CARBO CERAMICS INC (Form: 10-Q, Received: 04/27/2017 11:03:29)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

☐	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 ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 ☒

As of April 21, 2017, 27,139,979 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

PART I. FINANCIAL INFORMATION		PAGES

Item 1.	Financial Statements	3

	Consolidated Balance Sheets - March 31, 2017 (Unaudited) and December 31, 2016	3

	Consolidated Statements of Operations (Unaudited) - Three months ended March 31, 2017 and 2016	4

	Consolidated Statements of Comprehensive Loss (Unaudited) - Three months ended March 31, 2017 and 2016	5

	Consolidated Statements of Cash Flows (Unaudited) - Three months ended March 31, 2017 and 2016	6

	Notes to Consolidated Financial Statements (Unaudited)	7-13

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14-18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Mine Safety Disclosure	21

Item 5.	Other Information	21

Item 6.	Exhibits	22

Signatures		23

Exhibit Index		24

PART I. FINANCI AL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CARBO CERAMICS INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)

	March 31,			December 31,
	2017			2016
	(Unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	55,591		$	91,680
Restricted cash		5,503			—
Trade accounts and other receivables, net		29,429			23,622
Inventories:
Finished goods		71,813			74,133
Raw materials and supplies		20,025			23,041
Total inventories		91,838			97,174
Prepaid expenses and other current assets		4,211			3,548
Income tax receivable		2,633			1,199
Total current assets		189,205			217,223
Restricted cash		6,289			—
Property, plant and equipment:
Land and land improvements		45,534			45,530
Land-use and mineral rights		19,696			19,696
Buildings		87,713			87,318
Machinery and equipment		648,242			647,753
Construction in progress		92,932			92,704
Total property, plant and equipment		894,117			893,001
Less accumulated depreciation and amortization		410,914			398,898
Net property, plant and equipment		483,203			494,103
Goodwill		3,500			3,500
Intangible and other assets, net		9,106			8,631
Total assets	$	691,303		$	723,457
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion	$	—		$	13,000
Accounts payable		6,298			7,782
Accrued payroll and benefits		2,595			3,434
Derivative instruments		2,135			1,599
Other accrued expenses		10,390			8,989
Total current liabilities		21,418			34,804
Deferred income taxes		2,290			1,236
Long-term debt, net		47,957			42,404
Notes payable, related parties		25,000			25,000
Other long-term liabilities		4,006			3,443
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; 27,139,979 and 26,881,066 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively		271			269
Additional paid-in capital		122,511			117,192
Retained earnings		500,472			533,435
Accumulated other comprehensive loss		(32,622	)		(34,326	)
Total shareholders' equity		590,632			616,570
Total liabilities and shareholders' equity	$	691,303		$	723,457

The accompanying notes are an integral part of these statements .

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share data)

(Unaudited)

	Three months ended
	March 31,
	2017			2016
Revenues	$	34,670		$	33,102
Cost of sales		54,128			56,743
Gross loss		(19,458	)		(23,641	)
Selling, general and administrative expenses		10,797			11,475
Loss on disposal or impairment of assets		—			948
Operating loss		(30,255	)		(36,064	)
Other expense:
Interest expense, net		(2,088	)		(797	)
Other, net		187			76
		(1,901	)		(721	)
Loss before income taxes		(32,156	)		(36,785	)
Income tax expense (benefit)		288			(12,101	)
Net loss	$	(32,444	)	$	(24,684	)
Loss per share:
Basic	$	(1.22	)	$	(1.07	)
Diluted	$	(1.22	)	$	(1.07	)
Other information:
Dividends declared per common share	$	—		$	—

The accompanying notes are an integral part of these statements.

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

($ in thousands)

(Unaudited)

	Three months ended
	March 31,
	2017			2016
Net loss	$	(32,444	)	$	(24,684	)
Other comprehensive income:
Foreign currency translation adjustment		1,704			1,443
Deferred income taxes		—			—
Other comprehensive income, net of tax		1,704			1,443
Comprehensive loss	$	(30,740	)	$	(23,241	)

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,
	2017			2016
Operating activities
Net loss	$	(32,444	)	$	(24,684	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		12,430			12,291
Provision for doubtful accounts		238			424
Deferred income taxes		1,302			(11,897	)
Loss on disposal or impairment of assets		—			948
Foreign currency transaction loss (gain), net		5			(129	)
Stock compensation expense		1,348			1,564
Change in fair value of derivative instruments		385			(784	)
Changes in operating assets and liabilities:
Trade accounts and other receivables		(5,794	)		23,339
Inventories		5,455			(5,937	)
Prepaid expenses and other current assets		(650	)		169
Accounts payable		(1,475	)		(439	)
Accrued expenses		785			(2,879	)
Income tax receivable, net		(1,377	)		(277	)
Other, net		721			(4	)
Net cash used in operating activities		(19,071	)		(8,295	)
Investing activities
Capital expenditures		(634	)		(6,088	)
Net cash used in investing activities		(634	)		(6,088	)
Financing activities
Repayments on long-term debt		(3,250	)		(23,000	)
Repayments on insurance financing agreement		(462	)		—
Payments of debt issuance costs		(875	)		—
Purchase of common stock		(518	)		(418	)
Net cash used in financing activities		(5,105	)		(23,418	)
Effect of exchange rate changes on cash		513			397
Net decrease in cash and cash equivalents and restricted cash		(24,297	)		(37,404	)
Cash and cash equivalents and restricted cash at beginning of period		91,680			78,866
Cash and cash equivalents and restricted cash at end of period	$	67,383		$	41,462
Supplemental cash flow information
Interest paid	$	761		$	966
Income taxes paid	$	—		$	—

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 (“U.S. GAAP”) 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, 2016 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, 2016 included in the annual report on Form 10-K of CARBO Ceramics Inc. for the year ended December 31, 2016.

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

Beginning in late 2014, a severe decline in oil and natural gas prices led to a significant decline in oil and natural gas industry drilling activities and capital spending. As a result of the continued negative impact this has had on its business, the Company continues to operate its plants at significantly reduced levels. As of March 31, 2017, the Company is producing ceramic proppants from its Eufaula, Alabama and Kopeysk, Russia manufacturing facilities, and processing sand at its Marshfield, Wisconsin facility. The Company produces ceramic pellets for the industrial markets in a limited capacity, and when market demands, at our McIntyre, Georgia facility. Our Millen, Georgia facility is currently mothballed, and our Toomsboro, Georgia facility is currently idled. As a result of the steps the Company has taken to enhance its liquidity, the Company currently believes that cash on hand will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least one year from the date of this Form 10-Q. The Company’s view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 2017 and 2018, which is impacted by various assumptions regarding demand and sales prices for our products. Although the Company has observed certain factors in the first quarter 2017 that could be indicative of improving industry conditions, its financial forecasts in recent periods have not always been accurate due to the inability to estimate customer demand, which is highly volatile in the current operating environment. The Company has no committed sales backlog from its customers. As a result, there is no guarantee that its financial forecast, which projects sufficient cash will be available to meet planned operating expenses and other cash needs, will be achieved.

Additionally, the construction projects relating to the second production line at Millen, Georgia and the second phase of the retrofit of an existing plant with the KRYPTOSPHERE® technology remain suspended. As of March 31, 2017, the value of the temporarily suspended projects relating to these two projects totaled approximately 93% of the Company’s total construction in progress, and both projects are over 90% complete.

Deferred Taxes – Valuation Allowance

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized. A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements. Additionally there can be statutory limitations and losses also assessed on the deferred tax assets should certain conditions arise. As a result of the significant decline in oil and gas activities and net losses incurred over the past several quarters, we determined during the three months ended March 31, 2017 that it was more likely than not that a portion of our deferred tax assets will not be realized in the future. Accordingly, we established a $10,477 valuation allowance against a portion of our deferred tax assets. Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities.

Restricted Cash

As a result of the repayment of the Wells Fargo term loan, combined with the continued use of letters of credit and corporate cards with Wells Fargo (see Note 7), a portion of the Company’s cash balance is now restricted to its use in order to provide collateral to Wells Fargo. As of March 31, 2017 and December 31, 2016, restricted cash was $11,792 and $0, respectively.

Lower of Cost or Market Adjustments

As of March 31, 2017 and 2016, the Company reviewed the carrying values of all inventories and concluded that no adjustments were warranted for finished goods and raw materials intended for use in the Company’s manufacturing process.

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling certain facilities, certain production costs have been expensed instead of being capitalized into inventory. The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of production at normal production levels. For the three months ended March 31, 2017 and 2016, the Company expensed $11,212 and $9,707, respectively, in production costs.

Long-lived and other noncurrent assets impairment considerations

As noted, the Company has temporarily idled production at various manufacturing facilities, including throughout 2017 and 2016. The Company does not assess temporarily idled assets for impairment unless events or circumstances indicate that the carrying amounts of those assets may not be recoverable. Short-term stoppages of production for less than one year do not generally significantly impact the long-term expected cash flows of the idled facility. As of March 31, 2016, as a result of changes in the planned usage of certain long-term bauxite raw materials, the Company evaluated the carrying value of those bauxite raw materials. Based upon this evaluation, during the three months ended March 31, 2016, the Company recognized an impairment charge of $1,065 on these bauxite raw material inventories. At December 31, 2016, as a result of the continued and severity of the market downturn, the Company identified indicators of impairments related to each of its domestic manufacturing plant asset groups. The Company completed undiscounted cash flow analyses on that date and determined no impairment charge was necessary at that time. As of March 31, 2017, the Company concluded that there were no events or circumstances that would indicate that carrying amounts of long-lived and other noncurrent assets might be impaired. However, the Company continues to monitor market conditions closely. Further deterioration of market conditions could result in impairment charges being taken on the Company’s long-lived and other noncurrent assets, including the Company’s manufacturing plants, goodwill and intangible assets. The Company will evaluate long-lived and other noncurrent assets for impairment at such time that events or circumstances indicate that carrying amounts might be impaired.

2.	Loss Per Share

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

	Three months ended
	March 31,
	2017			2016
Numerator for basic and diluted loss per share:
Net loss	$	(32,444	)	$	(24,684	)
Effect of reallocating undistributed earnings of participating securities		—			—
Net loss available under the two-class method	$	(32,444	)	$	(24,684	)
Denominator:
Denominator for basic loss per share--weighted-average shares		26,607,377			23,062,560
Effect of dilutive potential common shares		—			—
Denominator for diluted loss per share--adjusted weighted-average shares		26,607,377			23,062,560
Basic loss per share	$	(1.22	)	$	(1.07	)
Diluted loss per share	$	(1.22	)	$	(1.07	)

3.	Common Stock Repurchase Program

On January 28, 2015, 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. As of March 31, 2017, the Company had not repurchased any shares under the plan.

4.	Natural Gas Derivative Instruments

Natural gas is used to fire the kilns at the Company’s domestic manufacturing plants. In an effort to mitigate potential volatility in the cost of natural gas purchases and reduce exposure to short-term spikes in the price of this commodity, from time to time, the Company enters into contracts to purchase a portion of the anticipated monthly natural gas requirements at specified prices. Contracts are geographic by plant location. As a result of the Company’s significantly reducing production levels and not taking delivery of all of the contracted natural gas quantities, the Company accounts for relevant contracts as derivative instruments.

