sublimit Amount” in their entirety as follows:

“ Letter of Credit Maximum Amount ” means $5,000,000; provided that, on and after the Maturity Date, the Letter of Credit Maximum Amount shall be zero.

“ Maturity Date ” means the earlier of (a) July 25, 2018 and (b) the earlier termination in whole of the Revolving Commitments pursuant to Section 2.1(b)(i) or Article 7.

“ Swing Line Sublimit Amount ” means $5,000,000; provided that, on and after the Maturity Date, the Swing Line Sublimit Amount shall be zero.

(c) Section 1.1 of the Credit Agreement is hereby amended by restating clause (f) of the definition of “Debt” as follows:

(f) obligations of such Person as lessee under Capital Leases and obligations of such Person in respect of synthetic leases (except that the Jenkins Capital Lease Obligations and the Wilkinson Capital Lease Obligations shall not constitute Debt for purposes of the calculations for compliance under Sections 6.16 and 6.17);

(d) Section 1.1 of the Credit Agreement is hereby amended by restating clause (b) of the definition of “Net Income” as follows:

(b) the cumulative effect of any change in GAAP; provided that, for purposes of this Agreement, “Net Income” shall not include any net income generated from either the Jenkins Bonds or the Wilkinson Bonds.

(e) Section 1.1 of the Credit Agreement is hereby amended by restating the last sentence of the definition of “Revolving Commitment” as follows:

The initial aggregate Revolving Commitment on the Amendment No. 2 Effective Date is $50,000,000.

(f) Section 6.3 of the Credit Agreement is hereby amended by deleting the “ and ” at the end of clause (f), by deleting clause (g), and by adding the following new clauses (g) and (h):

(g) the Jenkins Bonds; and

(h) the Wilkinson Bonds.

(g) Schedules I, II, 4.7, and 6.1 to the Credit Agreement are hereby deleted in their entirety and replaced with Schedules I, II, 4.7, and 6.1 attached hereto.

Section 4. Borrower Representations and Warranties . The Borrower represents and warrants that: (a) the representations and warranties contained in the Credit Agreement, as amended hereby, and the representations and warranties contained in the other Credit Documents, are true and correct in all material respects on and as of the Effective Date as if made on as and as of such date except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case such representation or warranty is true and correct in all material respects as of such earlier date; (b) no Default has occurred and is continuing; (c) the execution, delivery and performance of this Amendment are within the corporate power and authority of the Borrower and have been duly authorized by appropriate corporate and governing action and proceedings; (d) this Amendment constitutes the legal, valid, and binding obligation of the Borrower enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and general principles of equity; and (e) there are no governmental or other third party consents, licenses and approvals required in connection with the execution, delivery, performance, validity and enforceability of this Amendment.

Section 5. Conditions to Effectiveness . This Amendment shall become effective on the Effective Date and enforceable against the parties hereto upon the occurrence of the following conditions precedent:

(a) The Administrative Agent shall have received multiple original counterparts, as requested by the Administrative Agent, of:

(1) This Amendment duly and validly executed and delivered by duly authorized officers of the Borrower, the Administrative Agent, the Swing Line Lender, the Issuing Lender, and the Lenders;

(2) a Note payable to the order of each Lender in the amount of its Revolving Commitment duly and validly executed and delivered by a duly authorized officer of the Borrower;

(3) a secretary’s certificate from the Borrower certifying the Borrower’s authorizing resolutions and organizational documents;

(4) a certificate of good standing and existence for the Borrower in the state in which the Borrower is organized, which certificate shall be dated a date not earlier than thirty (30) days prior to Effective Date; and

(5) a legal opinion of outside counsel to the Borrower, in form and substance reasonably acceptable to the Administrative Agent.

(b) No Default shall have occurred and be continuing as of the Effective Date.

(d) The Borrower shall have paid (i) to the Administrative Agent the fees described in that certain Increase and Extension Fee Letter dated July 25, 2013 between the Borrower and the Administrative Agent and (ii) all other costs and expenses which have been invoiced and are payable pursuant to Section 10.1 of the Credit Agreement.

