UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the fiscal year ended December 31, 20172019

or

For the transition period from ____________ to _____________

Commission File No. 001-15903

CARBO Ceramics Inc.

(Exact name of registrant as specified in its charter)

575 North Dairy Ashford, Suite 300

Houston, Texas 77079

(Address of principal executive offices)
(281) 921-6400

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Securities registered pursuant to Section 12(g) of* On March 31, 2020, CARBO Ceramic Inc.’s common stock began being quoted on the Act:  NoneOTC Pink marketplace.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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:

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 Act).    Yes  ☐    No  ☒

The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on June 30, 2017,2019, as reported on the New York Stock Exchange, was approximately $112,118,204.$24,740,589.  Shares of Common Stock held by each director and executive officer and each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 28, 2018,May 4, 2020, the Registrant had 27,414,44529,214,687 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant’s Annual Meeting of Stockholders to be held May 22, 2018, are incorporated by reference in Part III.None.

TABLE OF CONTENTS

PART I

General

As used herein, “Company”, “we”, “our” and “us” may refer to CARBO Ceramics Inc. (“we,CARBO”) and/or its consolidated subsidiaries.

Recent Developments

Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

On March 29, 2020 (the “Petition Date”), CARBO and its direct wholly owned subsidiaries Asset Guard Products Inc. (“AGPI”) and StrataGen, Inc. (“StrataGen,” “us,” “our”and together with CARBO and AGPI, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions”) for reorganization under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Chapter 11 proceedings are being jointly administered under the caption In re CARBO Ceramics Inc, et al. (the “Chapter 11 Cases”).

On March 28, 2020, the Debtors entered into a restructuring support agreement (the “RSA”) with the holders of all of the loans outstanding under the Amended and Restated Credit Agreement, dated as of March 2, 2017 (as amended, the “Credit Agreement”), by and among CARBO, as borrower, AGPI and StrataGen, as guarantors, Wilks Brothers, LLC, as administrative agent and lender (“Wilks”), Equify Financial, LLC (“Equify”), as lender (together with Wilks, the “Supporting Lenders”) that sets forth the terms of a prenegotiated Chapter 11 plan of reorganization (the “Plan”) pursuant to which, among other things and subject to the terms and conditions of the RSA, each Supporting Lender will receive its pro rata share of 100% of the equity interests in a reorganized CARBO entity (“Reorganized CARBO” and such interests, the “Reorganized CARBO Interests”) in exchange for its secured claims under the Credit Facility and its claims under the DIP Facility described below, except to the extent such DIP Facility claims (the “DIP Facility Claims”) are converted into borrowings under an exit credit facility, with Reorganized CARBO retaining (i) 100% of the equity interests in a reorganized AGPI entity and (ii) 100% of the equity interests in a reorganized StrataGen entity.  In addition, pursuant to the Plan, a liquidating trust (the “Liquidating Trust”) will be established for the benefit of general unsecured creditors.  The Supporting Lenders will contribute $100,000 to fund the costs of administering the Liquidating Trust, and any avoidance actions that are not otherwise released under the Plan will be transferred to the Liquidating Trust. The Chapter 11 Cases and the restructuring transactions contemplated by the RSA and the Plan (collectively, the “Restructuring”) are expected to result in the cancellation of CARBO’s common stock.  The Debtors filed the Plan with the Bankruptcy Court on April 8, 2020.

Since the commencement of the Chapter 11 Cases, each of the Debtors has continued to operate its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

The Bankruptcy Petitions constituted an event of default that accelerated the Debtors’ obligations under the Credit Agreement.  However, under the Bankruptcy Code, the Supporting Lenders are stayed from taking any action against the Debtors as a result of this event of default.

Debtor-in-Possession Financing

On March 30, 2020, the Debtors entered into the DIP Credit Agreement with the DIP Facility Lenders providing for a $15 million DIP Facility. On March 30, 2020, the Bankruptcy Court granted interim approval of the Debtors’ motion to approve the DIP Facility, including the DIP Credit Agreement, and the borrowing by CARBO of up to $5 million of loans thereunder between March 30, 2020 and the Bankruptcy Court’s entry of a final order approving the DIP Facility and DIP Credit Agreement.

