e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| |
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| þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2007
or
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|
| o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission
File No. 001-15903
CARBO CERAMICS INC.
(Exact name of registrant as specified in its charter)
| |
|
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DELAWARE
(State or other jurisdiction of
incorporation or organization)
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72-1100013
(I.R.S. Employer
Identification Number) |
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|
6565 MacArthur Boulevard
Suite 1050
Irving, Texas 75039
(Address of principal executive offices) |
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(972) 401-0090
(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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As
of July 24, 2007, 24,478,752 shares of the registrant’s Common
Stock, par value $.01 per share, were outstanding.
CARBO
CERAMICS INC.
Index to Quarterly Report on Form 10-Q
2
PART I. FINANCIAL INFORMATION
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|
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| ITEM 1. |
|
FINANCIAL STATEMENTS |
CARBO CERAMICS INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
| |
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|
|
|
|
|
|
|
| |
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June 30, |
|
|
December 31, |
|
| |
|
2007 |
|
|
2006 |
|
| |
|
(Unaudited) |
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|
(Note 1) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,782 |
|
|
$ |
24,973 |
|
Short-term investments |
|
|
— |
|
|
|
7,500 |
|
Trade accounts and other receivables, net |
|
|
63,338 |
|
|
|
63,461 |
|
Inventories: |
|
|
|
|
|
|
|
|
Finished goods |
|
|
31,654 |
|
|
|
26,181 |
|
Raw materials and supplies |
|
|
13,642 |
|
|
|
14,602 |
|
|
|
|
|
|
|
|
Total inventories |
|
|
45,296 |
|
|
|
40,783 |
|
Prepaid expenses and other current assets |
|
|
4,221 |
|
|
|
2,558 |
|
Deferred income taxes |
|
|
5,199 |
|
|
|
4,650 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
128,836 |
|
|
|
143,925 |
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
9,486 |
|
|
|
8,659 |
|
Land-use and mineral rights |
|
|
6,126 |
|
|
|
6,101 |
|
Buildings |
|
|
39,899 |
|
|
|
26,209 |
|
Machinery and equipment |
|
|
245,985 |
|
|
|
207,341 |
|
Construction in progress |
|
|
58,719 |
|
|
|
71,744 |
|
|
|
|
|
|
|
|
Total |
|
|
360,215 |
|
|
|
320,054 |
|
Less accumulated depreciation |
|
|
98,966 |
|
|
|
88,306 |
|
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
261,249 |
|
|
|
231,748 |
|
Goodwill |
|
|
23,213 |
|
|
|
21,840 |
|
Intangible and other assets, net |
|
|
8,126 |
|
|
|
7,152 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
421,424 |
|
|
$ |
404,665 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
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Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
13,347 |
|
|
$ |
12,939 |
|
Accrued payroll and benefits |
|
|
6,380 |
|
|
|
8,115 |
|
Accrued freight |
|
|
1,438 |
|
|
|
2,061 |
|
Accrued utilities |
|
|
2,786 |
|
|
|
3,166 |
|
Accrued income taxes |
|
|
731 |
|
|
|
3,172 |
|
Retainage related to construction in progress |
|
|
106 |
|
|
|
117 |
|
Other accrued expenses |
|
|
2,388 |
|
|
|
4,676 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
27,176 |
|
|
|
34,246 |
|
Deferred income taxes |
|
|
28,979 |
|
|
|
27,560 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share, 5,000 shares authorized,
none outstanding |
|
|
— |
|
|
|
— |
|
Common stock, par value $0.01 per share, 40,000,000 shares authorized;
24,475,966 and 24,391,214 shares issued and outstanding at June 30,
2007 and December 31, 2006, respectively |
|
|
245 |
|
|
|
244 |
|
Additional paid-in capital |
|
|
106,843 |
|
|
|
104,784 |
|
Retained earnings |
|
|
256,044 |
|
|
|
235,732 |
|
Accumulated other comprehensive income |
|
|
2,137 |
|
|
|
2,099 |
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
365,269 |
|
|
|
342,859 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity |
|
$ |
421,424 |
|
|
$ |
404,665 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
3
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(Unaudited)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
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|
Six months ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
| |
Revenues |
|
$ |
77,918 |
|
|
$ |
73,485 |
|
|
$ |
161,889 |
|
|
$ |
147,763 |
|
Cost of sales |
|
|
48,237 |
|
|
|
46,095 |
|
|
|
103,491 |
|
|
|
93,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
29,681 |
|
|
|
27,390 |
|
|
|
58,398 |
|
|
|
54,756 |
|
Selling, general and administrative expenses |
|
|
9,508 |
|
|
|
8,793 |
|
|
|
18,980 |
|
|
|
16,266 |
|
Start-up costs |
|
|
543 |
|
|
|
70 |
|
|
|
967 |
|
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
19,630 |
|
|
|
18,527 |
|
|
|
38,451 |
|
|
|
38,069 |
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
|
133 |
|
|
|
487 |
|
|
|
352 |
|
|
|
924 |
|
Other, net |
|
|
238 |
|
|
|
349 |
|
|
|
812 |
|
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
371 |
|
|
|
836 |
|
|
|
1,164 |
|
|
|
1,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
20,001 |
|
|
|
19,363 |
|
|
|
39,615 |
|
|
|
39,680 |
|
Income taxes |
|
|
7,120 |
|
|
|
6,501 |
|
|
|
13,435 |
|
|
|
13,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,881 |
|
|
$ |
12,862 |
|
|
$ |
26,180 |
|
|
$ |
25,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
1.08 |
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
1.07 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.12 |
|
|
$ |
0.10 |
|
|
$ |
0.24 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
4
CARBO CERAMICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
| |
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