Derivative accounting requires the natural gas contracts to be recognized as either assets or liabilities at fair value with an offsetting entry in earnings. The Company uses the income approach in determining the fair value of these derivative instruments. The model used considers the difference, as of each balance sheet date, between the contracted prices and the New York Mercantile Exchange (“NYMEX”) forward strip price for each contracted period. The estimated cash flows from these contracts are discounted using a discount rate of 8.0%, which reflects the nature of the contracts as well as the timing and risk of estimated cash flows associated with the contracts. The discount rate had an immaterial impact on the fair value of the contracts for the three months ended March 31, 2017. The last of these natural gas contracts will expire in December 2018. During the three months ended March 31, 2017 and 2016, the Company recognized an $891 and $227 loss, respectively, in cost of sales on derivatives instruments. The cumulative present value of these natural gas derivative contracts as of March 31, 2017 are presented as current and long-term liabilities, as applicable, in the Consolidated Balance Sheet.

At March 31, 2017, the Company had contracted for delivery a total of 3,690,000 MMBtu of natural gas at an average price of $4.37 per MMBtu through December 31, 2018. Contracts covering 3,480,000 MMBtu are subject to accounting as derivative instruments. Future decreases in the NYMEX forward strip prices will result in additional derivative losses while future increases in the NYMEX forward strip prices will result in derivative gains. Future gains or losses will approximate the change in NYMEX natural gas prices relative to the total quantity of natural gas under contracts now subject to accounting as derivatives. The historical average NYMEX natural gas contract settlement prices for the three months ended March 31, 2017 and 2016 were $3.32 per MMBtu and $2.09 per MMBtu, respectively.

5.	Fair Value Measurements

The Company’s derivative instruments are measured at fair value on a recurring basis. U.S. GAAP establishes a fair value hierarchy that has three levels based on the reliability of the inputs used to determine the fair value. These levels include: (1) Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; (2) Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and (3) Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s natural gas derivative instruments are included within Level 2 of the fair value hierarchy (see Note 4 herein for additional information on the derivative instruments). The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value:

	Fair value as of March 31, 2017
	Level 1		Level 2			Level 3		Total
Liabilities:
Derivative instruments		—		(3,852	)		—		(3,852	)
Total fair value	$	—	$	(3,852	)	$	—	$	(3,852	)

	Fair value as of December 31, 2016
	Level 1		Level 2			Level 3		Total
Liabilities:
Derivative instruments		—		(3,468	)		—		(3,468	)
Total fair value	$	—	$	(3,468	)	$	—	$	(3,468	)

At March 31, 2017, the fair value of the Company’s long-term debt approximated the carrying value.

6.	Stock Based Compensation

The 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (the “2014 Omnibus Incentive Plan”) provides for the 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, 2017, 52,961 shares were available for issuance under the 2014 Omnibus Incentive Plan. Although the 2009 CARBO Ceramics Inc. Omnibus Incentive Plan (the “2009 Omnibus Incentive Plan”) has expired, certain nonvested restricted shares granted under that plan remain outstanding in accordance with its terms. Additionally, certain units of phantom stock remain outstanding under the 2009 Omnibus Incentive Plan, as described below.

A summary of restricted stock activity and related information for the three months ended March 31, 2017 is presented below:

	Shares			Weighted-Average Grant-Date Fair Value Per Share
Nonvested at January 1, 2017		339,140		$	28.59
Granted		297,685		$	10.30
Vested		(136,063	)	$	35.68
Forfeited		(2,549	)	$	12.94
Nonvested at March 31, 2017		498,213		$	15.81

As of March 31, 2017, there was $6,816 of total unrecognized compensation cost related to restricted shares granted under both the expired 2009 Omnibus Incentive Plan and the 2014 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 three months ended March 31, 2017 was $1,947.

The Company made market-based cash awards to certain executives of the Company pursuant to the 2014 Omnibus Incentive Plan. As of March 31, 2017, the total target award outstanding was $2,982. The payout of awards can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three year period beginning January 1 of the year each grant was made.

The Company also made phantom stock awards to key employees pursuant to the 2014 Omnibus Incentive Plan. The units subject to a phantom stock award vest and cease to be forfeitable in equal annual installments over a three-year period. Participants awarded units of phantom stock 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 stock awards. As of March 31, 2017, there were no units of phantom stock outstanding from the expired 2009 Omnibus Incentive Plan. As of March 31, 2017, there were 163,215 units of phantom stock granted under the 2014 Omnibus Incentive Plan, of which 4,189 have vested and 2,292 have been forfeited. As of March 31, 2017, nonvested units of phantom stock under the 2014 Omnibus Incentive Plan had a total value of $2,044, a portion of which is accrued as a liability within Accrued Payroll and Benefits. Compensation expense for these units of phantom stock will be recognized over the three-year vesting period. The amount of compensation expense recognized each period will be based on the fair value of the Company’s common stock at the end of each period.

7.	Long-Term Debt and Notes Payable

On March 2, 2017, the Company entered into an Amended and Restated Credit Agreement (the “New Credit Agreement”) with Wilks Brothers, LLC (“Wilks”) to replace its current term loan with Wells Fargo Bank, National Association (“Wells Fargo”) and provide the Company with additional liquidity for a longer term. The New Credit Agreement is a $65,000 facility maturing on December 31, 2022, that consists of a $52,651 term loan that was made at closing to pay off Wells Fargo and an additional term loan of $12,349 that will be made in a single advance to the Company after the Company satisfies certain post-closing conditions. The $52,651 term loan was a non-cash transaction to the Company as Wilks directly paid Wells Fargo and assumed the New Credit Agreement. The Company’s obligations bear interest at 9.00% and are guaranteed by its two domestic operating subsidiaries. No principal repayments are required until maturity (except in unusual circumstances), and there are no financial covenants. In lieu of making cash interest payments, the Company has the option during the first two years of the loan to make interest payments as payment-in-kind, or PIK, by applying an 11.00% rate to the interest payment due (instead of the 9.00% cash interest rate) and capitalizing the resulting amount to the outstanding principal balance of the loan. The Company is required to provide Wilks 30 day notice of its intent to exercise this option for an interest payment. The Company does not anticipate utilizing this option and has therefore accrued interest expense using the 9.00% cash interest rate.

The loan cannot be prepaid during the first three years without making the lenders whole for interest that would have been payable over the entire remaining term of the loan. The Company’s obligations under the New Credit Agreement are secured by: (i) a p ledge of all accounts receivable and inventory, (ii) cash in certain accounts, (iii) domestic distribution assets residing on owned real property, (iv) the Company’s Marshfield, Wisconsin and Toomsboro, Georgia plant facilities and equipment, and (v) certa in real property interests in mines and minerals. Other liens previously in favor of Wells Fargo were released.

As of March 31, 2017, the Company’s outstanding debt under its New Credit Agreement was $52,651. During the period ended March 31, 2017, the Company expensed $455 of debt issuance costs relating to the previous Wells Fargo Amended Credit Agreement. As of March 31, 2017, the Company had $862 of unamortized debt issuance costs relating to the New Credit Agreement that are presented as a direct reduction from the carrying amount of the long-term debt obligation. The Company had $10,730 and $11,980 in standby letters of credit issued through Wells Fargo as of March 31, 2017 and December 31, 2016, respectively, primarily as collateral relating to our natural gas commitments and railcar leases. As of December 31, 2016, the Company’s outstanding debt under its previous Wells Fargo Amended Credit Agreement was $55,901, of which $13,000 was classified as current and $42,901 was classified as long-term. As of December 31, 2016, the Company had $497 of debt issuance costs that are presented as a direct reduction from the carrying amount of the long-term debt obligation. For the year ended December 31, 2016, the weighted average interest rate was 6.447% based on LIBOR-based rate borrowings.

On March 2, 2017, in connection with entry into the New Credit Agreement, the Company issued a Warrant (the “Warrant”) to Wilks. Subject to the terms of the Warrant, the Warrant entitles the holder thereof to purchase up to 523,022 shares of the Common Stock, at an exercise price of $14.91 per share, payable in cash. The Warrant expires on December 31, 2022. Until receipt of the Stockholder Approval, the holder of the Warrant shall not be entitled to exercise the Warrant to the extent that the number of shares of Common Stock to be purchased upon such exercise, plus the number of shares of Common Stock purchased on any prior exercise of the Warrant, exceeds 271,414 shares of Common Stock (which amount represents approximately 1% of the number of shares of Common Stock currently outstanding)‎. Based on a Schedule 13D filing with the SEC, as of March 10, 2017, Wilks owned 9.6% of the Company’s outstanding common stock, and should Wilks fully exercise the Warrant to purchase an additional 523,022 shares, it would hold 11.5% of the Company’s outstanding common stock. The Company allocated the proceeds received of $52,651 to each of these two instruments based on their relative fair values. Accordingly, the Company recorded long-term debt of $48,780 and warrants of $3,871 at inception. The amount associated with the Warrant was recorded as an increase to additional paid-in capital. The original issue discount of the long-term debt will be amortized using the effective interest method over the term of the loan. As of March 31, 2017, the unamortized original issue discount was $3,832.

In May 2016, the Company received proceeds of $25,000 from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of the Company’s Directors. Each Note matures on April 1, 2019 and bears interest at 7.00%. On March 2, 2017, in connection with the New Credit Agreement, the Notes were amended to provide for payment-in-kind, or PIK, interest payments at 8.00% until the lenders under the New Credit Agreement receive two consecutive semi-annual cash interest payments.

Interest cost for the three months ended March 31, 2017 and 2016 was $2,233 and $980, respectively, of which $0 and $80 was capitalized into the cost of property, plant and equipment in the three months ended March 31, 2017 and 2016, respectively. Interest cost primarily includes interest expense relating to our debts as well as amortization and the write-off of debt issuance costs and amortization of the original issue discount associated with the New Credit Agreement and Warrant.

8.	Shareholders’ Equity

On July 28, 2016, the Company filed a prospectus supplement and associated sales agreement related to an at-the-market (“ATM”) equity offering program pursuant to which the Company may sell, from time to time, common stock having an aggregate offering price of up to $75,000 through Cowen and Company LLC, as sales agent, for general corporate purposes. As of March 31, 2017, the Company had sold a total of 3,405,709 shares of its common stock under the ATM program for $46,612, or an average of $13.69 per share, and received proceeds of $45,564, net of commissions of $1,048. These sales occurred in August 2016 and September 2016, and the Company has not utilized the program since those sales.

As of March 31, 2017, the Company’s net investment that is subject to foreign currency fluctuations totaled $15,950, and the Company has recorded a cumulative foreign currency translation loss of $32,622, all related to the Russian Ruble. This cumulative translation loss is included in and is the only component of accumulated other comprehensive loss within shareholders’ equity. No income tax benefits have been recorded on these losses as a result of the uncertainty about recoverability of the related deferred income tax benefits.

9.	New Accounting Pronouncements

In November 2016, the FASB issued ASU No. 2016-18, “ Statement of Cash Flows (Topic 230) – Restricted Cash ,” which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted this guidance as of January 1, 2017. The adoption did not have a material impact on its consolidated financial statements and related disclosures.