The Debtors’ obligations under the DIP Credit Agreement are secured by first priority priming liens on substantially all of the Debtors’ assets, subject to certain customary exclusions and carve-outs. Borrowings under the DIP Facility will mature August 29, 2020 (the “Maturity Date”) and will bear interest at a rate of 8.00% per annum.  For more information regarding the DIP Credit Agreement and DIP Facility, see “Part I―Business―Recent Developments―Debtor-in-Possession Financing”.  The DIP Credit Agreement also provides for the payment of certain fees, including an unused commitment fee and upfront fee, as well as a DIP fee to be paid to the DIP Facility Lenders in the event the Debtors enter into an alternative debtor-in-possession financing arrangement with financial institutions other than the DIP Facility Lenders in lieu of the DIP Facility. Interest and any other amounts that become due under the DIP Facility will be paid in cash. The proceeds of the DIP Facility, including the Interim Period Borrowings, will be used to pay fees, expenses and other expenditures of the Debtors to be set forth in rolling budgets prepared in connection with the Chapter 11 Cases, subject to the approval of the DIP Facility Lenders and certain stipulated exceptions.

The DIP Credit Agreement terminates on the earliest of: (a) the Maturity Date; (b) the effective date of any Acceptable Plan or any other Chapter 11 Plan (each as defined in the DIP Credit Agreement); (c) the entry of an order for the conversion of any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code; (d) the entry of an order for the dismissal of any of the Chapter 11 Cases; and (e) at the election of the DIP Facility Lenders, the date on which any event of default under the DIP Credit Agreement is continuing.

The DIP Credit Agreement contains usual and customary affirmative and negative covenants and events of default for transactions of this type. In addition, the Debtors are required to maintain a minimum liquidity of $2,500,000 as of the last day of any calendar month following the effective date. On March 29, 2020, in connection with the filing of the Chapter 11 Cases, the Debtors entered into a commitment letter with Wilks (the “Commitment Letter”).

On April 8, 2020, the Debtors filed the Plan and a Disclosure Statement for the Debtors’ Joint Chapter 11 Plan of Reorganization (the “Disclosure Statement”).

Additional information about the Chapter 11 Cases, including the Plan, the Disclosure Statement and motions, orders and other court filings relating thereto, may be obtained by visiting http://dm.epiq11.com/Carbo or by calling 1-866-897-6433 (Toll Free) or 1-646-282-2500 (International).  The above-mentioned motions and procedures are also available on the docket of the Chapter 11 Cases, which can be accessed via PACER at https://www.pacer.gov.

Going Concern and Financial Reporting in Reorganization

As a result of our “Company”financial condition, the defaults under our Credit Agreement and the risk and uncertainties surrounding the Chapter 11 Cases, substantial doubt exists regarding our ability to continue as a going concern. Accordingly, the audit report issued by our independent registered public accounting firm on our financial statements as of and for the year ended December 31, 2019 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. For additional information concerning our bankruptcy proceedings under Chapter 11, see Note 1 to the Consolidated Financial Statements.

Listing and Trading of our Common Stock

Our common stock traded on the New York Stock Exchange (the “NYSE”) under the symbol “CRR” until December 20, 2019, at which time trading in our common stock on the NYSE was suspended due to our inability to satisfy the continued listing requirements of the NYSE. Trades in our common stock began being quoted on the OTCQB Market on December 23, 2019 under the symbol “CRRT”.  As a result of the filing of the Chapter 11 Cases, our stock was removed from the OTCQB Market on March 31, 2020 and is currently quoted on the OTC Pink marketplace under the trading symbol “CRRTQ”.

General

The Company is a global technology company that provides products and services to the global oil and gas, industrial, and industrialenvironmental markets to enhance value for its clients.  The Company was incorporated in 1987 in Delaware.  As used herein, “Company”, “CARBO”, “we”, “our” and “us” may refer to the Company and/or its consolidated subsidiaries.

The Company conducts its business within two operating segments: 1) Oilfield and Industrial Technologies and Services and 2) Environmental ProductsTechnologies and Services.  These two operating segments provide products and services to several market segments in the oil and gas, and the industrial markets.  Financial information about reportable operating segments is provided in Note 13 to the Company’s Consolidated Financial Statements.  

OurThe Company’s Oilfield and Industrial Technologies and Services segment includesmanufactures and sells ceramic technology products and services and base ceramic proppant for both the oilfield and industrial sectors.  The products have different technology features and product characteristics, which vary based on the application for which they are intended to be used.  The various ceramic products’ manufacturing processes are similar.  