Section 6. Acknowledgments and Agreements .

(a) The Borrower acknowledges that on the date hereof all Obligations are payable without defense, offset, counterclaim or recoupment.

(b) The Administrative Agent and the Lenders hereby expressly reserve all of their rights, remedies, and claims under the Credit Documents. Nothing in this Amendment shall constitute a waiver or relinquishment of (i) any Default or Event of Default under any of the Credit Documents, (ii) any of the agreements, terms or conditions contained in any of the Credit Documents, (iii) any rights or remedies of the Administrative Agent or any Lender with respect to the Credit Documents or (iv) the rights of the Administrative Agent or any Lender to collect the full amounts owing to them under the Credit Documents.

(c) Each of the Borrower, the Administrative Agent, the Swing Line Lender, the Issuing Lender and the Lenders does hereby adopt, ratify, and confirm the Credit Agreement, as amended hereby, and acknowledges and agrees that the Credit Agreement, as amended hereby, is and remains in full force and effect, and the Borrower acknowledges and agrees that its liabilities and obligations under the Credit Agreement, as amended hereby, are not impaired in any respect by this Amendment.

(d) From and after the Effective Date, all references to the Credit Agreement and the Credit Documents shall mean such Credit Agreement and such Credit Documents as amended by this Amendment.

(e) This Amendment is a Credit Document for the purposes of the provisions of the other Credit Documents. Without limiting the foregoing, any breach of representations, warranties, and covenants under this Amendment shall be a Default or Event of Default, as applicable, under the Credit Agreement.

Section 7. Counterparts . This Amendment may be signed in any number of counterparts, each of which shall be an original and all of which, taken together, constitute a single instrument. This Amendment may be executed by facsimile signature and all such signatures shall be effective as originals.

Section 8. Successors and Assigns . This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted pursuant to the Credit Agreement.

Section 9. Invalidity . In the event that any one or more of the provisions contained in this Amendment shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Amendment.

Section 10. Governing Law . This Amendment shall be deemed to be a contract made under and shall be governed by and construed in accordance with the laws of the State of Texas.

Section 11. Entire Agreement . THIS AMENDMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT, THE NOTES, AND THE OTHER CREDIT DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[ Signature Pages Follow ]

EXECUTED effective as of the date first above written.


BORROWER :

CARBO CERAMICS INC.

By:		/s/ Ernesto Bautista III
		Ernesto Bautista III
		Vice President and Chief Financial Officer

Signature Page to Amendment No. 2


ADMINISTRATIVE AGENT:

WELLS FARGO BANK, NATIONAL ASSOCIATION as Administrative Agent, Swing Line Lender and Issuing Lender

By:		/s/ Kristen Brockman
Name:		Kristen Brockman
Title:		Vice President

LENDERS:

WELLS FARGO BANK, NATIONAL ASSOCIATION as a Lender

By:		/s/ Kristen Brockman
Name:		Kristen Brockman
Title:		Vice President

Signature Page to Amendment No. 2

SCHEDULE I

Pricing Schedule

The Applicable Margin with respect to Commitment Fee, Revolving Advances, and Swing Line Advances shall be determined in accordance with the following Table based on the Borrower’s Leverage Ratio as reflected in the Compliance Certificate delivered in connection with the financial statements most recently delivered pursuant to Section 5.2. Adjustments, if any, to such Applicable Margin shall be effective on the date the Administrative Agent receives the applicable financial statements and corresponding Compliance Certificate as required by the terms of this Agreement. If the Borrower fails to deliver the financial statements and corresponding Compliance Certificate to the Administrative Agent at the time required pursuant to Section 5.2, then effective as of the date such financial statements and Compliance Certificate were required to the delivered pursuant to Section 5.2, the Applicable Margin with respect to Commitment Fee, Revolving Advances, and Swing Line Advances shall be determined at Level IV and shall remain at such level until the date such financial statements and corresponding Compliance Certificate are so delivered by the Borrower. Notwithstanding anything to the contrary contained herein, the determination of the Applicable Margin for any period shall be subject to the provisions of Section 2.8(c) .