In August 2015, the FASB issued ASU No. 2015-14, “ Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date ,” which revises the effective date of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”) to interim and annual periods beginning after December 15, 2017, with early adoption permitted no earlier than interim and annual periods beginning after December 15, 2016. In May 2014, the FASB issued ASU 2014-09, which amends current revenue guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Upon initial evaluation, the Company does not believe there will be a material impact on its consolidated financial statements, and is currently evaluating the potential impact on disclosures. The Company’s analysis of proppant sales contracts under ASC 606 supports the recognition of revenue at a point in time, typically when title passes to the customer upon delivery, for the majority of contracts, which is consistent with the current revenue recognition model. The Company is still evaluating the potential impact, if any, on sales contracts relating to the sale of fracture stimulation software and environmental products and services. The Company expects to utilize the modified retrospective approach, which requires a cumulative adjustment to retained earnings and no adjustments to prior periods. The Company does not expect a material cumulative adjustment upon adoption.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330),” (“ASU 2015-11”) which amends and simplifies the measurement of inventory. The main provisions of the standard require that inventory be measured at the lower of cost and net realizable value. Prior to the issuance of the standard, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). The Company adopted ASU 2015-11 as of January 1, 2017. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

10.	Segment Information

The Company has two operating segments: 1) oilfield technologies and services and 2) environmental products and services. Discrete financial information is available for each operating segment. Management of each operating segment reports to our Chief Executive Officer, the Company’s chief operating decision maker, who regularly evaluates income before income taxes as the measure to evaluate segment performance and to allocate resources. The accounting policies of each segment are the same as those described in the summary of significant accounting policies in Note 1 of the consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2016.

The Company’s oilfield technologies and services segment manufactures and sells ceramic proppants on a global basis for use primarily in the hydraulic fracturing of natural gas and oil wells. All of the Company’s ceramic proppant products have similar production processes and economic characteristics and are marketed predominantly to pressure pumping companies that perform hydraulic fracturing for major oil and gas companies. The Company’s manufacturing facilities also produce ceramic pellets for use in various industrial technology applications, including but not limited to casting and milling. This segment also promotes increased production and Estimated Ultimate Recovery (“EUR”) of oil and natural gas by providing industry leading technology to Design, Build, and Optimize the Frac ^TM . Through our wholly-owned subsidiary StrataGen, Inc., we sell one of the most widely used fracture stimulation software under the brand FracPro ^® and provide fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

Our environmental products and services segment is intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”). AGPI, a wholly-owned subsidiary of ours, provides spill prevention, containment and countermeasure systems for the oil and gas industry. AGPI uses proprietary technology designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials.

Summarized financial information for the Company’s operating segments for the three months ended March 31, 2017 and 2016 is shown in the following tables. Intersegment sales are not material.

	Oilfield Technologies and Services			Environmental Products and Services			Total
	($ in thousands)
Three Months Ended March 31, 2017
Revenue from external customers	$	29,620		$	5,050		$	34,670
Loss before income taxes		(31,763	)		(393	)		(32,156	)
Depreciation and amortization		12,094			336			12,430
Three Months Ended March 31, 2016
Revenue from external customers	$	29,409		$	3,693		$	33,102
Loss before income taxes		(36,000	)		(785	)		(36,785	)
Depreciation and amortization		11,853			438			12,291

11.	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.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

CARBO Ceramics Inc. (“we,” “us,” “our” or our “Company”) is a technology company that provides products and services to the global oil and gas and industrial markets to enhance value for its clients. The Company conducts its business within two operating segments: 1) oilfield technologies and services and 2) environmental products and services.

Our oilfield technologies and services segment includes the manufacturing and selling of proppant products for use primarily in the hydraulic fracturing of oil and natural gas wells, our industrial ceramics business, Fracpro® software for the design of fracture treatments, and StrataGen consulting services for the optimizing of well completions. Hydraulic fracturing is the most widely used method of increasing production from oil and natural gas wells. The hydraulic fracturing process consists of pumping fluids down a natural gas or oil well at pressures sufficient to create fractures in the hydrocarbon-bearing rock formation. A granular material, called proppant, is suspended and transported in the fluid and fills the fracture, “propping” it open once high-pressure pumping stops. The proppant filled fracture creates a conductive channel through which the hydrocarbons can flow more freely from the formation to the well and then to the surface.

There are three primary types of proppant that can be utilized in the hydraulic fracturing process: sand, resin coated sand and ceramic. Sand is the least expensive proppant, resin-coated sand is more expensive and ceramic proppant is typically the most expensive. The higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions results in an increase in the production rate of oil and natural gas, an increase in the total oil or natural gas that can be recovered from the well and, consequently, an increase in cash flow for the operators of the well. The increased production rates are primarily attributable to the higher strength and more uniform size and shape of ceramic proppant versus alternative materials. We are one of the world’s largest suppliers of ceramic proppant.

Our manufacturing facilities also produce ceramic pellets for use in various industrial technology applications, including but not limited to casting and milling.

Through our wholly-owned subsidiary StrataGen, Inc., our oilfield technologies and services segment also promotes increased production and EUR of oil and natural gas by selling a widely used fracture stimulation software under the brand FracPro®, and providing fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

FracPro® provides a suite of stimulation software solutions used for designing fracture treatments and for on-site real-time analysis. Use of FracPro has enabled our clients to recognize and remedy potential stimulation problems. FracPro has been integrated with third-party reservoir simulation software, furthering its reach and utility.

Our specialized consulting team operating under the name “StrataGen” works with operators around the world to help optimize well placement, fracture treatment design and production enhancement. The broad range of expertise of the StrataGen consultants includes: fracture treatment design; completion support; on-site treatment supervision; quality control; post-treatment evaluation and optimization; reservoir and fracture studies; rock mechanics and software application and training.

Our environmental products and services segment is intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”). Asset Guard Products Inc. (“AGPI”), the only subsidiary of ours to operate in this segment, provides spill prevention, containment and countermeasure systems for the oil and gas industry. AGPI uses proprietary technology to make products designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials. AGPI was formerly known as Falcon Technologies and Services, Inc.

Industry Conditions

During the three months ended March 31, 2017, the average price of West Texas Intermediate (“WTI”) crude oil increased 56% to $51.77 per barrel compared to $33.18 per barrel during the same period in 2016. The average North American rig count increased 43% during the three months ended March 31, 2017 to 1,038 rigs compared to 723 rigs during the same period in 2016. Although commodity prices have shown increases in the last year, they remain at significantly lower levels than prior to the severe industry downturn that began in late 2014, which has not encouraged a broad move away from low-cost completions. E&P operators that are existing or target customers of ours continued to use more third-party raw frac sand than ceramic or resin-coated proppants as a percentage of overall proppant consumption during the three months ended March 31, 2017. We expect this trend to continue as our customers are under increasing pressure to consider lower up-front cost alternatives in the current commodity price environment, notwithstanding the superior performance results of our products. These events, along with an oversupplied ceramic proppant market that is liquidating imported inventory, and low oil and natural gas prices, kept demand and average prices low for our proppants during the three months ended March 31, 2017.

Generally, demand for most of our products and services depends primarily upon the supply of and demand for natural gas and oil and on the number of natural gas and oil wells drilled, completed or re-completed worldwide. More specifically, the demand for most of

our products and services is dependent on the number of oil and natural gas wells that are hydraulically fractured to stim ulate production. Because the demand for these products and services is also dependent on the commodity price of oil and natural gas, lower commodity prices result in fewer of our premium products being purchased. In addition to rig counts and commodity prices, our results of operations are also significantly affected by a host of other factors, including but not limited to (a) well completions activity, which is not necessarily correlated with rig count, (b) customer preferences, (c) new product and tech nology adoption (including of our KRYPTOSPHERE, CARBOAIR and SCALEGUARD technologies), (d) imports and competition, (e) changes in the product mix of what we sell, (f) costs of developing our products and services and running our business, and (g) changes in our strategy and execution. Current demand for proppant is extremely dynamic, but even if rig count and commodity prices remain constant, our business results are also highly dependent on these additional factors.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with U.S. GAAP, which require us to make estimates and assumptions (see Note 1 to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2016). We believe that some of our accounting policies involve a higher degree of judgment and complexity than others. As of December 31, 2016, our critical accounting policies included revenue recognition, estimating the recoverability of accounts receivable, inventory valuation, accounting for income taxes, accounting for long-lived assets, accounting for derivative instruments, and accounting for abnormally low production levels. These critical accounting policies are discussed more fully in our annual report on Form 10-K for the year ended December 31, 2016.

There have been no changes in our evaluation of our critical accounting policies since December 31, 2016.

Results of Operations

Three Months Ended March 31, 2017

Revenues . Oilfield technologies and services segment revenues of $29.6 million for the three months ended March 31, 2017 increased 1% compared to $29.4 million for the same period in 2016. The increase was mainly attributable to an increase in technology product sales and an increase in frac sand sales. These increases were partially offset by decreases in base ceramic proppant sales. Our worldwide product sales volumes and average selling price per pound in the three months ended March 31, 2017 compared to the same period in 2016 were as follows:

	Three months ended
Product Sales	March 31,
(Volumes in million lbs)	2017				2016
	Volumes		Average Price / lb		Volumes		Average Price / lb
Ceramic		83	$	0.26		120	$	0.22
Northern White Sand		370		0.02		75		0.02
Total		453	$	0.06		195	$	0.14

North American (defined as Canada and U.S.) ceramic proppant sales volume decreased 35% in the three months ended March 31, 2017 compared to the same period in 2016, primarily due to lower sales of base ceramic proppant, partially offset by higher sales of technology products. International (excluding Canada) ceramic proppant sales volumes decreased 23%.

Primarily due to the change in product mix, the average selling price per pound of all proppant sold by us was $0.06 during the three months ended March 31, 2017 compared to $0.14 for the same period in 2016.

Environmental products and services segment revenues of $5.1 million for the three months ended March 31, 2017 increased 37% compared to $3.7 million in the same period in 2016. The increase was mainly attributable to an increase in oil and natural gas industry activity.

Gross Loss. Oilfield technologies and services segment gross loss for the three months ended March 31, 2017 was $19.9 million, or 67% of revenues, compared to gross loss of $23.5 million, or 80% of revenues, for the same period in 2016. Gross loss was negatively affected by a 31% decline in ceramic proppant sales volumes and a $1.5 million increase in slowing and idling costs; however, oilfield technologies and services gross loss improved primarily due to an increase in oil and natural gas industry activity and incurring no severance charges during the three months ended March 31, 2017 compared to $6.7 million in the same period of 2016.

Environmental products and services segment gross profit for the three months ended March 31, 2017 was $0.4 million compared to gross loss of $0.1 million for the same period in 2016. This $0.5 million improvement was largely due to a shift in the segment’s revenue mix towards more profitable product sales combined with an increase in oil and natural gas industry activity.

Consolidated cost of sales for the three months ended March 31, 2017 and 2016 included the following:

(In thousands)	2017		2016
Primary cost of sales	$	42,025	$	40,121
Slowing and idling production		11,212		9,707
Loss on derivative instruments		891		227
Severance charges		—		6,688
Total Cost of Sales	$	54,128	$	56,743

Selling, General and Administrative (SG&A) and Other Operating Expenses. Oilfield technologies and services segment SG&A totaled $10.0 million for the three months ended March 31, 2017 compared to $10.7 million for the same period in 2016 due to the continued focus on cash preservation.

Environmental products and services segment SG&A was flat at $0.8 million for the three months ended March 31, 2017 and 2016.

Consolidated other operating expense was $0 and $0.9 million for the three months ended March 31, 2017 and 2016, respectively. Other operating expense in 2016 was primarily related to a $1.1 million long-term bauxite impairment partially offset by gains on asset sales.