Oilfield ceramic technology products and selling ofbase ceramic proppant productsare manufactured and sold to pressure pumping companies and oil and gas operators for use primarily in the hydraulic fracturing of oil and natural gas wells, FracPro^® software for the design of fracture treatments, and StrataGen^® consulting services for the optimizing of well completions.oil wells.  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‑

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‑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.  TheWe believe that the higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions typically 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 oneDuring the fourth quarter of the world’s largest suppliers2019, we idled all of ceramic proppant.our sand operations, and we do not expect to resume operations.  

We manufacture various distinct ceramic proppants.  Our technology suite of ceramic proppants includeincludes the following:

KRYPTOSPHERE^® HD is a high-performance mono-mesh ceramic proppant engineered to deliver increased conductivity and durability in the highest closure stress wells.  Even inIn challenging, high-cost environments such as deep waterultra-deep wells, KRYPTOSPHERE HD retains its integrity and enables greater production and Estimated Ultimate Recovery (“EUR”) from the reservoir.

KRYPTOSPHERE XT meets client needs for a lower density proppant than KRYPTOSPHERE HD, and the closure stress is lower than the application for KRYPTOSPHERE HD, but higher than KRYPTOSPHERE LD. Commercialization occurred in January 2019.

KRYPTOSPHERE LD meets client needs for a lower density proppant than KRYPTOSPHERE HD, yet has similar characteristics and conductivity in high stress wells.

SCALEGUARD^® is a porous ceramic proppant that is infused with scale-inhibiting chemicals and placed throughout the fracture as part of the hydraulic fracturing process.  The infused scale inhibitor in SCALEGUARD is designed to be released into the fracture only on contact with water and thereby reduce or eliminate expensive remedial maintenance programs.  We also are developing SALTGUARD^® and PARAGUARD™was commercialized in 2018.  The product has been shown to help prevent salt build up in oil and paraffin wax buildup ingas wells.

Our FUSION^® technology improves well productivity by forming a stable, high-permeability proppant pack that prevents proppant washout from the non-compressive annulus and near-wellbore areas.

CARBOAIR^® is a high-transport, ultra-low-density ceramic proppant technology that has been developed primarily to increase production and EUR from slickwater fracturing operations. The technology enables exploration and production (“E&P”) operators to avoid the introduction of gel into their fracs while improvingincreasing reservoir contact and improving fracture conductivity.

NANOMITE™ C is a micro mesh ceramic proppant which is engineered to prop natural fractures which are opened during the hydraulic fracturing process which would not normally be propped open. The resulting propped reservoir contact increases and the EUR is increased.

Our RPM relative permeability modification technology is engineered to alter the wettability of proppant to neutral, preventing the retention of water-based fluid in the proppant pack. As a result, RPM technology increases the effective fracture length, conductivity and permeability of the pack to hydrocarbons, leading to higher production and increased ultimate recovery.

In addition, we manufacture CARBONRT^®, a detectable proppant that utilizes a non-radioactive tracer material to assist operators in determining the locations of fractures in a natural gas or oil well.  This tracer is added to the proppant granules during the manufacturing process, and can be added to most of the types of proppant that the Company sells.

Our base ceramic suite of products include:

CARBOHSP^® and CARBOPROP^® are high and intermediate density ceramic proppants, respectively, designed primarily for use in deep oil and natural gas wells.includes:

CARBOLITE^®, and CARBOECONOPROP^® and CARBOHYDROPROP^® are low-density ceramic proppants.  CARBOLITE^® is used in medium depth oil and natural gas wells, where higher production rates can be achieved due to the product’s uniform size and spherical shape.  CARBOECONOPROP was introduced to provide a lower cost ceramic to compete more directly with resin-coated sand and sand proppant, and CARBOHYDROPROP was introduced to improve performance in “slickwater” fracture treatments.proppant.

We produce resin-coated ceramic (CARBOBOND LITE^®), which addresses a niche market in which oil and natural gas wells are subject to the risk of proppant flow-back.

Our sand proppants include CARBO NORTHERN-WHITE, which is a frac sand that is used by operators that still value quality, but do not wishindustrial ceramic technology products are manufactured and sold to pay the higher costs associated with ceramic or resin-coated proppants.

