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8-K - FORM 8-K - CARBO CERAMICS INCd429963d8k.htm

Exhibit 99.1

 

LOGO

CONTACT: MARK THOMAS

                       MANAGER OF INVESTOR RELATIONS

                       (281) 921-6400

Release #12-16

CARBO CERAMICS INC. ANNOUNCES THIRD QUARTER 2012 EARNINGS

Conference Call Scheduled for Today, 10:30 a.m. Central Time

 

   

Quarterly revenues of $151.1 million compared to $167.1 million during the same quarter in the prior year

 

   

Net income of $23.9 million, or $1.04 per diluted share for the quarter

HOUSTON, TX (October 25, 2012) – CARBO Ceramics Inc. (NYSE: CRR) today reported net income of $23.9 million, or $1.04 per diluted share, on revenues of $151.1 million for the quarter ended September 30, 2012.

President and CEO Gary Kolstad commented, “While the third quarter had its share of challenges, we are pleased that global sales volumes of CARBO’s Ceramic Proppant Volumes were only down 3% year-over-year, as gains in international sales volumes partially offset declines in North America.

“Despite the industry’s lower drilling and completion activity, we continue to see strong ceramic proppant sales volumes in the active major shale plays such as the Eagle Ford, Permian and Bakken. One reason for this strength is that several clients appear to be replacing lower quality, lower conductivity Chinese Intermediate Density Ceramic (IDC) proppant with our high quality, high conductivity lightweight ceramic proppant. We have initiated a technical marketing campaign to help our clients better understand how CARBO’s ceramic proppant can positively impact well production and ultimate recovery when compared to IDC alternatives. We believe these efforts are effectively demonstrating the advantages of CARBO’s lightweight products to E&P companies.

“International sales volumes continued their positive trend, with China leading our international growth year-over-year. Given the excess supply of Chinese ceramic proppant in the market today, the growth we are witnessing in China is a testament to the CARBO® brand name as well as our history of product performance and quality.

“With respect to our distribution investments, we are pleased with the construction progress made at our site in South Texas. Once completed, this large distribution facility will allow us to better serve the Eagle Ford shale. CARBO also purchased property in North Dakota that we intend to use as a large distribution center, enhancing our ability to serve the Bakken shale play.

“Falcon Technologies®, our environmental risk reduction business, continues to lead the premium containment market within the oil and gas industry. We are pleased to see Falcon set another quarterly sales record as the E&P community utilizes Falcon’s Engineered to ProtectTM solutions to safeguard their assets and the environment,” Mr. Kolstad said.

Third Quarter Results

Revenues for the third quarter of 2012 decreased 10 percent, or $15.9 million, when compared to the third quarter of 2011. North American (defined as Canada and the U.S.) proppant sales volume decreased 11 percent, while International proppant sales volume increased 33 percent, compared to the same period last year.


CARBO Ceramics Third Quarter 2012 Earnings Release

October 25, 2012

Page 2

 

 

Operating profit for the third quarter of 2012 decreased 38 percent, or $21.0 million, compared to the third quarter of 2011. The decrease in operating profit was primarily the result of lower proppant sales volumes, a decrease in the average proppant selling price, higher fixed cost absorption, and an increase in freight and logistics costs, partially offset by a greater contribution from the Company’s other business units and a decrease in SG&A expenses.

Net income for the third quarter of 2012 decreased 35 percent, or $13.0 million compared to the third quarter of 2011.

 

Proppant Sales Volumes

(in millions lbs)

   Three Months Ended
September 30, 2012
     Three Months Ended
September 30, 2011
 

Ceramic Proppant Volumes

     385         398   

Other Proppant Volumes*

     27         34   
  

 

 

    

 

 

 

Total

     412         432   
  

 

 

    

 

 

 

 

*

Includes CARBOBOND® RCS (resin-coated sand) and API / ISO certified ceramic proppant manufactured on an outsourced basis.

Technology and Business Highlights

 

 

CARBO engineers recently completed an internal study for a Bakken client which indicated an approximate 20% increase in initial production in wells containing CARBOECONOPROP® compared to similar wells containing Chinese IDC.

 

 

CARBOBOND RCS-C, a curable premium resin-coated sand, was successfully employed in south-central Texas for the first time in a gelled propane frac and had excellent fluid compatibility.

 

 

Fracpro® continues to grow its technology platform and expand its client base. Its latest development, FracproREMOTE is an Apple® iPAD® application that allows clients to remotely connect to a frac job in real time. The application connects Fracpro on location to the iPAD and allows the user to see and graph multiple channels of data.

 

 

StrataGen® consulting also continues to grow its technology platform and expand its client base. StrataGen completed the development of NetWORXSM during the quarter. NetWORX is a new brittle shale frac model and will be offered in consulting, software and on-line subscription formats. This development increases our Data and Neural Analysis® suite of product offerings, which also includes EFWORXSM and BakkenWORXSM completion models.

 

 

The Falcon Technologies business continues to grow and diversify its geographic footprint, opening a new operations location in Ohio to better serve the Utica and Southwest Marcellus shale plays.

Outlook

CEO Gary Kolstad commented on the outlook for CARBO stating, “The global macroeconomic environment along with recent swings in commodity prices leave many uncertainties with regard to industry activity over the near term. However, conversations with our clients remain encouraging about increased usage of CARBO’s ceramic proppants. Although challenges will likely continue in the fourth quarter, we expect the pressures on sales volumes and pricing to lessen over the coming quarters as inventories of Chinese IDC proppant in the United States appear to be declining. In addition, we expect the fourth quarter to be adversely affected by normal seasonality issues, including weather and holidays.