| |
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
26,180 |
|
|
$ |
25,846 |
|
Adjustments to reconcile net income to net cash
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
10,730 |
|
|
|
8,952 |
|
Amortization |
|
|
537 |
|
|
|
363 |
|
Provision for doubtful accounts |
|
|
36 |
|
|
|
416 |
|
Deferred income taxes |
|
|
(162 |
) |
|
|
445 |
|
Excess tax benefits from stock based compensation |
|
|
(134 |
) |
|
|
(334 |
) |
Foreign currency transaction gain |
|
|
(797 |
) |
|
|
(640 |
) |
Non-cash stock compensation expense |
|
|
1,240 |
|
|
|
1,539 |
|
Earnings in equity-method investee |
|
|
(75 |
) |
|
|
(30 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade accounts and other receivables |
|
|
761 |
|
|
|
(4,141 |
) |
Inventories |
|
|
(4,089 |
) |
|
|
(8,016 |
) |
Prepaid expenses and other current assets |
|
|
(1,577 |
) |
|
|
(1,162 |
) |
Long-term prepaid expenses |
|
|
69 |
|
|
|
108 |
|
Accounts payable |
|
|
221 |
|
|
|
(1,643 |
) |
Accrued payroll and benefits |
|
|
(1,777 |
) |
|
|
(1,491 |
) |
Accrued freight |
|
|
(625 |
) |
|
|
(202 |
) |
Accrued utilities |
|
|
(381 |
) |
|
|
(362 |
) |
Accrued income taxes |
|
|
(2,347 |
) |
|
|
11,860 |
|
Other accrued expenses |
|
|
(2,331 |
) |
|
|
4,355 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
25,479 |
|
|
|
35,863 |
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
|
(39,694 |
) |
|
|
(36,766 |
) |
Acquisition of business, net of cash acquired |
|
|
(2,545 |
) |
|
|
— |
|
Purchases of short-term investments |
|
|
(4,000 |
) |
|
|
(25,190 |
) |
Proceeds from maturities of short-term investments |
|
|
11,500 |
|
|
|
25,950 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(34,739 |
) |
|
|
(36,006 |
) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
726 |
|
|
|
543 |
|
Dividends paid |
|
|
(5,868 |
) |
|
|
(4,866 |
) |
Excess tax benefits from stock based compensation |
|
|
134 |
|
|
|
334 |
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(5,008 |
) |
|
|
(3,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(14,268 |
) |
|
|
(4,132 |
) |
Effect of exchange rate changes on cash |
|
|
77 |
|
|
|
(4 |
) |
Cash and cash equivalents at beginning of period |
|
|
24,973 |
|
|
|
19,695 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
10,782 |
|
|
$ |
15,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
15,945 |
|
|
$ |
1,529 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
5
CARBO CERAMICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of CARBO Ceramics Inc. have been
prepared in accordance with accounting principles generally accepted in the United States for
interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required by accounting
principles generally accepted in the United States for complete financial statements. In the
opinion of management, all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. The results of the interim periods presented
herein are not necessarily indicative of the results to be expected for any other interim period or
the full year. The consolidated balance sheet as of December 31, 2006 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, 2006 included in the Company’s annual report on Form 10-K for the year ended December
31, 2006.
The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its
operating subsidiaries (the “Company”). The significant operating subsidiaries include: CARBO
Ceramics (China) Company Limited, CARBO Ceramics (Eurasia) LLC, and Pinnacle Technologies, Inc.
The consolidated financial statements also include a 49% interest in a fracture-related services
company in Canada, acquired in April 2005, that is reported under the equity method of accounting.
All significant intercompany transactions have been eliminated.
2. Acquisition of Business
On April 12, 2007, the Company purchased 100 percent of the outstanding shares of Applied
Geomechanics, Inc. (“AGI”), a supplier of tiltmeters. Results of operations for AGI, included in
the consolidated financial statements since that date, are not material. AGI develops and markets
precision measurement instruments for oilfield, geotechnical and scientific applications. The
Company’s acquisition and the resulting goodwill were attributable to the Company’s strategy to
expand its ability to produce tiltmeters and related equipment and improve the Company’s revenue
generating potential in the geotechnical (non-oilfield) monitoring business. The acquisition was
accounted for using the purchase method of accounting provided for under Financial Accounting
Standards Board Statement No. 141, “Business Combinations.” The aggregate cost of the acquisition
was $2,553 in cash and direct costs of the transaction. Goodwill of $1,373 arising in the
transaction is not deductible for income tax purposes.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Numerator for basic and diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
12,881 |
|
|
$ |
12,862 |
|
|
$ |
26,180 |
|
|
$ |
25,846 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share—
Weighted-average shares |
|
|
24,363,774 |
|
|
|
24,274,498 |
|
|
|
24,346,370 |
|
|
|
24,259,042 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options |
|
|
84,296 |
|
|
|
111,071 |
|
|
|
83,905 |
|
|
|
115,542 |
|
Nonvested and deferred stock awards |
|
|
29,564 |
|
|
|
15,371 |
|
|
|
28,975 |
|
|
|
17,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares |
|
|
113,860 |
|
|
|
126,442 |
|
|
|
112,880 |
|
|
|
133,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share—
Adjusted weighted-average shares |
|
|
24,477,634 |
|
|
|
24,400,940 |
|
|
|
24,459,250 |
|
|
|
24,392,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
1.08 |
|
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.53 |
|
|
$ |
0.53 |
|
|
$ |
1.07 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
4. Segment Information
The Company has two operating segments: 1) Proppant and 2) Fracture and Reservoir Diagnostics.