Our manufacturing facilities also produce ceramic mediaindustrial companies globally.  These products are designed for use in various industrial technology applications, including but not limited to the casting and milling markets.  Newmilling.

Our industrial sand products are manufactured and sold to industrial companies.  These products are designed for use in various industrial applications.

ACCUCAST^® is a high-performance ceramic casting media that is engineered for precision performance.  Outperforming specialty and silica sand products, their unique thermal, physical and chemical properties reduce media consumption and costs, lower production defects and reduce energy consumption.

CARBOGRIND^® is a high-performance ceramic media products have been developed specificallythat improves grinding efficiency while lowering operational costs for clients.  The durability of our ceramic grinding media results in longer product life, while the uniform size and spherical shape add efficiency to grinding operations and reduce wear on the mechanical parts of milling equipment.

The CARBOBEAD™ family of high-performance ceramic media technologies are engineered to provide economic, Health, Safety and Environmental (HSE) and performance advantages in a wide variety of industrial applications expanding our market opportunities outside the oilcompared to sand and natural gas industry.  other competing synthetic media types.

We also have begun plant trialsproduce industrial products at our manufacturing facilities for third parties under tolling arrangements.  These products have been used in industrial, agricultural and oilfield applications.  We continue to produce products other than ceramic proppantwork towards developing additional opportunities within the industrial, agricultural and media for contract manufacturing clients.  Those mineral processing plant trials have proven successfuloil and have ledgas industries to increasedgrow revenue, generation.  One example, we recently signed a multi-year contract manufacturing agreementand to be the exclusive toll processor for a product in the agricultural industry.reduce our plant’s slowing and idling costs.

Through our wholly-owned subsidiary StrataGen, Inc., our Oilfield Technologies and Services segment also promoteswe promote increased production and EUR of oil and natural gas by selling one of the mosta 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.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 enabledenables our clients to recognizeoptimize stimulation jobs to enhance oil and remedy potential stimulation problems.gas production.  FracPro has also been integrated with third partythird-party reservoir simulation software, furthering its reach and utility.

The StrataGen our specialized consulting team 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,supervision; quality control; post-treatment evaluation and optimization; reservoir and fracture studies; rock mechanics;mechanics and software application and training.

Our Environmental ProductsTechnologies 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 wholly-owned subsidiary of ours to operate in this segment, provides spill prevention, containment and countermeasure systems for the oil and gas and industrial industry.industries.   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.  

Current demand for proppant is extremely dynamic.  Most of our oilfield products and services depend primarily on the supply of and demand for oil and natural gas, as well as 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 stimulate production.  The demand for our products and services is also dependent on the commodity price of oil and natural gas, and lower commodity prices result in fewer purchases of our premium products.  In addition, our results of operations are also significantly affected by a host of other factors, including but not limited to (a) rig counts, (b) well completions activity, which is not necessarily correlated with rig count, (c) customer preferences, (d) new product and technology adoption, (e) imports and competition, (f) changes in the product mix of what we sell, (g) costs of developing our products and services and running our business, and (h) changes in our strategy and execution.  

During the year ended December 31, 2017,2019, we generated approximately 79%73% of our consolidated revenues in the United States and 21%27% in international markets.

Competition

As the demand for ceramic proppant (including proppant produced by us) continued to be negatively impacted by the severe decline in the oil2019 and natural gas industry in 2017,continuing into 2020, the number of domestic and international competitors in the marketplace continued to decrease, and many of our competitors have shut down plants and/or reduced production.  However, we do not have full visibility as to the extent or duration of

these shut-downs and reductions.  One of our worldwide proppant competitors is Saint-Gobain

Proppants (“Saint-Gobain”).  Saint-Gobain is a division of Compagnie de Saint-Gobain, a large French glass and materials company.  Saint-Gobain manufactures a variety of ceramic proppants that it markets in competition with some of our products.  Saint-Gobain’s primary manufacturing facilities are located in Fort Smith and Bauxite, Arkansas.  Saint-Gobain also manufactures ceramic proppant in China.  Mineracao Curimbaba (“Curimbaba”), based in Brazil, also manufactures and markets ceramic proppant in competition with some of our products.  Imerys, S.A., a competitor based in France (“Imerys”), has ceramic proppant manufacturing facilities in Andersonville and Wrens, Georgia and also competes with some of our products.  Imerys sold their Wrens, Georgia proppant manufacturing facility to a third party in 2019.