“We continue to introduce our resin-coated products to more clients in more geographic areas. While this is a tough economic and operational environment for market development, we are confident that our high quality premium resin-coated products will gain a presence in the market.

“The distribution facility in South Texas is scheduled for completion during the fourth quarter. Regarding our new property in North Dakota, we expect to begin construction of a distribution facility during the fourth quarter, with an anticipated completion date during the first half of 2013. These facilities will play a key role in providing the flexibility required to meet our clients’ needs.


CARBO Ceramics Third Quarter 2012 Earnings Release

October 25, 2012

Page 3

 

“Engineering work on the Millen, Georgia project is progressing and we anticipate production could commence at the new plant near the end of 2013.

“Falcon extended its geographic footprint during the third quarter and is experiencing solid growth. Although Falcon may see an adverse impact from normal seasonality events during the fourth quarter, we believe Falcon is positioned to provide continued growth for many years to come.

“CARBO’s primary mission is to make oil and gas wells produce better and recover more. In order to accomplish this mission a focus on technology is at the heart of the company. CARBO has identified a new technique for the production of ceramic proppant. While still in a development phase, lab results indicate this technique can produce a ceramic proppant with increased strength and conductivity when compared to traditional ceramic proppants. Work continues on this project, and we will monitor the results in connection with future growth plans. We are encouraged by our overall R&D efforts and look forward to building on our thirty-three year history of leading the industry with new products,” Mr. Kolstad concluded.

As previously announced, a conference call to discuss the Company’s third quarter results is scheduled for today at 10:30 a.m. Central Time (11:30 a.m. Eastern). Due to historical high call volume, CARBO is offering participants the opportunity to register in advance for the conference through the following link:

http://services.choruscall.com/diamondpass/registration?confirmationNumber=10019041

Registered participants will immediately receive an email with a calendar reminder and a dial-in number and PIN that will allow them immediate access to the call.

Participants who do not wish to pre-register for the call may dial in using (877) 270-2148 (for U.S. and Canadian callers) or (412) 902-6510 (for locations outside North America) and referencing conference number 10019041. The conference call also can be accessed through the company’s website, www.carboceramics.com.

A telephonic replay of the earnings conference call will be available through November 2, 2012, at 9:00 a.m. Eastern Time. To access the replay from the U.S. and Canada, please dial 1-877-344-7529; international callers outside North America should dial 1-412-317-0088. Please reference conference number 10019041. Interested parties may also access the archived webcast of the earnings teleconference through the company’s website approximately two hours after the end of the call.

CARBO is the world’s largest supplier of ceramic proppant for fracturing oil and gas wells and a supplier of resin-coated sand proppant; the provider of the industry’s most widely used fracture simulation software; and a provider of fracture design and consulting services. The company also provides a broad range of technologies for spill prevention, containment and countermeasures, along with geotechnical monitoring.

The statements in this news release 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, including the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on management’s current expectations and estimates, which involve risks and uncertainties that could cause actual results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, changes in the cost of raw materials and natural gas used in manufacturing our products, changes in demand and prices charged for our products, changes in the demand for, or price of, oil and natural gas, risks of increased competition, technological, manufacturing, distribution and product development risks, loss of key customers, changes in government regulations, 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, weather-related risks and other risks and uncertainties described in our publicly available filings with the Securities and Exchange Commission. We assume no obligation to update forward-looking statements, except as required by law.

- tables follow -


      Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2012     2011     2012     2011  
     (In thousands except per share data)     (In thousands except per share data)  

Revenues

   $ 151,134      $ 167,083      $ 491,914      $ 467,582   

Cost of sales

     100,984        94,390        314,047        270,715   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     50,150        72,693        177,867        196,867   

Selling, general & administrative expenses

     15,093        16,622        48,801        46,754   

Start-up costs

     —          127        68        127   

Loss (gain) on disposal or impairment of assets

     42        (112     (12     1,537   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     35,015        56,056        129,010        148,449   

Interest income (expense), net

     17        60        (18     160   

Foreign currency exchange (loss) gain, net

     (175     86        (31     (228

Other (expense) income, net

     (2     11        (214     (119
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     34,855        56,213        128,747        148,262   

Income taxes

     10,957        19,302        42,641        51,243   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 23,898      $ 36,911      $ 86,106      $ 97,019   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 1.04      $ 1.59      $ 3.73      $ 4.19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.04      $ 1.59      $ 3.73      $ 4.19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding:

        

Basic

     22,963        23,027        22,966        23,023   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     22,963        23,028        22,967        23,024   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

   $ 11,532      $ 9,174      $ 33,333      $ 25,661   
  

 

 

   

 

 

   

 

 

   

 

 

 

Selected Balance Sheet Information

 

     September 30, 2012      December 31, 2011  
     (In thousands)  

Assets

     

Cash and cash equivalents

   $ 52,021       $ 41,270   

Other current assets

     266,107         261,295   

Property, plant and equipment, net

     424,626         392,659   

Intangible and other assets, net

     31,813         33,477   

Total assets

     786,731         740,865   

Liabilities and Shareholders’ Equity

     

Accrued income taxes

   $ 4,727       $ —     

Other current liabilities

     49,862         79,066   

Deferred income taxes

     40,755         31,641   

Shareholders’ equity

     691,387         630,158   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 786,731       $ 740,865