Services and software sold by the Fracture and Reservoir Diagnostics segment are provided through
the Company’s wholly-owned subsidiary Pinnacle Technologies, Inc. (“Pinnacle”).
Goodwill totaling $23,213 arising from the Company’s acquisitions of Pinnacle and AGI is not
assigned to an operating segment because that information is not used by the Company’s chief
operating decision maker in allocating resources. An inter-segment note receivable totaling
$21,421 at June 30, 2007 and the costs of the Company’s corporate offices are reported in the
Proppant segment. Inter-segment sales are not material.
Summarized financial information for the Company’s reportable segments is shown in the
following table:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Fracture |
|
|
| |
|
|
|
|
|
and |
|
|
| |
|
|
|
|
|
Reservoir |
|
|
| |
|
Proppant |
|
Diagnostics |
|
Total |
Three Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
67,265 |
|
|
$ |
10,653 |
|
|
$ |
77,918 |
|
Income before income taxes |
|
|
18,415 |
|
|
|
1,586 |
|
|
|
20,001 |
|
Three Months Ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
65,670 |
|
|
$ |
7,815 |
|
|
$ |
73,485 |
|
Income before income taxes |
|
|
18,846 |
|
|
|
517 |
|
|
|
19,363 |
|
Six Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
140,872 |
|
|
$ |
21,017 |
|
|
$ |
161,889 |
|
Income before income taxes |
|
|
37,005 |
|
|
|
2,610 |
|
|
|
39,615 |
|
Segment assets as of June 30, 2007 |
|
|
376,837 |
|
|
|
42,795 |
|
|
|
419,632 |
|
Six Months Ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
132,670 |
|
|
$ |
15,093 |
|
|
$ |
147,763 |
|
Income before income taxes |
|
|
38,451 |
|
|
|
1,229 |
|
|
|
39,680 |
|
5. Dividends Paid
On April 17, 2007, the Board of Directors declared a cash dividend of $0.12 per common share
payable to shareholders of record on April 30, 2007. The dividend was paid on May 15, 2007. On
July 17, 2007, the Board of Directors declared a cash dividend of $0.14 per common share payable to
shareholders of record on July 31, 2007. This dividend is payable on August 15, 2007.
6. Comprehensive Income
Comprehensive income, which includes net income and all other changes in equity during a
period except those resulting from investments and distributions to owners, was as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
Six months ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Net income |
|
$ |
12,881 |
|
|
$ |
12,862 |
|
|
$ |
26,180 |
|
|
$ |
25,846 |
|
Foreign currency translation adjustment |
|
|
515 |
|
|
|
428 |
|
|
|
38 |
|
|
|
823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
13,396 |
|
|
$ |
13,290 |
|
|
$ |
26,218 |
|
|
$ |
26,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The foreign currency translation adjustment for the three and six month periods ended June 30,
2007 is net of deferred income taxes of $258 and $1,151, respectively.
7. Stock-Based Compensation
The Company has three stock-based compensation plans: a restricted stock plan and two stock
option plans. The restricted stock plan provides for granting shares of Common Stock in the form
of restricted stock awards to employees and non-employee directors of the Company. Under the
restricted stock plan, the Company may issue up to 375,000 shares, plus (i) the number of shares
that are forfeited, and (ii) the number of shares that are withheld from the participants to
satisfy tax withholding obligations. No more than 75,000 shares may be
7
granted to any single employee. One-third of the shares subject to award vest (i.e., transfer
and forfeiture restrictions on these shares are lifted) on each of the first three anniversaries of
the grant date. All unvested shares granted to an individual vest upon retirement at or after the
age of 62. The stock option plans provided for granting options to purchase shares of the
Company’s Common Stock to employees and non-employee directors. Under the terms of the stock
option plans the Company’s ability to issue grants of options has expired. However, there are
outstanding stock options that were previously granted under the stock option plans. Under the
stock option plans, the Company was permitted to grant options for up to 2,175,000 shares. The
exercise price of each option generally was equal to the market price on the date of grant. The
maximum term of an option is ten years and options generally become exercisable (i.e., vest)
proportionately on each of the first four anniversaries of the grant date. The Company’s policy is
to issue new shares upon exercise. As of June 30, 2007, 199,225 shares were available for issuance
under the restricted stock plan and no options were available for issuance under the stock option
plans.
The Company also has a Director Deferred Fee plan (the “Plan”) that permits non-employee
directors of the Company to elect once in December of each year to defer in the following calendar
year the receipt of cash compensation for service as a director, which would otherwise be payable
in that year, and to receive those fees in the form of the Company’s Common Stock on a specified
later date, on or after the Director’s retirement from the Board of Directors. The number of
shares reserved for an electing Director is based on the fair market value of the Company’s Common
Stock on the date immediately preceding the date those fees would have been paid absent the
deferral. As of June 30, 2007, 3,718 shares were reserved for future issuance in payment of $168
of fees deferred under the Plan by electing directors.