Income Taxes. Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of deferred tax assets should be reduced by the amount not expected to be realized. A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements. Additionally there can be statutory limitations and losses also assessed on the deferred tax assets should certain conditions arise. As a result of the significant decline in oil and gas activities and net losses incurred over the past several quarters, we determined during the three months ended March 31, 2017 that it was more likely than not that a portion of our deferred tax assets will not be realized in the future. Accordingly, we established a $10.5 million valuation allowance against a portion of our deferred tax assets. Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities. As a result, income tax expense was $0.3 million, or 0.9% of pretax loss, for the three months ended March 31, 2017 compared to income tax benefit of $12.1 million, or 32.9% of pretax loss, for the same period in 2016.

Outlook

We have set out a strategy for both revenue growth and profitability improvement. We expect to see continued expansion of our technology products, industrial ceramic media, frac sand, and environmental businesses. Given the first quarter revenue and our outlook for the next couple of quarters, we believe our 2017 revenue will show strong double-digit growth of at least a 40 percent increase over 2016.

Clients are adopting technologies that we have developed over the past several years to enhance their oil and gas production. These technologies include KRYPTOSPHERE, CARBOAIR and the GUARD family. We believe sales of these technologies will continue to grow in 2017 and currently expect another KRYPTOSPHERE HD job in the second quarter of 2017.

We continue to grow our industrial footprint with our long-standing product offerings. We also believe there will be opportunities in the future to expand our product offerings to add additional revenue streams. We anticipate increased levels of industrial sales throughout 2017.

Growing the frac sand business is another part of our strategy to return our overall operations to generating positive EBITDA. We are in the process of bringing our Marshfield, Wisconsin sand facility to full utilization in the next one to two quarters to further increase our cash production and generate revenue from idle rail cars under lease.

We continue to see growth in our environmental business with the increase in industry activity and market penetration of our products. Similar to our oilfield business, we are executing on a strategy to expand product sales into industrial markets.

Our strategy is to reduce our reliance on base ceramic proppant. We believe the worst of the industry down cycle is behind us. While imports of low quality Chinese ceramic have been virtually zero over the last eight quarters, it appears some competitors are still pricing below cost.

Given the successful industrial product trials we completed at our plants in the first quarter of 2017, we expect to generate revenue from our underutilized plants. Our dual approach of producing products for other companies and developing technology products f or ourselves, should bring opportunities to produce positive cash flow from assets that currently consume cash.

We believe broader sources of revenue, an improving commodity price environment and a corresponding increase in industry activity, will improve our results of operations in 2017. This view, including our expectations regarding increased demand for our products, is based on improving industry conditions and interactions with our customers. During this cyclical downturn, generating accurate financial forecasts has been difficult; however, our outlook for 2017 is an improved operating environment.

In addition, we continue to explore certain asset monetization opportunities to further strengthen the balance sheet.

Liquidity and Capital Resources

At March 31, 2017, we had cash and cash equivalents and restricted cash of $67.4 million compared to cash and cash equivalents and restricted cash of $91.7 million at December 31, 2016. During the three months ended March 31, 2017, we generated $0.5 million from the effect of exchange rate changes on cash. Uses of cash included $19.1 million used in operating activities, $3.3 million in repayments on our long-term debt, $0.6 million for capital expenditures, $0.9 million for payments of debt issuance costs, $0.5 million for purchases of our common stock, and $0.5 million in repayments on notes payable. We are currently taking steps to satisfy certain post-closing conditions relating to the New Credit Agreement. Once the post-closing conditions are satisfied, we will receive proceeds from long-term debt of $12.3 million.

On January 19, 2016, our Board of Directors suspended our policy of paying quarterly cash dividends. We estimate that our total capital expenditures for the remainder of 2017 will be less than $3.0 million. Due to market conditions, the completion of the second line at the manufacturing facility in Millen, Georgia and the second phase of a plant retrofit with KRYPTOSPHERE® technology have been suspended until such time that market conditions warrant completion.

We anticipate that cash on hand will be sufficient to meet planned operating expenses and other cash needs for at least one year from the date of this Form 10-Q. Our view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 2017 and 2018, which is impacted by various assumptions regarding demand and sales prices for our products. Generally, we expect demand for our products and the sales prices to increase in 2017 and 2018 compared to 2016. Although we have observed certain factors in the first quarter 2017 that could be indicative of improving industry conditions, our financial forecasts are based on estimates of customer demand, which is highly volatile in the current operating environment, and we have no committed sales backlog with our customers. As a result, there is inherent uncertainty in our forecasts.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of March 31, 2017.

Forward-Looking Information

The statements in this Quarterly Report on 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may”, “will”, “estimate”, “intend”, “continue”, “believe”, “expect”, “anticipate”, “should”, “could”, “potential”, “opportunity”, or other similar terminology. 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 the cost of raw materials and natural gas used in manufacturing our products;

•

risks related to our ability to access needed cash and capital;

•

our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;

•

our ability to manage distribution costs effectively;

•

our ability to successfully implement strategic changes in our business;

•

changes in demand and prices charged for our products;

•

technological, manufacturing and product development risks;

•

our dependence on and loss of key customers and end users;

•

potential declines or increased volatility in oil and natural gas prices that adversely affect our customers, the energy industry or our production costs;

•

potential reductions in spending on exploration and development drilling in the oil and natural gas industry that reduce demand for our products and services;

•

seasonal sales fluctuations;

•

an increase in competition in the proppant market, including imports from foreign countries;

•

logistical and distribution challenges relating to certain resource plays that do not have the type of infrastructure systems that are needed to efficiently support oilfield services activities;

•

the development of alternative stimulation techniques that would not benefit from the use of our existing products and services, such as extraction of oil or gas without fracturing;

•

changes in foreign and domestic governmental regulations, including environmental restrictions on operations and regulation of hydraulic fracturing;

•

increased regulation of emissions from our manufacturing facilities;

•

the development and utilization of alternative proppants for use in hydraulic fracturing;

•

general global economic and business conditions;

•

weather-related risks and other risks and uncertainties;

•

changes in foreign and domestic political and legislative risks;

•

risks of war and international and domestic terrorism;

•

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

•

the potential expropriation of assets by foreign governments.

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”). Please see the discussion set forth under the caption “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2016, under the caption “Risk Factors” in this report, 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 QUALITATI VE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk through foreign currency fluctuations that could impact our investments in Russia. As of March 31, 2017, our net investments subject to foreign currency fluctuations totaled $16.0 million and we had recorded cumulative foreign currency translation loss of $32.6 million, all related to the Russian Ruble. This cumulative translation loss is included in Accumulated Other Comprehensive Loss. From time to time, we 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, 2017. No income tax benefits have been recorded on these losses as a result of the uncertainty about recoverability of the related deferred income tax benefits.

We are also exposed to market risk in the price of natural gas, which is used in production by our domestic manufacturing facilities and is subject to volatility. In an effort to mitigate potential volatility in the cost of natural gas purchases and reduce exposure to short-term spikes in the price of the commodity, from time to time, we enter into contracts to purchase a portion of our anticipated monthly natural gas requirements at specified prices. At March 31, 2017, we had contracted for a total of 3,690,000 MMBtu of natural gas at an average price of $4.37 per MMBtu through December 31, 2018.

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 March 31, 2017, management had 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 our 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 our disclosure controls and procedures were effective to ensure that information required to be disclosed by the reports that we file or submit 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 we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our 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, 2017 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHE R INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2016 except as follows. The risk factors below update the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2016:

We may not have sufficient cash and/or be able to access liquidity alternatives in the credit and capital markets to meet our liquidity needs.

Our primary sources of liquidity are cash on hand and cash flow from operations. Our ability to fund our working capital and capital expenditures and other obligations depends on our future operating performance and cash from operations and other liquidity-generating transactions, which are in turn subject to prevailing oil and natural gas prices, economic conditions and other factors, many of which are beyond our control.

If our future operating performance falls materially below our expectations, our plans prove to be materially inaccurate, or industry conditions do not materially improve, we may require additional financing. Even if additional or alternative financing becomes available to us, future financing transactions may significantly increase the Company’s interest expense, which could in turn reduce our financial flexibility and our ability to fund other activities and could make us more vulnerable to changes in operating performance or economic downturns generally. The inability to generate sufficient cash, modify our New Credit Agreement, or obtain replacement or additional financing, or an event of default under our New Credit Agreement, could have a material adverse effect on our financial condition.

We therefore cannot provide any assurance that we will be able to access the capital or credit markets on acceptable terms or timing, or at all. Access to the capital markets and the cost and availability of credit may be adversely affected by factors beyond our control, including turmoil in the financial services industry, volatility in securities trading markets, the continuing downturn in the oil and gas industry and general economic conditions. Currently, we no longer qualify as a “well-known seasoned issuer,” which previously enabled us to, among other things, file automatically effective shelf registration statements. Now, even if we are able to access the public capital markets, any attempt to do so could be more expensive or subject to significant delays when compared with previous periods.

The outstanding indebtedness under our New Credit Agreement is secured by a substantial portion of our domestic assets and guaranteed by our two domestic operating subsidiaries, subject to certain exceptions.

The outstanding indebtedness under our New Credit Agreement is secured by (i) a pledge of all accounts receivable and inventory, (ii) cash in certain accounts, (iii) domestic distribution assets residing on owned real property, (iv) our Marshfield, Wisconsin and Toomsboro, Georgia plant facilities and equipment, and (v) certain real property interests in mines and minerals. In the event of a default, our lenders may (1) elect to declare all outstanding borrowings made under the New Credit Agreement and the guaranties of the two operating subsidiaries, together with accrued interest and other fees, to be immediately due and payable; (2) exercise their set-off rights; and/or (3) enforce and foreclose on their security interest and liquidate some or all of such pledged assets. Any of these actions could, individually or in the aggregate, have a substantial negative impact on our financial condition and results of operations.

ITEM 2.

UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS

The following table provides information about our repurchases of Common Stock during the quarter ended March 31, 2017:

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 be Purchased Under the Plan ⁽¹⁾
01/01/17 to 01/31/17		—			—		—		2,000,000
02/01/17 to 02/28/17		36,223		$	14.31		—		2,000,000
03/01/17 to 03/31/17		—			—		—		2,000,000
Total		36,223	⁽²⁾				—

(1)

On January 28, 2015, we announced the authorization by our Board of Directors for the repurchase of up to two million shares of our Common Stock. The Plan is effective until all shares have been purchased under the Plan, or until such date that our Board of Directors cancels the Plan. No shares have been purchased under the Plan.

(2)	Represents 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.