We are aware of two major manufacturers of ceramic proppant in Russia.  One of which is FORES Refractory Plant (“FORES”) located in Ekaterinburg, Russia.  Although we have limited information about FORES, we believe that FORES manufactures intermediate-density and low-density ceramic proppant lines and markets its products both inside and outside of Russia.  We are also aware of a large number of manufacturers in China.  Most of these companies produce intermediate-density and low-density ceramic proppants that are marketed both inside and outside of China.  Chinese proppant imports into the United States increased beginning in 2010 and 2011, which contributed to an over-supply of ceramic proppant beginning in 2012.  However, beginning in early 2015, imports into North America declined significantly.significantly or stopped.

Our KRYPTOSPHERE product line is replacingreplaced both CARBOHSPCARBOHSP and CARBOPROP.CARBOPROP.  Historically, competition for CARBOHSP and CARBOPROP principally includes ceramic proppant manufactured by Saint-Gobain, Curimbaba, as well as various manufacturers located in China.  Our CARBOLITE, CARBOECONOPROP and CARBOHYDROPROP products compete primarily with ceramic proppant produced by Saint-Gobain, Curimbaba and Imerys and with sand-based proppant for use in the hydraulic fracturing of natural gas and oil wells.  At this time, there is not in our view a comparable competitor’s product to our mono-mesh KRYPTOSPHERE product line, which is the subject of patent protection.

The leading suppliers of mined sand are Unimin Corp., U.S. Silica Company, Fairmount Minerals Limited, Inc., Hi-Crush Partners LP, and Badger Mining Corp.  The leading suppliers of resin-coated sand are Hexion and Santrol, a subsidiary of Fairmount Minerals.

We believe that some of the significant factors that influence a customer’s decision to purchase our ceramic proppant are (i) reservoir and geological characteristics, (ii) price/performance ratio, (iii) on-time delivery performance, (iv) technical support, (v) proppant availability and (vi) the financial status of E&P operators.  We believe that our products are competitively priced and that our delivery performance and customer experience is far better than the competition.  We have seen an increased usage of our technology proppants internationally and in North America, especially with E&Ps which are focused on increasing the EUR of their wells, are completing wells with higher permeability or are making attempts to lower their lease operating expenses (LOE).

The leading suppliers of Northern White mined sand are Covia Corporation, U.S. Silica Company, Hi-Crush Partners LP, and Badger Mining Corp. There are several other sand competitors (including the aforementioned) which have added in-basin capacity in the last year.

Our industrial ceramic products enhance our clients’ performance for their manufacturing processes, products, and services.  The two primary industries of the ten market segments we currently serve are foundry with our ACCUCAST products and grinding applications with our CARBOGRIND products.  Our industrial sector has competitors across several industries we sell into.

ACCUCAST metal casting media products are used by foundries to form high quality cores and molds.  During the past year, our sales activity has focused on North America and primarily in the United States due to the new OSHA PEL for respirable crystalline silica that went into effect in 2018 for foundries.  ACCUCAST ceramic media is a solution for the new OSHA requirements.  We utilize direct sales B2B and a network of qualified distributors.  Our competition in the North American foundry market includes several ceramic media manufacturers and the primary competitors in the North American foundry market is Itochu and Prince Minerals.  Itochu, based in Tokyo and Osaka, Japan, is a diverse global company competing in many industries including Textile, Machinery, Metals & Minerals, Energy & Chemicals, Food, General Products & Realty, and Financial Business Services with distribution facilities and manufacturing located globally.  Their Cerabeads, casting media for the foundry market, is produced in Japan and distributed globally.  Sales are direct B2B and through a broad group of distributors. Prince Minerals, headquarters in Houston, TX, is a manufacturer and distributor of specialty chemicals and industrial additives.  They sell direct B2B and through distributors selling both internally and externally manufactured products.  Their Ceramcast, media for the foundry market, has been historically produced by a third-party manufacturer in China with narrow product offerings for foundries.