Applicable Margin	Leverage Ratio	LIBO Advances			Base Rate Advances			Commitment Fee
Level I	Less than 1.00		2.25	%		1.25	%		0.375	%
Level II	Equal to or greater than 1.00 but less than 1.50		2.50	%		1.50	%		0.375	%
Level III	Equal to or greater than 1.50 but less than 2.00		2.75	%		1.75	%		0.50	%
Level IV	Equal to or greater than 2.00		3.00	%		2.00	%		0.50	%

Schedule I

Pricing Schedule

SCHEDULE II

Commitments, Contact Information


ADMINISTRATIVE AGENT

Wells Fargo Bank, National Association	Address:	1700 Lincoln St., 5 ^th Floor Denver, CO 80209 MAC C7300-059
	Attn: Telephone: Facsimile:	Wholesale Loan Servicing (303) 863-5378 (303) 863-2729

	with a copy to:
	Address:	1000 Louisiana, 9 ^th Floor MAC T5002-090 Houston, Texas 77002
	Attn: Telephone: Facsimile:	Kristen Brockman, Vice President (713) 319-1954 (713) 739-1087

CREDIT PARTIES

Borrower/Guarantors	Address for Notices :
	Energy Center II 575 N. Dairy Ashford Rd., Ste 300 Houston, TX 77079
	Attn:	Ernesto Bautista III Chief Financial Officer
	Telephone : Facsimile:	(281) 931-8884 (281) 931-8302

LENDERS

Wells Fargo Bank, National Association	Address for Notices :
		1700 Lincoln St., 5 ^th Floor Denver, CO 80209 MAC C7300-059
Revolving Commitment:	Attn:	Wholesale Loan Servicing
$50,000,000	Telephone: Facsimile:	(303) 863-5378 (303) 863-2729

	with a copy to:
	Address:	1000 Louisiana, 9 ^th Floor MAC T5002-090 Houston, Texas 77002
	Attn:	Kristen Brockman, Vice President
	Telephone:	(713) 319-1954
	Facsimile:	(713) 739-1087

Schedule II

Borrower, Administrative Agent, and Lender Information

Schedule 4.7

Litigation

On February 9, 2012, Borrower 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 Borrower’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 Borrower’s business operations and business prospects that were made during the Relevant Time Period and requests unspecified damages and costs. In September 2012, Borrower and Messrs. Kolstad and Bautista filed a motion to dismiss this lawsuit. The motion to dismiss was granted, and the Federal Securities Lawsuit was dismissed without prejudice in June 2013.

On June 13, 2012, the Directors of Borrower and Mr. Bautista were named as defendants in a purported derivative action lawsuit brought on behalf of Borrower 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. The lawsuit requests unspecified damages and costs, and has been further stayed while it is determined whether the plaintiffs in the Federal Securities Lawsuit will appeal the dismissal or seek leave to file a second amended complaint.

Schedule 4.7

Schedule 6.1

Existing Debt

Capital Leases

Lease Agreement dated as of November 1, 2008, by and between Development Authority of Wilkinson County, as Lessor, and CARBO Ceramics Inc., as Lessee.

Lease Agreement dated as of November 1, 2012, by and between Development Authority of Jenkins County, as Lessor, and CARBO Ceramics Inc., as Lessee.

Schedule 6.1

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: July 29, 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: July 29, 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 June 30, 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: July 29, 2013

/s/ Gary A. Kolstad

Name: Gary A. Kolstad

Title: Chief Executive Officer

Dated: July 29, 2013

/s/ Ernesto Bautista III

Name: Ernesto Bautista III

Title: Chief Financial Officer

Exhibit 95

MINE SAFETY DISCLOSURES

For the fiscal quarter ended June 30, 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	$	617		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	$	200		0		No		No		0		0		0

Totals		0		0		0		0		0	$	1,217		0						0		0		0

(1)	Amounts represent the total dollar value of proposed assessments received and/or outstanding at the end of June 30, 2013.

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