E XHIBITS

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

10.1		Amended and Restated Credit Agreement, dated as of March 2, 2017, by and between CARBO Ceramics Inc., as borrower, and Wilks Brothers, LLC, as lender and administrative agent (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed March 6, 2017)

10.2		Letter Agreement, dated as of March 2, 2017, by and between Carbo Ceramics Inc., Wilks Brothers, LLC, William C. Morris, Robert S. Rubin and Gary A. Kolstad (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed March 6, 2017)

10.3		Registration Rights Agreement, dated as of March 2, 2017, by and between Carbo Ceramics Inc. and Wilks Brothers, LLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed March 6, 2017)

10.4		Warrant, dated as of March 2, 2017, issued by Carbo Ceramics Inc. to Wilks Brothers, LLC (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed March 6, 2017)

10.5		Second Amended and Restated Pledge and Security Agreement, dated as of March 2, 2017, by and among CARBO Ceramics Inc., as borrower, and Wilks Brothers, LLC, as administrative agent (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed March 6, 2017)

10.6		Fifth Amended and Restated Employment Agreement dated as of March 20, 2017, by and between CARBO Ceramics Inc. and Gary A. Kolstad

10.7		Letter Agreement, dated as of March 2, 2017, between CARBO Ceramics Inc. and William C. Morris

10.8		Letter Agreement, dated as of March 2, 2017, between CARBO Ceramics Inc. and Robert S. Rubin

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, 2017, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

SIGNAT URES

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/ G ary A. Kolstad
		Gary A. Kolstad
		President and Chief Executive Officer

		/s/ Ernesto Bautista III
		Ernesto Bautista III
		Chief Financial Officer

	Date: April 27, 2017

EXHIBIT INDEX


EXHIBIT		DESCRIPTION

10.1		Amended and Restated Credit Agreement, dated as of March 2, 2017, by and between CARBO Ceramics Inc., as borrower, and Wilks Brothers, LLC, as lender and administrative agent (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed March 6, 2017)

10.2		Letter Agreement, dated as of March 2, 2017, by and between Carbo Ceramics Inc., Wilks Brothers, LLC, William C. Morris, Robert S. Rubin and Gary A. Kolstad (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed March 6, 2017)

10.3		Registration Rights Agreement, dated as of March 2, 2017, by and between Carbo Ceramics Inc. and Wilks Brothers, LLC (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed March 6, 2017)

10.4		Warrant, dated as of March 2, 2017, issued by Carbo Ceramics Inc. to Wilks Brothers, LLC (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed March 6, 2017)

10.5		Second Amended and Restated Pledge and Security Agreement, dated as of March 2, 2017, by and among CARBO Ceramics Inc., as borrower, and Wilks Brothers, LLC, as administrative agent (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed March 6, 2017)

10.6		Fifth Amended and Restated Employment Agreement dated as of March 20, 2017, by and between CARBO Ceramics Inc. and Gary A. Kolstad

10.7		Letter Agreement, dated as of March 2, 2017, between CARBO Ceramics Inc. and William C. Morris

10.8		Letter Agreement, dated as of March 2, 2017, between CARBO Ceramics Inc. and Robert S. Rubin

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, 2017, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statements of Cash Flows; and (v) Notes to the Consolidated Financial Statements.

Exhibit 10.6

FIFTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT

FIFTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “ Agreement ”), entered into as of May 10, 2006, amended as of January 1, 2008, amended and restated as of October 31, 2008, further amended as of March 19, 2010, and further amended and restated effective as of January 1, 2012, December 16, 2014, March 15, 2016, and March 20, 2017, by and between Gary Kolstad (the “ Executive ”), residing at the address currently on file with CARBO Ceramics Inc., a Delaware corporation (the “ Company ”), and the Company.

WITNESSETH

WHEREAS, the Company wishes to employ the Executive as President and Chief Executive Officer of the Company and the Executive wishes to serve the Company in such capacity.

NOW, THEREFORE, in consideration of the conditions and covenants set forth herein, it is agreed as follows:

1. Employment, Duties and Agreements .

(a) The Company hereby employs the Executive, and the Executive hereby agrees to be employed by the Company during the Term, as the Company’s President and Chief Executive Officer on the terms and conditions set forth herein, “ Term ” shall mean the period commencing on June 1, 2006 (the “ Effective Date ”) and ending on December 31, 2007; provided , that the Term shall be extended automatically for successive one-year periods, at the rate of Base Salary and on other terms then in effect pursuant to this Agreement, unless written notice of an election not to extend is given by either party to the other at least ninety (90) days prior to the date the Term would then otherwise expire absent its extension; provided , that the Term may be terminated prior to its scheduled expiration date in accordance with Section 3 hereof. Upon any expiration of the Term, the Executive’s employment with the Company shall be at will.

(b) The Executive shall have such responsibilities and duties as the Board of Directors of the Company (the “ Board ”) may from time to time reasonably determine consistent with the Executive’s position as President and Chief Executive Officer of the Company. In rendering his services hereunder, the Executive shall be subject to, and shall act in accordance with, all reasonable instructions and directions of the Board and all applicable policies and rules thereof. The Executive shall devote the Executive’s full working time to the performance of the Executive’s responsibilities and duties hereunder. During the Term, the Executive will not, without the prior written consent of the Board, render services, whether or not compensated, to any other person or entity as an employee, independent contractor, director or otherwise; provided , however , that nothing herein shall restrict the Executive from rendering services to not-for-profit organizations, including, without limitation, any country club of which he is a member, or managing the Executive’s personal investments during the Executive’s non-working time.

(c) During the Term, the Executive will not engage in any other business affiliation with respect to any entity, including, without limitation, the establishment of a proprietorship or the participation in a partnership or joint venture, or acquire any equity interest in any entity (other than the Company) if (i) such engagement or ownership would interfere with the full-time performance of his responsibilities and duties hereunder or (ii) such entity is engaged in any of the businesses of the Company or its subsidiaries, including without limitation, the production, supply or distribution of proppants used in the hydraulic fracturing of natural gas and oil wells. The Executive represents and warrants that, as of the Effective Date, the Executive will not be engaged in any such business affiliation and will not own any such equity interests.

2. Compensation . During the Term, the Executive shall be entitled to the following compensation.

(a) Effective as of April 1, 2017, the Company shall pay the Executive a base salary at the rate of $850,000 per annum, payable in accordance with the Company’s normal payroll practices (“ Base Salary ”). The Board shall have the right to review the Executive’s performance and compensation from time to time and may, in its sole discretion, increase his Base Salary based on such factors as the Board deems appropriate.

(b)

Commencing with the 2017 fiscal year, Executive will receive an annual incentive award(“Bonus Award”) granted under the 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to the Performance-Based Cash Award Agreement attached hereto as Appendix A (the “Bonus Award Agreement”) with such performance targets, measures and other provisions as shall be established from time to time by the

Compensation Comm ittee of the Board. Any Bonus Award paid pursuant to this Section 2(b) shall be paid to the Executive in accordance with the terms of the Bonus Award Agreement.

(c) The Executive shall be entitled to four (4) weeks of paid vacation during each calendar year of the Term in accordance with the Company’s standard vacation policy and practices. The Executive shall take vacations only at such times as are consistent with reasonable business needs of the Company.

(d) The Company shall reimburse the Executive for all reasonable, ordinary and necessary expenses incurred by the Executive in the performance of the Executive’s duties hereunder, provided that the Executive accounts to the Company for such expenses in a manner reasonably prescribed by the Company.

(e) The Executive shall be entitled to such benefits and perquisites as are generally made available to senior executive officers of the Company.

3. Early Termination of the Term . The Term shall terminate prior to its scheduled expiration date upon the occurrence of any of the following events.

(a) The Term and the Executive’s employment hereunder shall terminate upon written notice to the Executive by the Company specifying Disability as the basis for such termination. In respect of such termination, the Company shall pay to the Executive (i) within thirty (30) days after such termination, the Executive’s earned but unpaid Base Salary, earned but unused vacation (determined in accordance with the Company’s standard vacation policy and practices) and reimbursement for expenses incurred (in accordance with Section 2(d) hereof), all as of the date of such termination (the “ Accrued Obligations ”), and (ii) as soon as practicable and in any event no later than two and one half (2 ¹ / 2 ) months following the end of the fiscal year in which such termination takes place, an amount equal to the Bonus Award that would have been earned for such fiscal year multiplied by a fraction, the numerator of which is the number of days in the period commencing on January 1 of such fiscal year and ending on the date of such termination (inclusive) and the denominator of which is 365 (the “ Termination Bonus Amount ”). The Executive shall not be entitled to any further compensation or payments under this Agreement. “ Disability ” shall mean a physical or mental impairment of the Executive that (A) qualifies the Executive for (x) disability benefits under any long-term disability plan maintained by the Company or (y) Social Security disability benefits or (B) has prevented or, at the date of determination, will reasonably be likely to prevent, the Executive from performing the essential functions of his position for a period of six (6) consecutive months. The existence of a Disability shall be determined by the Board in its absolute discretion. The Executive agrees to submit to medical examinations by a licensed medical doctor selected by the Board to determine whether a Disability exists, as the Board may request from time to time.

(b) The Company may terminate the Term and the Executive’s employment hereunder for Cause. Termination for Cause shall be effective upon written notice to the Executive by the Company specifying that such termination is for Cause. In respect of such termination, the Company shall pay to the Executive, within thirty (30) days after such termination, the Accrued Obligations. The Executive shall not be entitled to any further compensation or payments under this Agreement. “ Cause ” shall mean: (i) any material violation by the Executive of this Agreement; (ii) any failure by the Executive substantially to perform his duties hereunder; (iii) any act or omission involving dishonesty, fraud, willful misconduct or gross negligence on the part of the Executive that is or may be materially injurious to the Company; and (iv) any felony or other crime involving moral turpitude committed by the Executive. If the basis for terminating the Executive’s employment for Cause is the result of a violation or failure described in clause (i) or (ii) of the foregoing definition of “Cause” and the majority of the Board (excluding the Executive, if he is a member of the Board) reasonably determines that such violation or failure is capable of being remedied, the Board shall give the Executive thirty (30) days’ prior written notice of the Company’s intent to terminate the Executive’s employment for Cause, which notice shall set forth the violation or failure forming the basis for the determination to terminate the Executive’s employment for Cause. The Executive shall have the right to remedy such violation or failure within a reasonable period of time (as determined by the Board), provided that the Executive begins to take appropriate steps to remedy such violation or failure within ten (10) days of the date of such written notice and diligently prosecutes such efforts thereafter. The Term and the Executive’s employment hereunder may not be terminated for Cause unless a majority of the Board (excluding the Executive, if he is a member of the Board) finds in good faith that termination for Cause is justified and, if the basis for terminating the Executive’s employment for Cause arises as a result of a violation or failure described in clause (i) or (ii) of the definition of “Cause”, that the violation or failure has not been remedied within the period of time designated by the Board or that there is no reasonable prospect that the Executive will remedy the violation or failure forming the basis for terminating his employment for Cause.

(c) The Term and the Executive’s employment hereunder shall terminate upon the death of the Executive. In respect of such termination, the Company shall pay to the Executive’s estate or any beneficiary previously designated by the Executive in writing (a “ Designated Beneficiary ”) (i) within thirty (30) days after such termination, the Accrued Obligations, and (ii) as soon as practicable and in any event no later than two and one half (2 ¹ / 2 ) months following the end of the fiscal year in which such termination takes place, an amount equal to the Termination Bonus Amount for such fiscal year. The Executive, his estate and his Designated Beneficiary shall not be entitled to any further compens ation or payments under this Agreement.