CARBOGRIND products are used in milling equipment for processing ore in the precious metals mining industry and other milling applications such as pigments, paints, and ceramic tile.  Within the precious metals mining industry, we sell globally through direct sales teams and distributors.  Competitors in the precious metals mining industry include Keramos, Magotteaux, Saint Gobain, Kings, and Cenotec.  The majority of these competitors manufacture their ceramic grinding products in manufacturing plants located in China.    

We believe some of the significant factors that influence a customer’s decision to purchase our industrial ceramic media are (i) broad portfolio of superior ceramic products designed specifically to solve challenges for different industries (ii) excellent price/performance ratio, (iii) on-time delivery performance, (iv) technical support, (v) product availability (vi) consistent superior quality and (vii) the financial status of our clients.  We believe our industrial products are competitively priced and our delivery performance and customer experience is better than the competition.  Lastly, our superior technical support has enabled us to persuade

customers to use our technology products in an increasingly broad range of applications which in turn has increased the overall market for our technologyindustrial products.

Product Development

We continually conduct testingThe ASSETGUARD™ environmental sector is divided into two divisions: a manufacturing division and development activities with respect to alternative raw materials to be used in our existinga services division.  The manufacturing division supplies products into both the oil and alternative production methods.  During 2015, we completed the first line of a plant retrofit to enable production of KRYPTOSPHERE products including both KRYPTOSPHERE LDgas and KRYPTOSPHERE HD.  We introduced KRYPTOSPHERE HD in 2013, a proppant with greatly increased strength and conductivity when compared to our traditional proppants.  This proppant is intended for use in ultra-high stress wells.  In 2015, we introduced KRYPTOSPHERE LD, a lower density proppant than KRYPTOSPHERE HD.  For information regarding our research and development expenditures, see Note 1industrial markets.  The service business, operating as Falcon Technologies, provides services to the “Notes to Consolidated Financial Statements.”

SCALEGUARD, our proppant-delivered, scale-inhibiting technology continues to show positive performance resultsoil and gas market.  In 2018, oil and gas activity levels accelerated, and as a result additional competition entered into the market at that time.  Falcon Technologies operates in multiple basins across North America.  SCALEGUARD has now been successfully used in hundreds of hydraulic fracturing stages.  We are pursuing the development of other infused proppant technologies, some of which underwent field trials in 2016United States, and 2017.

Going beyond our existing proppant detection capabilities, we are developing technology for far-field detection of proppant in a fracture, which has shown positive results.

We are aware of others engagedat least two dozen competitors operating within the United States.

It is our belief that there are several key factors that are driving customers to purchase from ASSETGUARD, including (i) centralized manufacturing, which offers customers one stop shopping capability, along with a proven track record of on time delivery and competitive pricing, (ii) field services that are established across the United States as being professional, efficient, and reliable and centered on customer satisfaction, (iii) and the technical support available to the customer is unmatched in the development of alternative products for use as proppants in the hydraulic fracturing process, but are uncertain of the financial status and product viability of these potential competitors.  We believe that while there are potential specialty applications for such products, they will not significantly impact the use of ceramic proppants.  Further, we believeindustry, ensuring that the “know-how”client receives timely response to their issues and trade secrets necessaryquick resolution to efficiently manufacture a product of consistently high quality are difficult barriers to entry to overcome.any problem that might arise.

Customers and Marketing

Our clients include bothThe customer base within CARBO is transforming as our revenue streams change from primarily oil and gas, customers,to oil and gas, industrial and environmental customers.  Our largest customersThe three business sectors are participantseach utilizing different sales channels, including direct to the end consumer of our products and services, an intermediary which adds their services around our products, distributors and through ecommerce for certain products. We are seeing shifts in the hydraulic fracturing industry.  Specifically, Halliburton Energy Services, Inc.purchasing behaviors of some of the end users of our products and Keane Group eachhave changed and are changing our sales and marketing efforts accordingly.

Ascent Resources accounted for more than 10% of our 20172019 revenues.  However, on December 27, 2019, the end users of our products are principallyCompany and Ascent mutually agreed to terminate the operators of natural gassand purchase agreement, and oil wells that hire the pressure pumping service companieswe do not expect material future sales to hydraulically fracture wells.  We work both with the pressure pumping service companies and with the operators of natural gas and oil wells to present the technical and economic advantages of using ceramic proppant.Ascent.  We generally supply our customers with products on a just-in-time basis, as specified in individual purchase orders.  Continuing sales of product depend on our direct customers and the operators being satisfied with value creation, product quality, availability and delivery performance.  In addition, our ability to increase sales of all of our products and services depends significantly on a favorable level of activity in the upstream natural gas and oil industries.  We sell our software products and consulting services directly to operators of oil and natural gas wellsindustry and expansion into other industrial and environmental business segments as well as to service companies involvedcapturing further market share in hydraulic fracturing.conventional segments.

