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| CRR > SEC Filings for CRR > Form 10-Q on 2-Nov-2009 | All Recent SEC Filings |
2-Nov-2009
Quarterly Report
by decreases in cost of sales resulting from lower freight costs, as well as
reduced manufacturing costs attributed primarily to a change in the mix of
products sold and lower natural gas prices.
Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A
expenses totaled $10.8 million for the third quarter of 2009 compared to
$10.2 million for the same period in 2008. As a percentage of revenues, SG&A
expenses increased to 11.8% compared to 9.9% for third quarter of 2008. SG&A
expenses in the third quarter of 2009 included $1.2 million related to the
relocation of certain Company offices and costs associated with the acquisition
of the Falcon assets, which more than offset benefits realized from cost
reduction initiatives. Other operating expenses of $1.4 million in the third
quarter of 2008 mainly resulted from write-off of a prepayment for the purchase
of ceramic proppant from a third party proppant manufacturer.
Other Income (Expense). Other income for the third quarter of 2009 increased
$0.5 million compared to the same period in 2008. This increase is mainly
attributable to a decrease in foreign currency exchange losses.
Income Tax Expense. Income tax expense was $7.1 million, or 32.9% of pretax
income, for the third quarter of 2009 compared to $4.8 million, or 23.8% of
pretax income, for the same period last year. The $2.3 million increase is due
to a benefit relating to a mining depletion adjustment that the Company recorded
during the third quarter of 2008 relating to amounts claimed on the 2007 tax
return filed, an amended 2006 return as well as deductions available for mining
activities during the first and second quarters of 2008, and higher pretax
income in 2009.
Income from Discontinued Operations, Net of Income Taxes. Income from
discontinued operations for the third quarter of 2008 was $3.1 million and
includes gross profit of $8.6 million offset by selling, general, and
administrative expenses of $3.6 million. Income taxes related to discontinued
operations for the third quarter of 2008 was $1.9 million. The sale of the
discontinued operations was completed on October 10, 2008.
Nine Months Ended September 30, 2009
Revenues. Revenues of $251.7 million for the nine months ended September 30,
2009 decreased 11% compared to $282.2 million in revenues for the same period in
2008. Revenues decreased primarily due to a 12% decrease in sales volume
partially offset by a 3% increase in the average proppant selling price.
Worldwide proppant sales volume totaled 765 million pounds in the first nine
months of 2009 compared to 869 million pounds for the same period in 2008.
Despite a 43% decrease in the drilling rig count in the U.S. and Canada, sales
volume in that region decreased by only 10%. Sales volume decreases for most of
the Company's products in the U.S. and Canada were partially offset by greater
demand for the Company's lightweight products, such as CARBOHYDROPROP®in shale
formations. International (excluding Canada) sales volume decreased 22%
primarily attributable to decreases in Russia and North Africa partially offset
by an increase in Mexico. The higher average selling price was primarily
attributed to price increases introduced in the second half of 2008 that were
partially offset by price reductions in the second quarter of 2009.
Gross Profit. Gross profit for the nine months ended September 30, 2009 was
$91.4 million, or 36% of revenues, compared to $85.6 million, or 30% of
revenues, for the same period in 2008. Gross profit, as well as gross profit as
a percentage of revenues, for the nine months ended September 30, 2009 increased
compared to the same period last year in spite of decreased sales volume. This
was primarily the result of a change in the mix of products sold, the increase
in the average selling price, and lower freight and manufacturing costs.
Selling, General and Administrative (SG&A) and Other Operating Expenses. SG&A
expenses totaled $31.1 million for the nine months ended September 30, 2009
compared to $27.5 million for the same period in 2008. As a percentage of
revenues, SG&A expenses increased to 12.3% compared to 9.7% for the same nine
month period in 2008. The increases primarily resulted from higher
administrative expenses necessary to support the infrastructure for an
enterprise information system implemented during the second quarter of 2008,
additional allowances for the collection of doubtful accounts, costs associated
with the relocation of certain Company offices and Falcon acquisition costs.
Other operating expenses decreased $1.7 million primarily resulting from costs
of $0.2 million incurred in early 2008 associated with the start-up of the
second production line at the Company's Toomsboro facility and $1.4 million from
write-off of a prepayment for the purchase of ceramic proppant from a China
proppant manufacturer in the third quarter of 2008.
Other Income (Expense). Other income for the nine months ended September 30,
2009 declined $0.9 million compared to the same period in 2008. This decline is
mainly attributed to a $1.1 million decrease in foreign currency exchange gains
recognized during the first nine months of 2008 that did not recur in 2009
primarily as a result of the reduction in intercompany liabilities that were
subject to exchange rate fluctuations.