(d) The Company may terminate the Term and the Executive’s employment hereunder at any time without Cause. Such termination without Cause shall be communicated by written notice to the Executive from the Company and shall be effective as of the date on which the Executive experiences a “separation from service” within the meaning of Section 1.409A-1(h) of the Treasury Regulations (as amended) promulgated under the United States Internal Revenue Code of 1986 (as amended) (“ Separation from Service ”). In respect of such termination, the Company shall pay to the Executive (i) within thirty (30) days after such Separation from Service, the Accrued Obligations, and (ii) as soon as practicable and in any event no later than two and one half (2 ¹ / 2 ) months following the end of the fiscal year in which such Separation from Service takes place, an amount equal to the Termination Bonus Amount for such fiscal year. In addition, in consideration for the Executive’s execution, within seventy-five (75) days following the Executive’s Separation from Service, of a general release of claims in form and substance satisfactory to the Company, the Company shall pay to the Executive (or to the Executive’s estate or Designated Beneficiary, if the Executive should die during the payout period described in this sentence) an amount equal to two times (2x) the Executive’s Base Salary (at the level in effect immediately preceding such Separation from Service) (the “ Severance Payment ”) as follows: (A) on the seventy-fifth (75 ^th ) day following the Separation from Service, a lump sum equal to the lesser of (I) the Severance Payment or (II) the amount described in Section 1.409A-1(b)(9)(iii)(A) of the Treasury Regulations (as amended) promulgated under the United States Internal Revenue Code of 1986 (as amended) for the year in which the Separation from Service occurs and (B) the remainder of the Severance Payment (if any) in equal installments, in accordance with the Company’s normal payroll practices, over the eighteen (18)-month period commencing on the earlier to occur of (I) the six (6)-month anniversary of the date of the Executive’s Separation from Service or (II) the Executive’s death. The Executive (or his estate or Designated Beneficiary) shall not be entitled to any further compensation or payments under this Agreement. In no event shall any portion of the Severance Payment be paid later than December 31 of the second year following the year in which the Separation from Service occurs. The Severance Payment will not constitute compensation for any purpose under any retirement plan or other employee benefit plan, program, arrangement or agreement of the Company, and no period during which the Severance Payment is being paid shall constitute a period of employment with the Company for any such purposes.

(e) During the one-year period following a Change in Control of the Company, the Company may terminate the Term and the Executive’s employment hereunder without Cause or the Executive may voluntarily terminate the Term and his employment hereunder for Good Reason. If such termination is made by the Company without Cause, it shall be communicated by written notice to the Executive from the Company and shall be effective upon the Executive’s Separation from Service. In respect of any such termination, in lieu of all other amounts or benefits to which the Executive would otherwise be entitled pursuant to any other provisions of Section 3 of this Agreement, the Company shall pay to the Executive (or to the Executive’s estate or Designated Beneficiary, if the Executive should die during the payout period described in this sentence) (i) within thirty (30) days after such Separation from Service, the Accrued Obligations and (ii) an amount equal to the sum of (A) the Bonus Award with respect to the fiscal year immediately preceding the fiscal year in which such Separation from Service takes place multiplied by a fraction, the numerator of which is the number of days in the period commencing on January 1 of the fiscal year in which such Separation from Service takes place and ending on the date of such Separation from Service (inclusive) and the denominator of which is 365 and (B) two times (2x) the Executive’s Base Salary (at the level in effect immediately preceding such Separation from Service) (together, the “ CiC Severance Payment ”) as follows: (A) within two and one half (2 ½) months following the Separation from Service, a lump sum equal to the lesser of (I) the CiC Severance Payment or (II) the amount described in Section 1.409A-1(b)(9)(iii)(A) of the Treasury Regulations (as amended) promulgated under the United States Internal Revenue Code of 1986 (as amended) for the year in which the Separation from Service occurs and (B) the remainder of the CiC Severance Payment (if any) in equal installments, in accordance with the Company’s normal payroll practices, over the eighteen (18)-month period commencing on the earlier to occur of (I) the six (6)-month anniversary of the date of the Executive’s Separation from Service or (II) the Executive’s death. The Executive (or his estate or Designated Beneficiary) shall not be entitled to any further compensation or payments under this Agreement. In no event shall any portion of the CiC

Severance Payment be paid later than December 31 of the second year following the year in which the Separation from Service occurs. The CiC Severance Payment will not constitute compensation for any purpose under any retirement plan or other employee benefit plan, program, arrangement or agreement of the Company, and no period during which the CiC Severance Payment is being paid shall constitute a period of employment with the Company for any such purposes.

(f) For purposes of Section 3(e) hereof:

(1) “ Change in Control ” shall mean (i) the occurrence of a change in control of the Company of a nature that would be required to be reported or is reported in response to Item 5.01 of the current report on Form 8-K, as in effect on the Effective Date, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”); or (ii) any “ Person ” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities (other than any Person who was a “beneficial owner” of securities of the Company representing 30% or more of the combined voting power of the Company’s outstanding securities prior to the Effective Date); or (iii) individuals who constitute the Board on the Effective Date (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the members of the Board, provided that any person becoming a director subsequent to the Effective Date whose appointment to fill a vacancy or to fill a new Board position was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company’s shareholders was approved by the same nominating committee serving under an Incumbent Board, shall be, for purposes of this clause (iii), considered as though he were a member of the Incumbent Board; or (iv) the occurrence of any of the following of which the Incumbent Board does not approve (A) merger or consolidation in which the Company is not the surviving corporation or (B) sale of all or substantially all of the assets of the Company; or (v) stockholder approval pursuant to a proxy statement soliciting proxies from stockholders of the Company, by someone other than the then current management of the Company, of a plan of reorganization, merger or consolidation of the Company with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan of reorganization are exchanged or converted into cash or property or securities not issued by the Company.

(2) “ Good Reason ” shall mea n, without the Executive’s express written consent, the occurrence of any one or more of the following: (i) ~~the assignment of the Executive to duties materially inconsistent with the Executive’s authorities, duties, responsibilities and status (including o~~ ~~ffices, titles, and reporting requirements) as an officer of the Company, or other changes~~ ~~in the Executive’s authorities, duties or responsibilities, if such assignment or changes result in~~ a material diminution in the Executive’s authorities, duties, or responsibilities from those in effect immediately prior to the Change in Control, including a failure to reelect the Executive to, or a removal of him from, any office of the Company that the Executive held immediately prior to the Change in Control; or (ii) the Company’s requiring the Executive to be based at a location more than 50 miles from Houston, Texas (except for required travel on the Company’s business to an extent substantially consistent with the Executive’s business obligations immediately prior to the Change in Control) if such action constitutes a material change in the geographic location where the Executive must perform services; or (iii) the Company materially breaches this Agreement or any other written agreement with the Executive under which the Executive provides services to the Company; or (iv) a material reduction in the Executive’s base compensation as of the date of the Change in Control; provided, in each case, that within thirty (30) days following the occurrence of any of the events set forth herein, the Executive shall have delivered written notice to the Company of his intention to terminate his employment for Good Reason, which notice specifies in reasonable detail the circumstances claimed to give rise to the Executive’s right to terminate employment for Good Reason, the Company shall not have cured such circumstances within thirty (30) days following the Company’s receipt of such notice, and the Executive’s Separation from Service with the Company shall have occurred within sixty (60) days following such failure to cure.

4. Restrictive Covenants .

(a) The Executive agrees that all information pertaining to the prior, current or contemplated business of the Company and its corporate affiliates, and their officers, directors, employees, agents, shareholders and customers (excluding (i) publicly available information (in substantially the form in which it is publicly available) unless such information is publicly available by reason of unauthorized disclosure by the Executive or by any person or entity of whose intention to make such unauthorized disclosure the Executive is aware and (ii) information of a general nature

not pertaining exclusively to the Company that generally would be acquired in similar employment with a nother company) constitutes a valuable and confidential asset of the Company. Such information includes, without limitation, information related to trade secrets, customer lists, production techniques, and financial information of the Company. In connectio n with the performance and execution of his duties, the Company shall make such information available to the Executive during the Term and the Executive agrees that he shall, during the Term and continuing thereafter, (A) hold all such information in tru st and confidence for the Company and its corporate affiliates, and (B) not use or disclose any such information to any person, firm, corporation or other entity other than under court order or other legal or regulatory requirement.

(b) To protect the confidential information described in Section 4(a), upon expiration of the Term and continuing for a period ending two (2) years after the Executive’s employment by the Company terminates for any reason whatsoever, the Executive agrees that the Executive will not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services to any person, firm, corporation or other entity, in whatever form, engaged in a Competing Business. For the purposes of this Agreement, a “ Competing Business ” is defined as any business that provides the same or similar products or services as the Company or its subsidiaries, including without limitation any business which engages in the production or supply of ceramic, resin-coated sand or other proppants for use in the hydraulic fracturing of natural gas and oil wells, or for foundry or grinding media purposes.

(c) During the Term and continuing for a period ending twelve (12) months after the Executive’s employment by the Company terminates for any reason whatsoever, the Executive agrees that the Executive will not, directly or indirectly, individually or on behalf of other persons, solicit, aid or induce (i) then remaining employees of the Company or its corporate affiliates to leave their employment with the Company or its corporate affiliates in order to accept employment with or render services to or with another person, firm, corporation or other entity, or assist or aid any other person, firm, corporation or other entity in identifying or hiring such employees or (ii) any customer of the Company or its corporate affiliates who was a customer of the Company or its corporate affiliates at any time during which the Executive was actively employed by the Company to purchase products or services then sold by the Company or its corporate affiliates from another person, firm, corporation or other entity, or assist or aid any other person or entity in identifying or soliciting any such customer.

(d) Prior to agreeing to, or commencing to, act as an employee, officer, director, trustee, principal, agent or other representative of any type of business other than as an employee of the Company during the period in which the non-competition agreement, as described in Section 4(b), applies, the Executive shall (i) disclose such agreement in writing to the Company and (ii) disclose to the other entity with which he proposes to act in such capacity, or to the other principal together with whom he proposes to act as a principal, the existence of this Agreement, including, in particular, the non-disclosure agreement contained in Section 4(a), the non-competition agreement contained in Section 4(b), and the non-solicitation agreement contained in Section 4(c).

(e) With respect to the restrictive covenants set forth in Sections 4(a), 4(b) and 4(c), the Executive acknowledges and agrees as follows.

(i) The specified duration of a restrictive covenant shall be extended by and for the term of any period during which the Executive is in violation of such covenant.

(ii) The restrictive covenants are in addition to any rights the Company may have in law or at equity.

(iii) It is impossible to measure in money the damages which will accrue to the Company in the event that the Executive breaches any of the restrictive covenants. Therefore, if the Executive breaches any restrictive covenant, the Company and its corporate affiliates shall be entitled to an injunction restraining the Executive from violating such restrictive covenants. If the Company or any of its corporate affiliates shall institute any action or proceeding to enforce a restrictive covenant, the Executive hereby waives the claim or defense that the Company or any of its corporate affiliates has an adequate remedy at law and the Executive agrees not to assert in any such action or proceeding the claim or defense that the Company or any of its corporate affiliates has an adequate remedy at law. The foregoing shall not prejudice the Company’s or its corporate affiliates’ right to require the Executive to account for and pay over to the Company or its corporate affiliates, and the Executive hereby agrees to account for and pay over, the compensation, profits, monies, accruals or other benefits derived or received by the Executive as a result of any transaction constituting a breach of the restrictive covenants.

(f) The restrictions in this Section 4 shall be i n addition to any restrictions imposed on the Executive by statute or at common law.