We recognize the importance of a technical marketing program in demonstrating long-term economic advantages when selling products and services that offer financial benefits over time.  We have a broad technicalOur sales force seeks to advise end users on the benefits of using our base ceramic proppant, technology ceramic products, fracture simulation software, and related consulting services.

Although originally our ceramic products were intended for use in deeper, higher-stress wells that require high-strength proppant, we believe that there is economic benefit to operators of using ceramic proppant in shallower, lower-stress wells.  We also believe that our new product introductions and education-based technical marketing efforts have enabled us to maintain our position not only as one of the world’s largest suppliers of ceramic proppant but also as a leading innovator in our industry.

We provide a variety of technical support services and have developed computer software that models the return on investment achievable by using our ceramic proppant versus alternatives in the hydraulic fracturing of a natural gas or oil well.  In addition to the technical marketing effort, from time to time, we engage in field trials to demonstrate the economic benefits of our products and validate the findings of our computer simulations.  Periodically, we provide proppant to operators for field trials on a discounted basis in exchange for their agreement to provide production data for direct comparison of the results of fracturing with ceramic proppant as compared to alternative proppants.

Our international marketing efforts are conducted primarilycoordinated through our Houston corporate office in conjunction with sales officespersonnel located strategically in the United Arab Emirates, Canada, Russia, and South America.certain international locations.  Our products and services are used worldwide by U.S. customers operating domestically and abroad, and by foreign customers.  Sales outside the United States accounted for 21%, 34%27% and 29%19% of our sales for 2017, 20162019 and 2015,2018, respectively.  The distribution of our international and domestic revenues is shown below, based upon the region in which the customer used the products and services:

Production Capacity

We have constructed adequate capacity to support present and foreseeable demand for our ceramic proppant. We continue to incorporate new methods and technologies to reduce ourproducts. Our manufacturing costs and make our products more cost-competitive.   Asper unit are typically inversely related to production levels.  When production levels increase, our manufacturing costs per unit tend to decrease.decrease, and when production levels decrease, costs per unit tend to increase.

Stated capacity of our facilities varies based on the mix of products we expect to produce.  The following table sets forth the current stated capacity of each of our existing ceramic manufacturing and other facilities:

The retrofit of the first production line at our Eufaula, Alabama plant to produce KRYPTOSPHERE was completed in late 2015.  With this retrofit, we can now2015, which currently allows us to produce up to approximately 10060 million pounds of KRYPTOSPHERE annually.  While this retrofit enables production of our new KRYPTOSPHERE technology products, it did not add additional production capacity.

During the fourth quarter of 2019, the Company began to shift predominantly all industrial ceramic media production to its McIntyre, Georgia facility and all oilfield ceramic proppant production to its Eufaula, Alabama facility.  The retrofit of a second productionToomsboro, Georgia plant was idled, and at this time, we do not intend to resume operations.  Our resin-coating line at this plant has been deferred untilNew Iberia, Louisiana is expected to continue to resin coat and infuse ceramic proppant primarily for our oilfield customers.  In April 2020 and as a result of the current market conditions, warrant moving forward with the project.Company provided a WARN Act notice under the Worker Adjustment and Retraining Notification Act due to the Company’s likely closure of the Eufaula, Alabama plant in June 2020.  The current expectation is for the Company to operate our McIntyre, Georgia and New Iberia, Louisiana plants, both for the oilfield and industrial markets.  However, as a result of our bankruptcy filing, the production and utilization plan for our plants may significantly change as a result of the outcome of the bankruptcy.  