A summary of stock option activity and related information for the six months ended June 30,
2007 is presented below:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted- |
|
Aggregate |
| |
|
|
|
|
|
Average |
|
Intrinsic |
| |
|
Options |
|
Exercise Price |
|
Value |
Outstanding at January 1, 2007 |
|
|
241,400 |
|
|
$ |
22.49 |
|
|
|
|
|
Granted |
|
|
— |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(31,620 |
) |
|
$ |
22.96 |
|
|
|
|
|
Forfeited |
|
|
(1,780 |
) |
|
$ |
35.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2007 |
|
|
208,000 |
|
|
$ |
22.31 |
|
|
$ |
4,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2007 |
|
|
199,325 |
|
|
$ |
21.72 |
|
|
$ |
4,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007, there was $89 of total unrecognized compensation cost, net of estimated
forfeitures, related to stock options granted under the plans. The weighted-average remaining
contractual term of options outstanding at June 30, 2007 is 4.4 years. The total intrinsic value
of options exercised during the six months ended June 30, 2007 was $632.
A summary of restricted stock activity and related information for the six months ended June
30, 2007 is presented below:
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted- |
| |
|
|
|
|
|
Average |
| |
|
|
|
|
|
Grant-Date |
| |
|
Shares |
|
Fair Value |
Nonvested at January 1, 2007 |
|
|
80,083 |
|
|
$ |
52.96 |
|
Granted |
|
|
54,753 |
|
|
$ |
37.98 |
|
Vested |
|
|
(31,558 |
) |
|
$ |
50.73 |
|
Forfeited |
|
|
(1,621 |
) |
|
$ |
45.14 |
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2007 |
|
|
101,657 |
|
|
$ |
45.70 |
|
|
|
|
|
|
|
|
|
|
As of June 30, 2007, there was $3,418 of total unrecognized compensation cost, net of
estimated forfeitures, related to restricted shares granted under the plan. That cost is expected
to be recognized over a weighted-average period of 2.0 years. The total fair value of shares
vested during the six months ended June 30, 2007 was $1,284.
8
8. New Accounting Pronouncements
Effective January 1, 2007, the Company adopted the Financial Accounting Standards Board’s
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in financial statements and requires the
impact of a tax position to be recognized in the financial statements if that position will more
likely than not be sustained by the taxing authority. The Company had a recorded reserve of
approximately $575 associated with uncertain tax positions as of January 1, 2007. There were no
significant changes to the recorded reserve as a result of the adoption of FIN 48 or during the six
months ended June 30, 2007. Substantially all of this amount, if recognized, would impact the
effective tax rate. Related accrued interest and penalties are recorded in income tax expense and
are not material.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which
it operates, the most significant of which are U.S. federal and certain state jurisdictions. The
Company does not currently have material income tax exposure in foreign jurisdictions due to tax
holidays, recent commencement of operations or immaterial operations. In June 2006 the Company
concluded an audit by the U.S. Internal Revenue Service for its 2003 tax year. The outcome did not
have a material effect on the financial statements. The 2004 through 2006 tax years are still
subject to examination. Various U.S. state jurisdiction tax years remain open to examination as
well though the Company believes assessments, if any, would be immaterial to its consolidated
financial statements.
In February 2007, the Financial Accounting Standards Board issued Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 provides an
option to report selected financial assets and liabilities at fair value and establishes
presentation and disclosure requirements. The fair value option established by SFAS 159 permits
the Company to elect to measure eligible items at fair value on an instrument-by-instrument basis
and then report unrealized gains and losses for those items in the Company’s earnings. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating
SFAS 159 and has not yet determined the impact of adoption.
9. Legal Proceedings
The Company is subject to legal proceedings, claims and litigation arising in the ordinary
course of business. While the outcome of these matters is currently not determinable, management
does not expect that the ultimate cost to resolve these matters will have a material adverse effect
on the Company’s consolidated financial position, results of operations, or cash flows.
On January 26, 2007, following self-disclosure of certain air pollution emissions, the Company
received a Notice of Violation (“NOV”) from the State of Georgia Environmental Protection Division
(“EPD”) regarding appropriate permitting for emissions of two specific substances from its
Toomsboro facility. Pursuant to the NOV, the Company conducted performance testing of these
emissions and provided updated results in the course of additional dialogue with the relevant
government agencies, including discussions of emissions at the Company’s nearby McIntyre, Georgia
manufacturing facility. Following these discussions, a second NOV was issued on May 22, 2007 for
the McIntyre plant for alleged violations similar to those in the January NOV, related to the
Toomsboro facility. A response to the NOV with a schedule of responsive activities was submitted
to EPD in mid June. Although the Company is awaiting EPD’s review of this response, the Company is
implementing many of those activities and continues to assess what impact, financial or otherwise,
that might result from the NOVs, and does not at this time have an estimate of costs associated
with compliance.
9
|
|
|
| ITEM 2. |
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
Business
The Company manufactures ceramic proppant and provides services that are used in the hydraulic
fracturing of natural gas and oil wells. Goods and services are provided through two operating
segments: 1) Proppant and 2) Fracture and Reservoir Diagnostics. The Company’s Proppant segment
manufactures and sells ceramic proppants. The Company’s Fracture and Reservoir Diagnostics segment
provides fracture mapping and reservoir diagnostic services, sells fracture simulation software and
provides engineering services to oil and gas companies worldwide. These services and software are
provided through the Company’s wholly-owned subsidiary, Pinnacle Technologies, Inc.