Income Tax Expense. Income tax expense was $20.3 million, or 33.6% of pretax
income, for the nine months ended September 30, 2009 compared to $17.6 million,
or 30.7% of pretax income for the same period last year. The $2.7 million
increase is due to higher pre-tax income combined with a higher effective tax
rate primarily associated with a benefit relating to a mining depletion
adjustment that the Company recorded during the third quarter of 2008 relating
to amounts claimed on the 2007 tax return filed, an amended 2006 return as well
as deductions available for mining activities during the first and second
quarters of 2008.
Income from Discontinued Operations, Net of Income Taxes. Income from
discontinued operations for the nine months ended September 30, 2008 was
$6.2 million and includes gross profit of $19.5 million offset by selling,
general, and administrative expenses of $9.5 million. Income taxes related to
discontinued operations for the nine months ended September 30, 2008 was
$3.8 million. The sale of the discontinued operations was completed on
October 10, 2008.
Liquidity and Capital Resources
At September 30, 2009, the Company had cash and cash equivalents of
$90.9 million compared to cash and cash equivalents of $154.8 million at
December 31, 2008. For the nine months ended September 30, 2009, the Company
generated $5.9 million of cash from operating activities of continuing
operations, which included using $64.2 million for income tax payments
associated with the sale of discontinued operations on October 10, 2008, third
and fourth quarter 2008 estimated tax payments that were deferred to 2009 as a
result of hurricane Gustav tax relief, and 2009 taxable income. The Company also
generated $0.6 million from employee exercises of stock options. Uses of cash
included $35.4 million for capital expenditures, $12.1 million for the payment
of cash dividends, $22.7 million for repurchases of the Company's Common Stock,
and $0.2 million from the effect of exchange rate changes on cash.
On October 2, 2009, a wholly-owned subsidiary of the Company completed the
acquisition of the Falcon assets for a cash purchase price of $23.0 million.
The Company believes its operating results for the remainder of 2009 will
continue to be influenced by the level of drilling in North America. While North
American drilling rig count improved in the third quarter of 2009, it is not
apparent as to whether this is the start of a recovery or a short-term
correction. The Company believes the steep natural gas decline curves in North
America will eventually help in bringing supply and demand more into balance;
however, the timing of a sustainable recovery in the oil and gas industry is
difficult to pinpoint.
Subject to the Company's financial condition, the amount of funds generated from
operations and the level of capital expenditures, the Company's current
intention is to continue to pay quarterly dividends to holders of its Common
Stock. On September 22, 2009, the Board of Directors declared a cash dividend of
$0.18 per common share to shareholders of the Company's Common Stock on November
2, 2009. The dividend is payable on November 16, 2009. The Company estimates its
total capital expenditures for the remainder of 2009 will be between
$12.0 million and $17.0 million, which include costs associated with the
previously announced construction of the Company's third production line at its
Toomsboro, Georgia facility. However, the project has been delayed, as certain
permits needed to proceed with construction have not been received as expected.
The Company currently anticipates that the project will be completed near the
end of 2010.
The Company maintains an unsecured line of credit of $10.0 million. As of
September 30, 2009, there was no outstanding debt under the credit agreement.
The Company anticipates that cash on hand, cash provided by operating activities
and funds available under its line of credit will be sufficient to meet planned
operating expenses, tax obligations, capital expenditures and other cash needs
for the next 12 months. The Company also believes that it could acquire
additional debt financing, if needed. Based on these assumptions, the Company
believes that its fixed costs could be met even with a moderate decrease in
demand for the Company's products.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of September 30, 2009.
Forward-Looking Information
The statements in this Form 10-Q that are not historical statements, including
statements regarding our future financial and operating performance and
liquidity and capital resources, are forward-looking statements within the
meaning of the federal securities laws. All forward-looking statements are based
on management's current expectations and estimates, which involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements. Among these factors are:
• changes in overall economic conditions,
• changes in the cost of raw materials and natural gas used in manufacturing our products,
• changes in demand and prices charged for our products,
• changes in the demand for, or price of, oil and natural gas,
• risks of increased competition,
• technological, manufacturing and product development risks,
• loss of key customers,
• changes in foreign and domestic government regulations,
• changes in foreign and domestic political and legislative risks,
• the risks of war and international and domestic terrorism,
• risks associated with foreign operations and foreign currency exchange rates and controls, and
• weather-related risks and other risks and uncertainties.
Additional factors that could affect our future results or events are described from time to time in our reports filed with the Securities and Exchange Commission (the "SEC"). See in particular our Form 10-K for the fiscal year ended December 31, 2008 under the caption "Risk Factors" and similar disclosures in subsequently filed reports with the SEC. We assume no obligation to update forward-looking statements, except as required by law.
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