5. Arbitration of Disputes .

(a) Any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation or validity hereof shall be settled exclusively and finally by arbitration. It is specifically understood and agreed that any disagreement, dispute or controversy which cannot be resolved between the parties, including without limitation any matter relating to interpretation of this Agreement, may be submitted to arbitration irrespective of the magnitude thereof, the amount in controversy or whether such disagreement, dispute or controversy would otherwise be considered justiciable or ripe for resolution by a court or arbitral tribunal. Notwithstanding this Section 5, the Company shall be entitled to institute a court action or proceeding for injunctive relief as provided in Section 4 of this Agreement.

(b) The arbitration shall be conducted in accordance with the Commercial Arbitration Rules (the “ Arbitration Rules ”) of the American Arbitration Association (“ AAA ”).

(c) The arbitral tribunal shall consist of one arbitrator. The parties to the arbitration jointly shall directly appoint such arbitrator within thirty (30) days of initiation of the arbitration. If the parties shall fail to appoint such arbitrator as provided above, such arbitrator shall be appointed by the AAA as provided in the Arbitration Rules and shall be a person who (i) maintains his principal place of business within thirty (30) miles of the City of Houston, Texas and (ii) has substantial experience in executive compensation. The parties shall each pay an equal portion of the fees, if any, and expenses of such arbitrator.

(d) The arbitration shall be conducted within thirty (30) miles of the City of Houston, Texas or in such other city in the United States of America as the parties to the dispute may designate by mutual written consent.

(e) At any oral hearing of evidence in connection with the arbitration, each party thereto or its legal counsel shall have the right to examine its witnesses and to cross-examine the witnesses of any opposing party. No evidence of any witness shall be presented unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties to the dispute otherwise agree in writing or except under extraordinary circumstances where the interests of justice require a different procedure.

(f) Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereto hereby waive to the extent permitted by law any rights to appeal or to seek review of such award by any court or tribunal.

(g) Nothing herein contained shall be deemed to give the arbitral tribunal any authority, power, or right to alter, change, amend, modify, add to or subtract from any of the provisions of this Agreement.

(h) Notwithstanding anything to the contrary in this Agreement, the arbitration provisions set forth in this Section 5 shall be governed exclusively by the Federal Arbitration Act, Title 9, United States Code.

6. Miscellaneous.

(a) Each provision hereof is severable from this Agreement, and if one or more provisions hereof are declared invalid the remaining provisions shall nevertheless remain in full force and effect. If any provision of this Agreement is so broad, in scope or duration or otherwise, as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

(b) Any notice to be given hereunder shall be given in writing. Notice shall be deemed to be given when delivered by hand to the party to whom notice is being given, or ten (10) days after being mailed, postage prepaid, registered with return receipt requested, or sent by facsimile transmission with a confirmation by registered or certified mail, postage prepaid. Notices to the Executive should be addressed to the Executive as follows:

Gary Kolstad
c/o CARBO Ceramics Inc.
575 North Dairy Ashford
Suite 300
Houston, Texas 77079

Notices to the Company should be sent as follows:

CARBO Ceramics Inc.
575 North Dairy Ashfor d
Suite 300
Houston, Texas 77079
Attn: Secretary

with copies sent to:

Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, NY 10006
Attn: Christopher Austin, Esq.

Either party may change the address or person to whom notices should be sent to by notifying the other party in accordance with this Section 6(b).

(c) The failure to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect the validity of this Agreement, or any part hereof, or the right of either party thereafter to enforce each and every such provision in accordance with the terms of this Agreement.

(d) This Agreement contains the entire agreement between the parties with respect to the employment of the Executive by the Company after the Effective Date and supersedes any and all prior understandings, agreements or correspondence between the parties regarding such employment. It may not be amended or extended in any respect except by a writing signed by both parties hereto.

(e) The parties hereto acknowledge and agree that each party has reviewed and negotiated the terms and provisions of this Agreement and has contributed to its preparation (with advice of counsel, if desired). Accordingly, the rule of construction to the effect that ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement. Rather, the terms of this Agreement shall be construed fairly as to both parties hereto and not in favor of or against either party, regardless of which party generally was responsible for the preparation of this Agreement.

(f) This Agreement shall be governed by, and interpreted in accordance with, the laws of Texas, without reference to its principles of conflict of laws.

(g) This Agreement shall not be assignable by either party hereto without the written consent of the other, provided , however, that the Company may, without the written consent of the Executive, assign this Agreement to (i) any entity with which the Company is merged or consolidated or to which the Company transfers substantially all of its assets or (ii) any entity controlling, under common control with or controlled by the Company.

(h) This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

(i) The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning of any provision hereof.

[ Remainder of page intentionally left blank ]

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its duly authorized representative and the Executive has hereunto set his hand as of the day and year above written.


		CARBO CERAMICS INC.

By:		/s/ William C. Morris
		William C. Morris, Chairman


		/s/ Gary A. Kolstad
		Gary A. Kolstad

Appendix A

CARBO CERAMICS INC.

2014 OMNIBUS INCENTIVE PLAN

PERFORMANCE-BASED CASH AWARD AGREEMENT

(Annual Incentive Bonus)

This AWARD AGREEMENT between CARBO Ceramics Inc. (together with its Subsidiaries, the “Company”) and Gary A. Kolstad (the “Participant”) sets forth the terms and conditions governing the Bonus Award (as defined below) granted pursuant to the 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (the “Plan”). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Plan.

W I T N E S S E T H:

1. Grant of Bonus Award . Pursuant to the provisions of the Plan, the Company hereby grants to Participant, subject to the terms and conditions herein set forth, a cash award (the “Bonus Award”) with a target value of $850,000 (the “Target Award”). This Bonus Award is granted to the Participant as of ____________, ______ (the “Grant Date”).

2. Terms and Conditions . This Bonus Award is subject to the following terms and conditions:

(a) Performance Period . The Performance Period shall commence on January 1, [2017] and shall end on December 31 of the same year.

(b) Performance Measures, Targets, Schedule and Percentage . The Performance Measures, Performance Targets, Performance Schedule and the calculation of the Performance Percentage shall be in accordance Exhibit A to this Award Agreement.

(c) Bonus Award Calculation . In the manner required by Section 162(m) of the Code, the Committee shall, promptly after the date on which the necessary financial and other information for the Performance Period becomes available, certify the extent to which Performance Targets have been achieved. Using the Performance Schedule, the Committee shall determine the Performance Percentage and multiply the Target Award by such Performance Percentage in order to arrive at the amount payable under this Bonus Award.

(d) Vesting of Bonus Award . Subject to Sections 2(e) and 2(f) hereof, this Bonus Award shall vest in the amount determined by the Committee pursuant to Section 2(c) hereof, provided that the Participant shall have remained continuously employed by the Company or a Subsidiary of the Company through the last day of the Performance Period (such date, the “Vesting Date”).

(e) Termination of Employment .

(i) If the Participant experiences a Separation from Service due to his or her death or Disability at a time when this Bonus Award remains unvested, this Bonus Award shall vest as of the date of such Separation from Service in an amount equal to the Target Award.

(ii) If the Participant experiences a Separation from Service as a result of his termination of employment by the Company without Cause, this Bonus Award shall vest as of the date of such Separation from Service in an amount equal to an amount equal to (x) the Bonus Award for the Performance Period calculated in accordance with Section 2(c) hereof multiplied by (y) a fraction, the numerator of which is the number of days in the period commencing on January 1 of the Performance Period and ending on the date of such termination (inclusive) and the denominator of which is 365.

(iii) If the Participant experiences a Separation from Service that is not described in Section 2(e)(i) or 2(e)(ii) hereof at a time when the Participant’s outstanding Bonus Award remains un vested, then as of the date of such Separation from Service, the Bonus Award shall terminate automatically and be forfeited (without any consideration therefor) and the Participant shall have no further rights with respect thereto.

(iv) If the Participant’s employment is terminated for Cause prior to the date on which the Bonus Award is settled pursuant to Section 2(g) hereof, the Bonus Award (whether or not vested) shall terminate automatically and be forfeited (without any consideration therefor) as of the date of such termination of employment, and the Participant shall have no further rights with respect thereto. For purposes of this Award Agreement, “Cause” shall have the meaning set forth in the Fifth Amended and Restated Employment Agreement between the Participant and the Company, dated as of March 20, 2017.

(f) Vesting in the Event of a Change in Control . Notwithstanding any provision of this Section 2 to the contrary, if a Change in Control occurs at a time when the Participant’s outstanding Bonus Award remains unvested, the Bonus Award shall be treated in accordance with Section 19 of the Plan.

(g) Settlement of Bonus Award . Subject to the terms and conditions of the Plan (including without limitation Sections 9, 13 and 14 thereof) and this Award Agreement, including without limitation, Section 6 hereof, the Company shall pay a lump sum cash amount to the Participant in the amount determined pursuant to Section 2(c), Section 2(e)(i) or Section 2(e)(ii) in settlement of this Bonus Award, as applicable, (i) if the Bonus Award vests pursuant to Section 2(d) or Section 2(e)(ii), on the date of Committee certification under Section 2(c) but in no event later than March 15 ^th of the calendar year following the last day of the Performance Period, (ii) if the Bonus Award vests pursuant to Section 2(e)(i), on the date of Separation from Service, and (iii) if the Bonus Award vests pursuant to Section 2(f) and Section 19 of the Plan, the date on which the Change in Control occurs. Payment of the Bonus Award to the Participant pursuant to Section 2(g)(ii) and 2(g)(iii) hereof shall in no event be made to the Participant later than the date that is sixty (60) days following the date specified therein.

(h) Non-Transferability of Bonus Award . This Bonus Award may not be sold, transferred, pledged, assigned or otherwise alienated at any time other than a transfer in accordance with Section 17 of the Plan. Any attempt to do so contrary to the provisions hereof shall be null and void.

(i) Bonus Award Confers No Rights with Respect to Continued Employment . Nothing contained herein or in the Plan shall confer upon the Participant any right with respect to the continuation of his or her employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence as of the Grant Date. The Committee’s granting of the Bonus Award to the Participant shall neither require the Committee to grant any subsequent Bonus Award to the Participant (or any Bonus Award to any other person) at any time, nor preclude the Committee from making subsequent grants to the Participant or any other person.

(j) Compliance with Law and Regulations . This Bonus Award and any obligation of the Company to pay cash hereunder shall be subject to all applicable federal, state, local and non-U.S. laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. The Company’s obligations in connection with the Bonus Award are subject to all terms and conditions of this Award Agreement and the Plan (including, without limitation, Sections 9, 13 and 14 thereof).

(k) Modification of Bonus Award . The Committee may amend, suspend or terminate the Plan at any time in accordance with Section 15(a) of the Plan. The Committee may amend or modify the terms and conditions of the Bonus Award to the extent that the Committee determines, in its sole discretion, that the terms and conditions of the Bonus Award violate or may violate Section 409A of the Code; provided, however, that (i) no such amendment or modification shall be made without the Participant’s written consent if such amendment or modification would violate the terms and conditions of any other agreement between the Participant and the Company and (ii) unless the Committee determines otherwise, any such amendment or modification made pursuant to this Section 2(k) and Section 15(b) of the Plan shall maintain, to the maximum extent practicable, the original intent of the applicable Bonus Award provision without contravening the provisions of Section 409A of the Code or Section 162(m) of the Code. The amendment or modification of the Bonus Award pursuant to this Section 2(k) and Section 15(b) of the Plan shall be at the Committee’s sole discretion and the Committee shall not be obligated to amend or modify the

Bonus Award or the Plan, nor shall the Company be liable for any adverse tax or other consequences to the P articipant resulting from such amendments or modifications or the Committee’s failure to make any such amendments or modifications for purposes of complying with Section 409A of the Code or for any other purpose. To the extent the Committee amends or modif ies the Bonus Award pursuant to this Section 2(k) and Section 15(b) of the Plan, the Participant shall receive notification of any such changes to the Bonus Award and, unless the Committee determines otherwise, the changes described in such notification sh all be deemed to amend the terms and conditions of the Bonus Award and this Award Agreement.