Critical Accounting Policies
The consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require the Company to make estimates and
assumptions (see Note 1 to the consolidated financial statements included in the annual report on
Form 10-K for the year ended December 31, 2006). The Company believes that some of its accounting
policies involve a higher degree of judgment and complexity than others. Critical accounting
policies for the Company include revenue recognition, estimating the recoverability of accounts
receivable, inventory valuation, accounting for income taxes, accounting for long-lived assets and
accounting for legal contingencies. Critical accounting policies are discussed more fully in the
annual report on Form 10-K for the year ended December 31, 2006 and there have been no changes in
the Company’s evaluation of its critical accounting policies since the preparation of that report.
Results of Operations
Three Months Ended June 30, 2007
Revenues. Consolidated revenues of $77.9 million for the quarter ended June 30, 2007 increased 6%
compared to $73.5 million in revenues for the quarter ended June 30, 2006. The improvement was due
to a 2% increase in Proppant segment revenues and a 36% increase in Fracture and Reservoir
Diagnostics segment revenues.
Proppant segment revenues of $67.3 million for the quarter ended June 30, 2007 exceeded revenues of
$65.7 million for the same period in 2006 by 2% due to a 1% increase in proppant sales volume and a
1% increase in the average selling price, which was due to a change in the mix of products sold
during the period. Worldwide proppant sales totaled 207 million pounds for the quarter compared to
204 million pounds for the second quarter of 2006. The increase in sales volume was primarily
attributable to U.S. sales, as a new record for quarterly sales volume was established in this
region, as well as sales growth in Mexico. These increases offset the impact of Canadian sales
which declined 66% compared to last year’s second quarter. While a decline in seasonal sales in
Canada is anticipated in the second quarter each year, this year’s decline was more dramatic than
in recent years due to a prolonged period of wet weather and a decline in the drilling activity of
Canadian oil and gas operators brought about by high drilling and completion costs and lower
natural gas costs. In total, North American sales increased less than 1% as a result of the lag in
Canadian activity. Overseas sales volume increased 7% compared to last year’s second quarter
mainly due to increases in Russia and South America. The average selling price of proppant in the
second quarter of 2007 was $0.325 per pound, an increase of 1% compared to the second quarter of
2006 average selling price of $0.322 per pound.
Fracture and Reservoir Diagnostics segment revenues for the second quarter of 2007 were $10.6
million, 36% higher than revenues of $7.8 million for the same period in 2006. The increase was
due to increases in fracture mapping and reservoir monitoring
services, software products, consulting services and
non-oilfield monitoring sales attributable to the acquisition of Applied Geomechanics, Inc. in
April 2007.
Gross Profit. Consolidated gross profit for the second quarter of 2007 was $29.7 million, or 38%
of revenues, compared to $27.4 million, or 37% of revenues, for the second quarter of 2006. Gross
profit increased by 8% compared to last year’s second quarter as a result of increased revenues in
both the Proppant and Fracture and Reservoir Diagnostics segments. Gross profit increased as a
percentage of revenues primarily due to improved margins for the Fracture and Reservoir Diagnostics
segment.
10
Proppant segment gross profit of $24.7 million for the second quarter of 2007 increased 2% compared
to gross profit of $24.3 million for the second quarter of 2006 as a result of increased sales
volume. Gross profit as a percentage of revenues remained unchanged at 37% compared to last year’s
second quarter as lower natural gas costs in the Company’s U.S. manufacturing facilities were
offset by increases in the cost of raw materials for the production of high-strength proppants.
Fracture and Reservoir Diagnostics segment gross profit for the second quarter of 2007 was $5.0
million, or 47% of revenues, compared to $3.1 million, or 40% of revenues, for the second quarter
of 2006. The increase in gross profit and gross profit margin is primarily attributable to the
absorption of fixed costs over the higher services revenue generated in the second quarter of 2007.
Selling, General and Administrative (SG&A) and Other Operating Expenses. Consolidated expenses
consisted of $9.5 million of SG&A expenses and $0.5 million of other operating expenses for the
second quarter of 2007 compared to $8.8 million and $0.1 million, respectively, for the second
quarter of 2006. As a percentage of revenues, SG&A expenses were 12.2% for the quarter ended June
30, 2007 compared to 12.0% for the quarter ended June 30, 2006.
Proppant segment expenses consisted of $6.2 million of SG&A expenses and $0.5 million of other
operating expenses for the second quarter of 2007 compared to $6.2 million and $0.1 million,
respectively, for the second quarter of 2006. Although aggregate SG&A expenses remained unchanged
at $6.2 million, planned increases in global marketing activity, research and development activity
and administrative and legal expenses supporting revenue growth and global expansion were mainly
offset by a decrease in stock compensation expense. Operations in Russia accounted for a $0.4
million increase in SG&A expenses. The decrease in stock compensation is primarily due to
accelerated expense recognition for restricted stock awarded in the second quarter of 2006 to
directors of the Company. As a percentage of revenues, proppant segment SG&A expenses decreased to
9.3% compared to 9.5% for the second quarter of 2006. Other operating expenses of $0.5 million in
the second quarter of 2007 consisted primarily of final startup costs for the Company’s new
manufacturing facility in Russia.
Fracture and Reservoir Diagnostics segment SG&A expenses totaled $3.3 million, or 30% of revenues,
for the second quarter of 2007 and $2.6 million, or 33% of revenues, for the corresponding period
in 2006. The increase in aggregate expense was primarily due to additional personnel added to
sales and marketing staff plus increased technical development and administrative costs to support
increased sales activity.
Income Tax Expense. The Company’s effective income tax rate was 35.6% for the quarter ended June
30, 2007 and 33.6% for the quarter ended June 30, 2006. The effective income tax rate increased
primarily due to an adjustment in the second quarter of 2006 to reduce the Company’s net deferred
income tax liabilities resulting from changes in state income tax laws.
Six Months Ended June 30, 2007
Revenues. Consolidated revenues of $161.9 million for the six months ended June 30, 2007 exceeded
revenues of $147.8 million for the same period in 2006 by 10%. The improvement was due to a 6%
increase in Proppant segment revenues and a 39% increase in Fracture and Reservoir Diagnostics
segment revenues.
Proppant segment revenues of $140.9 million for the six months ended June 30, 2007 exceeded
revenues of $132.7 million for the same period in 2006 by 6%. The growth was driven primarily by a
5% increase in sales volume. Worldwide proppant sales totaled 435 million pounds in the first half
of 2007 compared to 413 million pounds in the first half of 2006. North American sales volume
increased 3% over last year due to higher sales in the U.S. and Mexico that were partially offset
by a reduction in Canada. Overseas sales volume increased 18%, with the strongest activity
occurring in Russia, West Africa, the Middle East and South America. Increases in those regions
were partially offset by a decline in China sales. The average selling price per pound of ceramic
proppant in the first half of 2007 was $0.324 versus $0.321 in the first half of 2006. The
slightly higher average selling price is primarily due to increased sales of higher-priced,
heavyweight proppant.
Fracture and Reservoir Diagnostics segment revenues of $21.0 million for the six months ended June
30, 2007 exceeded revenues of $15.1 million for the same period in 2006 by 39%. The growth was
driven primarily by an increase in demand for fracture mapping in North America and growth in the
reservoir diagnostics business.
11
Gross Profit. Consolidated gross profit for the six months ended June 30, 2007 was $58.4 million,
or 36% of revenues, compared to $54.8 million, or 37% of revenues, for the same period in 2006.
The 7% increase in gross profit was the result of higher gross profit in both the Proppant segment
and the Fracture and Reservoir Diagnostics segment, while the decline in gross profit as a
percentage of revenues was mostly due to higher Proppant segment manufacturing and freight costs in
the first quarter of 2007.
Proppant segment gross profit for the six months ended June 30, 2007 was $49.4 million, or 35% of
revenues, compared to $48.6 million, or 37% of revenues, for the same period in 2006. Gross profit
increased 2% due to increased sales volume but decreased as a percentage of revenues because of
higher manufacturing and freight costs associated with sales of high-strength proppant in the first
quarter of 2007. In order to satisfy exceptionally strong demand for high-strength proppant during
the first quarter of 2007, the Company shifted high-strength production to facilities which
typically do not produce that product, resulting in higher manufacturing costs. Additionally,
freight cost increased due to expedited first quarter shipments of high-strength proppant to
customer locations.
Fracture and Reservoir Diagnostics segment gross profit for the six months ended June 30, 2007 was
$9.0 million, or 43% of revenues, compared to $6.2 million, or 41% of revenues, for the same period
in 2006. The increase in gross profit and gross profit margin was primarily due to increased
utilization of staff and equipment and strong software sales in the first half of the year.
Selling, General and Administrative (SG&A) and Other Operating Expenses. Consolidated expenses
consisted of $19.0 million of SG&A expenses and $0.9 million of other operating expenses for the
six months ended June 30, 2007 compared to $16.3 million and $0.4 million, respectively, for the
six months ended June 30, 2006. As a percentage of revenues, SG&A expenses increased to 11.7% for
the first half of 2007 compared to 11.0% the same period in 2006.
Proppant segment expenses consisted of $12.7 million of SG&A expenses and $0.9 million of other
operating expenses for the six months ended June 30, 2007 compared to $11.5 million and $0.4
million, respectively, for the six months ended June 30, 2006. SG&A expenses increased primarily
because of planned increases in global marketing activity, research and development activity,
administrative and legal expenses to support revenue growth and global expansion offset by
decreases in expenses relating to stock compensation as well as expenses relating to the 2006
search for a new President and Chief Executive Officer. The decrease in stock compensation is
primarily due to accelerated expense recognition for restricted stock awarded in the second quarter
of 2006 to directors of the Company. As a percentage of revenues, SG&A expenses increased to 9.0%
in 2007 from 8.6% in 2006. Other operating expenses of $0.9 million for the six months ended June
30, 2007 consisted primarily of the final start-up costs associated with the Company’s new
manufacturing facility in Russia while other operating expenses of $0.4 million for the six months
ended June 30, 2006 consisted mostly of final start-up costs associated with the new manufacturing
facility in Toomsboro, Georgia that began production in January 2006.
Fracture and Reservoir Diagnostics segment SG&A expenses totaled $6.3 million, or 30% of revenues,
for the six months ended June 30, 2007 compared to $4.8 million, or 32% of revenues, for the six
months ended June 30, 2006. The increase in aggregate expense was primarily due to greater
technology development spending on the growing reservoir monitoring business as well as increases
in marketing and administrative expenses necessary to support revenue growth.
Income Tax Expense. The Company’s effective income tax rate was 33.9% for the six months ended
June 30, 2007 and 34.9% for the six months ended June 30, 2006. The effective tax rate
decreased primarily due to lower state income tax obligations compared to prior year estimates and
the related adjustment of deferred income tax liabilities.