3. Participant Bound by Plan . The Participant hereby acknowledges that the Company has made a copy of the Plan available to him or her and the Participant agrees to be bound by all the terms and provisions thereof.

4. Payment of Taxes . Participant shall be solely responsible for any applicable taxes (including without limitation income and excise taxes) and penalties, and any interest that accrues thereon, which he or she incurs in connection with the receipt, vesting or settlement of the Bonus Award. Notwithstanding any provision of the Plan or this Award Agreement to the contrary, in no event shall the Company or any Subsidiary be liable to the Participant on account of the Bonus Award’s failure to (i) qualify for favorable U.S. or non-U.S. tax treatment or (ii) avoid adverse tax treatment under U.S. or non-U.S. law, including, without limitation, Section 409A of the Code. Prior to any event in connection with the Bonus Award (e.g., vesting) that the Company determines may result in any U.S. or non-U.S. tax withholding obligation, whether national, federal, state, local or otherwise, including any social security tax obligation (the “Tax Withholding Obligation”), the Participant must make arrangements with the Company for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company in accordance with Section 14 of the Plan.

5. Notices . Any notice to the Company in connection with the Bonus Award shall be addressed to the Company at its offices at 575 N. Dairy Ashford, Suite 300 Houston, Texas 77079, Attention: Omnibus Incentive Plan Administrator, and any notice to the Participant in connection with the Bonus Award shall be addressed to him or her at his or her address as shown on the Company’s records at the time such notice is given, subject to the right of either party to designate a different address in writing at any time hereafter.

6. Section 409A of the Code . This Bonus Award is intended to be exempt from or comply with Section 409A of the Code and shall be construed accordingly. If (a) the Participant is a Specified Employee at the time at the time of his or her Separation from Service and (b) the Committee determines that the Bonus Award is “non-qualified deferred compensation” within the meaning of Section 409A of the Code, then any payment(s) with respect to the Bonus Award that becomes payable to the Participant upon his or her Separation from Service shall be made on the date that is six months and one day following the Participant’s Separation from Service (or, if earlier, the date of the Participant’s death).

7. Governing Law . The Plan and this Award Agreement, and the rights of all persons under the Plan and this Award Agreement, shall be construed and administered in accordance with the laws of the State of Delaware without regard to its conflict of law principles.

IN WITNESS WHEREOF, CARBO Ceramics Inc. has caused this Award Agreement to be executed on its behalf, and the Participant has accepted the terms of this Award Agreement by signing below, in each case as of the Grant Date.


CARBO CERAMICS INC.



By:

Name:

Title:


ACCEPTED AND AGREED BY: Gary A. Kolstad

Exhibit 10.7

Execution Version

[Carbo Cermics, Inc. Letterhead]

March 2, 2017

William C. Morris

60 East 42nd Street, Suite 3210

New York, New York 10165

Re: Carbo Ceramics, Inc. Promissory Note Amendment

Ladies and Gentlemen:

Reference is hereby made to that certain Promissory Note dated as of May 18, 2016 (the “ Promissory Note ”) in a principal amount of $20,000,000.00, issued by Carbo Ceramics, Inc. ( “ Payor ”) to William C. Morris (“ Payee ”). Payor and Payee wish to amend certain terms and provisions of the Promissory Note, as more particularly set forth herein. Capitalized terms used herein without definition shall have the meanings set forth in the Promissory Note .

1.	Amendments .

(a)

The legend in the Promissory Note is hereby amended and restated in its entirety as follows:

“ This instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain Amended and Restated Subordination and Intercreditor Agreement dated as of March 2, 2017, by and among WILLIAM C. mORRIS and rOBERT S. rUBIN, each as subordinated creditors, and WILKS BROTHERS, LLC (as Administrative Agent, as defined therein) (as the same may be amended or otherwise modified from time to time pursuant to the terms thereof, the “ Subordination and Intercreditor Agreement ”) to the indebtedness (including interest) owed by the Credit Parties (as defined in the Senior Credit Facilities, as defined below) pursuant to the Senior Credit Facilities; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination and Intercreditor Agreement.”

(b)

Section 2.b. of the Promissory Note is hereby amended and restated in its entirety as follows:

“b. Payments of interest on this Note shall be due and payable semi-annually in arrears on (i) each October 1 and April 1 (each an “ Interest Payment Date ”), commencing on October 1, 2016, until the Maturity Date and on the Maturity Date or (ii) any prepayment date, if earlier, whereupon all accrued and unpaid interest with respect to the prepaid portion of the Principal Amount shall be due. Notwithstanding the foregoing, Payor shall pay interest in kind (“ PIK Interest ”)

on (x) the following Interest Payme nt Dates: April 1, 2017 and October 1, 2017 and (y) any other Interest Payment Date (other than the Maturity Date) to the extent interest payable under the Senior Credit Facilities was not paid in cash for two consecutive interest periods under the Senior Credit Facilities prior to the relevant Interest Payment Date hereunder. PIK Interest shall be calculated at a rate equal to eight percent (8.0%) per annum and shall be paid-in-kind by being capitalized and added to the Principal Amount, effective as of s uch Interest Payment Date, and shall thereafter accrue interest until repaid at the same rate as the Principal Amount.”

(c)

Section 8.u. of the Promissory Note is hereby amended and restated in its entirety as follows:

“u. “ Senior Credit Facilities ” means that certain Amended and Restated Credit Agreement, dated as of March 2, 2017, among Payor, Wilks Brothers, LLC, as Administrative Agent and the other parties thereto (as amended, restated, supplemented or otherwise modified from time to time after the date hereof in accordance with the terms thereof and of the Subordination and Intercreditor Agreement).”

2.	Representations and Warranties . Payor represents and warrants to Payee that as of the date of this amendment, the representations and warranties contained in Section 5 of the Promissory Note are true and correct in all material respects.

Counterparts . This amendment may be executed in counterparts, each of which shall be deemed an original but all of which together shall be deemed to be one and the same amendment. A signed copy of this amendment delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this amendment.

4.	No Other Amendments . Except as amended herein, the terms and conditions of the Promissory Note shall remain in full force in effect as originally set forth therein.

5.	Governing Law . The provisions hereof shall be governed by and construed in accordance with the laws of the State of New York.

[Signature pages follow]

Very truly yours,

		CARBO CERAMICS INC., as Payor

By:		/s/ Ernesto Bautista III

	Ernesto Bautista III
	Chief Financial Officer

Acknowledged as of

the date first written above:

/s/ William C. Morris

William C. Morris, as Payee

Exhibit 10.8

Execution Version

[Carbo Cermics, Inc. Letterhead]

March 2, 2017

Robert S. Rubin

218 Columbia Heights

Brooklyn, New York 11201

Re: Carbo Ceramics, Inc. Promissory Note Amendment

Ladies and Gentlemen:

Reference is hereby made to that certain Promissory Note dated as of May 18, 2016 (the “ Promissory Note ”) in a principal amount of $5,000,000.00, issued by Carbo Ceramics, Inc. ( “ Payor ”) to Robert S. Rubin (“ Payee ”). Payor and Payee wish to amend certain terms and provisions of the Promissory Note, as more particularly set forth herein. Capitalized terms used herein without definition shall have the meanings set forth in the Promissory Note .

1.	Amendments .

(a)

The legend in the Promissory Note is hereby amended and restated in its entirety as follows:

(b)

Section 2.b. of the Promissory Note is hereby amended and restated in its entirety as follows:

on (x) the following Interest Payment Dates: April 1, 2017 and October 1, 2017 and (y) any other Interest Payment Date (other than the Maturity Date) to the extent interest payable under the Senior Credit Facilities was not paid in cash for two consecutive interest periods under the Senior Credit Facilitie s prior to the relevant Interest Payment Date hereunder. PIK Interest shall be calculated at a rate equal to eight percent (8.0%) per annum and shall be paid-in-kind by being capitalized and added to the Principal Amount, effective as of such Interest Pay ment Date, and shall thereafter accrue interest until repaid at the same rate as the Principal Amount.”

(c)

Section 8.u. of the Promissory Note is hereby amended and restated in its entirety as follows:

2.	Representations and Warranties . Payor represents and warrants to Payee that as of the date of this amendment, the representations and warranties contained in Section 5 of the Promissory Note are true and correct in all material respects.

4.	No Other Amendments . Except as amended herein, the terms and conditions of the Promissory Note shall remain in full force in effect as originally set forth therein.

5.	Governing Law . The provisions hereof shall be governed by and construed in accordance with the laws of the State of New York.

[Signature pages follow]


Very truly yours,

		CARBO CERAMICS INC., as Payor

By:		/s/ Ernesto Bautista III

	Ernesto Bautista III
	Chief Financial Officer

Acknowledged as of

the date first written above:

/s/ Robert S. Rubin

Robert S. Rubin, as Payee

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 27, 2017

/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 27, 2017

/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, 2017 (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 27, 2017


/s/ Gary A. Kolstad
Name:	Gary A. Kolstad
Title:	Chief Executive Officer

Dated: April 27, 2017


/s/ Ernesto Bautista III
Name:	Ernesto Bautista III
Title:	Chief Financial Officer

Exhibit 95

MINE SAFETY DISCLOSURE

For the three months ended March 31, 2017, 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, the Marshfield, Wisconsin processing facility, and the Millen, Georgia processing facility.

Mine or Operating Name/MSHA Identification Number	Section 104 S&S Citations (#)	Section 104(b) Orders (#)	Section 104(d) Citations and Orders (#)	Section 110(b)(2) Violations (#)	Section 107(a) Orders (#)	Total Dollar Value of MSHA Assessments Proposed ($) (1)		Total Number of Mining Related Fatalities (#)	Received Notice of Pattern of Violations Under Section 104(e) (yes/no)	Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)	Legal Actions Pending as of Last Day of Period (#)	Aggregate Legal Actions Initiated During Period (#)	Aggregate Legal Actions Resolved During Period (#)
Eufaula Facility MSHA ID 0102687 Eufaula, Alabama	1	0	0	0	0	$	0	0	No	No	0	0	0
McIntyre Facility MSHA ID 0901108 McIntyre, Georgia	0	0	0	0	0	$	116	0	No	No	0	0	0
Toomsboro Facility MSHA ID 0901164 Toomsboro, Georgia	0	0	0	0	0	$	0	0	No	No	0	0	0
Marshfield Facility MSHA ID 4703636 Marshfield, Wisconsin	0	0	0	0	0	$	0	0	No	No	0	0	0
Millen Facility MSHA ID 0901232 Millen, Georgia	0	0	0	0	0	$	0	0	No	No	0	0	0
Totals	1	0	0	0	0	$	116	0			0	0	0

(1)

Amounts represent the total dollar value of proposed assessments received and/or outstanding at the end of March 31, 2017. Assessments resulted from an inspection in December 2016, but were not received until the first quarter of 2017.