Liquidity and Capital Resources
At June 30, 2007, the Company had cash and cash equivalents of $10.8 million compared to cash and
cash equivalents of $25.0 million and short-term investments of $7.5 million at December 31, 2006.
For the six months ended June 30, 2007, the Company generated $25.5 million in cash from
operations, received $0.7 million in proceeds from employee exercises of stock options, retained
$0.1 million in cash from excess tax benefits relating to stock-based compensation to employees and
received $7.5 million for net purchases and maturities of short-term investments. Uses of cash
included $39.7 million of capital spending, $2.5 million for a business acquisition, and $5.8
million of cash dividends. Major capital spending for the Proppant segment
12
during the period included construction of the second production line at the manufacturing facility
in Toomsboro, Georgia that is expected to be completed in the second half of 2007, construction of
on a new proppant manufacturing facility in Kopeysk, Russia completed in the first half of 2007,
and a distribution facility expansion at Rock Springs, Wyoming. Capital spending for the Fracture
and Reservoir Diagnostics segment totaled $4.6 million.
The Company believes its 2007 results will continue to be heavily influenced by the level of
natural gas drilling in North America but expects its ability to demonstrate the value of ceramic
proppant relative to alternative proppants will allow it to grow sales volume and revenue at a more
rapid pace than the growth rate associated with drilling or fracturing activity. Given the levels
of natural gas inventories in the U.S. and the current low levels of drilling activity in Canada,
there is the possibility of a short-term contraction in drilling activity in North America. The
Company believes any slow-down in activity is likely to be of a relatively short duration due to
the increasing depletion rates in North American gas wells and the impact that lower levels of
drilling activity will have on natural gas supply and price. The Company believes its thirteen
production lines at six production facilities worldwide give it a
great deal of flexibility to adjust
supply to meet demand for its ceramic proppant.
Subject to its financial condition, the amount of funds generated from operations and the level of
capital expenditures, the Company’s current intention is to continue to pay quarterly dividends to
holders of its Common Stock. On July 17, 2007, the Company’s Board of Directors approved the
payment of a quarterly cash dividend of $0.14 per share to shareholders of the Company’s Common
Stock on July 31, 2007. The Company estimates its total capital expenditures for the remainder of
2007 will be approximately $18.0 to $23.0 million, including expansion of its manufacturing
facility in Toomsboro, Georgia.
The Company maintains an unsecured line of credit of $10.0 million. As of June 30, 2007, there was
no outstanding debt under the credit agreement. The Company anticipates that cash on hand, cash
provided by operating activities and funds available under its line of credit will be sufficient to
meet planned operating expenses, tax obligations and capital expenditures for the next 12 months.
The Company also believes that it could acquire additional debt financing, if needed.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of June 30, 2007.
Forward-Looking Information
The statements in this Form 10-Q that are not historical statements, including statements regarding
our future financial and operating performance, are forward-looking statements within the meaning
of the federal securities laws. All forward-looking statements are based on management’s current
expectations and estimates, which involve risks and uncertainties that could cause actual results
to differ materially from those expressed in forward-looking statements. Among these factors are:
| |
• |
|
changes in overall economic conditions, |
| |
| |
• |
|
changes in the cost of raw materials and natural gas used in manufacturing our products, |
| |
| |
• |
|
changes in demand for our products, |
| |
| |
• |
|
changes in the demand for, or price of, oil and natural gas, |
| |
| |
• |
|
risks of increased competition, |
| |
| |
• |
|
technological, manufacturing and product development risks, |
| |
| |
• |
|
loss of key customers, |
| |
| |
• |
|
changes in foreign and domestic government regulations, |
| |
| |
• |
|
changes in foreign and domestic political and legislative risks, |
| |
| |
• |
|
the risks of war and international and domestic terrorism, |
| |
| |
• |
|
risks associated with foreign operations and foreign currency exchange rates and controls, and |
| |
| |
• |
|
weather-related risks and other risks and uncertainties. |
Additional factors that could affect our future results or events are described from time to time
in our Securities and Exchange Commission reports. See in particular our Form 10-K for the fiscal
year ended December 31, 2006 under the caption “Risk Factors” and similar disclosures in
subsequently filed reports with the Securities and Exchange Commission. We assume no obligation to
update forward-looking statements, except as required by law.
13
|
|
|
| ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company’s major market risk exposure is to foreign currency fluctuations that could impact its
investments in China and Russia. As of June 30, 2007, the Company's
net investment that is subject to foreign currency fluctuations
totals $80.0 million and the Company recorded net cumulative foreign currency translation adjustments of $2.1 million. These currency translation adjustments are included in other comprehensive
income. Also, the Company’s subsidiary in Russia has borrowed
$40.8 million, as of June 30, 2007,
from another subsidiary of the Company to fund construction of the manufacturing plant in Russia.
This indebtedness, while eliminated in consolidation of the financial statements, is subject to
exchange rate fluctuations between the local reporting currency and the currency in which the debt
is denominated. Currency exchange rate fluctuations associated with this indebtedness result in
gains and losses that impact net income. When necessary, the Company may enter into forward
foreign exchange contracts to hedge the impact of foreign currency fluctuations. There were no
such foreign exchange contracts outstanding at June 30, 2007.
The Company has a $10.0 million line of credit with its primary commercial bank. Under the terms
of the revolving credit agreement, the Company may elect to pay interest at either a fluctuating
base rate established by the bank from time to time or at a rate based on the rate established in
the London inter-bank market. As of June 30, 2007, there was no outstanding debt under the credit
agreement. The Company does not believe that it has any material exposure to market risk
associated with interest rates.
|
|
|
| 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 Securities
and Exchange Commission’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 the end of the quarter ended June 30, 2007, management carried out an evaluation, under the
supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and
procedures. There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures, including the possibility of human error and the circumvention of the
controls and procedures. Accordingly, even effective disclosure controls and procedures can only
provide reasonable assurance of achieving their control objectives. Based upon such evaluation and
as of the end of the quarter for which this report is made, the Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and procedures are effective to
provide reasonable assurance that information required to be disclosed in the reports the Company
files and submits under the Exchange Act is recorded, processed, summarized and reported as and
when required.
| (b) |
|
Changes in Internal Control over Financial Reporting |
There were no changes in the Company’s internal control over financial reporting during the quarter
ended June 30, 2007 that materially affected, or are reasonably likely to materially affect, those
controls.
14
PART II. OTHER INFORMATION
|
|
|
| ITEM 1. |
|
LEGAL PROCEEDINGS |
See Note 9 of the Notes to the Consolidated Financial Statements which is incorporated
herein by reference.
Not applicable
|
|
|
| ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Not applicable
|
|
|
| ITEM 3. |
|
DEFAULTS UPON SENIOR SECURITIES |
Not applicable
|
|
|
| ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
| |
a. |
|
The Annual Meeting of Shareholders of Carbo Ceramics Inc. was held on April 17, 2007. |
| |
| |
b. |
|
The following matters were submitted to a vote at the meeting: |
(1) The election of the following nominees as directors of Carbo Ceramics Inc.
Votes representing 22,627,483 shares of Common Stock were cast. The vote with
respect to each nominee was as follows:
| |
|
|
|
|
|
|
|
|
| Nominee |
|
For |
|
|
Withheld |
|
Claude E. Cooke, Jr. |
|
|
22,024,367 |
|
|
|
603,116 |
|
Chad C. Deaton |
|
|
22,037,973 |
|
|
|
589,510 |
|
Gary A. Kolstad |
|
|
22,056,905 |
|
|
|
570,578 |
|
H. E. Lentz, Jr. |
|
|
22,037,923 |
|
|
|
589,560 |
|
William C. Morris |
|
|
22,029,092 |
|
|
|
598,391 |
|
Jesse P. Orsini |
|
|
18,643,184 |
|
|
|
3,984,299 |
|
Robert S. Rubin |
|
|
22,033,357 |
|
|
|
594,126 |
|
(2) The ratification of the appointment of Ernst & Young LLP as independent
accountants to audit the consolidated financial statements of CARBO Ceramics Inc.
for the year 2007. Votes representing 22,627,483 shares of Common Stock were cast.
Results of the vote were as follows: 22,454,861 for, 170,512 against, and 2,110
abstained.
|
|
|
| ITEM 5. |
|
OTHER INFORMATION |
Not applicable
15
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this
Quarterly Report on Form 10-Q:
| |
10.1 |
|
Incentive Compensation Plan for Key Employees (Effective January 1, 2007),
incorporated by reference from Exhibit 10.1 to Current Report on Form 8-K filed on
January 22, 2007. |
| |
| |
10.2 |
|
Incentive Compensation Plan for Energy Professional Staff (Effective
January 1, 2007), incorporated by reference from Exhibit 10.2 to Current Report on
Form 8-K filed on January 22, 2007. |
| |
| |
10.3 |
|
Summary Sheet 2007 David G. Gallagher Annual Base Salary, incorporated by
reference from Exhibit 10.1 to Current Report on Form 8-K filed on April 20, 2007. |
| |
| |
10.4 |
|
Summary Sheet 2007 Annual Base Salaries for Named Executive Officers,
incorporated by reference from Exhibit 10.2 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 2007 filed on 8-K filed on May 1, 2007. |
| |
| |
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 Paul G. Vitek. |
| |
| |
32 |
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
|
|
|
|
| |
CARBO CERAMICS INC.
|
|
| |
/s/ Gary A. Kolstad
|
|
| |
Gary A. Kolstad |
|
| |
President and Chief Executive Officer |
|
| |
| |
|
|
| |
/s/ Paul G. Vitek
|
|
| |
Paul G. Vitek |
|
| |
Sr. Vice President, Finance and
Chief Financial Officer |
| |
|
Date: July 30, 2007 |
|
|
17
EXHIBIT INDEX
| |
|
|
| EXHIBIT |
|
DESCRIPTION |
|
|
|
10.1
|
|
Incentive Compensation Plan for Key Employees (Effective January 1, 2007), incorporated by
reference from Exhibit 10.1 to Current Report on Form 8-K filed on January 22, 2007. |
|
|
|
10.2
|
|
Incentive Compensation Plan for Energy Professional Staff (Effective January 1, 2007),
incorporated by reference from Exhibit 10.2 to Current Report on Form 8-K filed on January 22,
2007. |
|
|
|
10.3
|
|
Summary Sheet 2007 David G. Gallagher Annual Base Salary, incorporated by reference from
Exhibit 10.1 to Current Report on Form 8-K filed on April 20, 2007. |
|
|
|
10.4
|
|
Summary Sheet 2007 Annual Base Salaries for Named Executive Officers, incorporated by
reference from Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended March 31,
2007 filed on 8-K filed on May 1, 2007. |
|
|
|
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 Paul G. Vitek. |
|
|
|
32
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
18