During 2017,2019, our overall total ceramic plant utilization excluding our Russia plant, which we sold in September 2017, was approximately 18%12% of stated capacity.  Our sand processing plant in Marshfield operated at approximately 82%63% of its stated capacity during 2017.  We do not expect any significant improvements to our ceramic proppant plant utilization in 2018, except possibly to due to mineral processing growth.  We expect utilization at2019.  During the fourth quarter of 2019, we idled our sand processing plant to improve during 2018.  Depending on industry conditions, we can modify output levels or idle operations at plants as needed.facility in Marshfield, Wisconsin and our ceramic manufacturing facility in Toomsboro, Georgia.  Refer to our discussion of impairment considerations in the “Critical Accounting Policies” section of Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.  Construction of additional manufacturing capacity beyond our existing facilities is not expected in the foreseeable future, and would be dependent on the expected future demand for our products, access to needed capital and the ability to obtain necessary environmental permits.

Long-Lived Assets by Geographic Area

Long-lived assets, consisting of net property, plant and equipment, goodwill, intangibles, and other long-term assets as of December 31 in the United States and other countries are as follows:

future.

Distribution

We maintain finished goods inventories at each of our manufacturing facilities and at remote stocking facilities.  Our North American remote stocking facilities consist of bulk storage silos with truck trailer and sand box loading facilities, as well as rail yards for direct transloading from rail cars to tank trucks.truck trailers.  We lease one of our distribution centers to a third party.  International remote stocking sites are duty-free warehouses operated by independent owners.  North American sites are typically supplied by rail, and international sites are typically supplied by container ship.  In total, we lease approximately 2,2251,334 rail cars for use in the distribution of our products, of which we have subleased approximately 74545 rail cars.  The pricemajority of our products sold for deliveryfleet of rail cars are not expected to be used in the lower 48 United Statesfuture, and Canada typically includes just-in-time deliveryas a result of proppantchanges to our long-term forecast and business model, we currently only expect to use a very limited number of railcars in our business.  We recorded an impairment of right of use assets related to excess rail cars during the operator’s well site, which eliminates the need for customers to maintain an inventoryfourth quarter of ceramic proppant.2019.

Raw Materials

Raw Materials

Ceramic proppant and ceramic media are made from alumina-bearing ores (commonly referred to as clay, bauxite, bauxitic clay or kaolin, depending on the alumina content) that are readily available on the world market.  The main known deposits of alumina-bearing ores in the United States are in Arkansas, Alabama and Georgia; other economically mineable known deposits are located in Australia, Brazil, China, Gabon, Guyana, India, Jamaica, Russia and Surinam.  Bauxite is largely used in the production of aluminum

metal, refractory material and abrasives.  We believe that our ability to purchase bauxite on the open market coupled with our current bauxite inventories will sufficiently provide for our bauxite needs in the United States during 2018.2020.

Our Eufaula, McIntyre Toomsboro and MillenToomsboro facilities primarily use locally mined kaolin for the production of CARBOLITE, CARBOECONOPROP and CARBOHYDROPROP.  We have entered into bi-lateral contracts that require a supplier to sell to us, and require us to purchase from the supplier, at least fifty percent of the Eufaula facility’s and Millen facility’s annual kaolin requirements.  The Eufaula contract runs through May 2020, with an option for us to extend this agreement for additional three yearthree-year terms.  The Millen contract, which commenced in July 2014, has an initial term of five years with options to extend the agreement for additional five year terms.  Our Millen facility is currently idled.  We have obtained ownership rights in acreage in Wilkinson County, Georgia, which contains in excess of a twelve yeartwelve-year supply of kaolin for our Georgia facilities based on full capacity production rates.  We have entered into a long-term agreement with a third party to mine and transport this material at a fixed price subject to annual adjustment.  The agreement requires us to utilize the third party to mine and transport a majority of the McIntyre and Toomsboro facility’s annual kaolin requirement.  Overall, we estimate that our fee simple and leasehold mineral rights in the states of Alabama and Georgia contain approximately 20.119.0 million tons of kaolin suitable for use in production of our kaolin-based proppants.

We utilize our own Northern White sand, CARBO NORTHERN-WHITE, and purchase third party wet processed sand reserves for our sand processing facility in Marshfield, Wisconsin, which supplies raw frac sand to the proppant market.

Ceramic Production Process

Ceramic proppants are made by grinding or dispersing ore to a fine powder, combining the powder into small pellets and firing the pellets in a rotary kiln.  We use three different methods to produce ceramic proppant.  Industrial ceramic media follows a similar process.

Our plant in McIntyre, Georgia uses a dry process, which utilizes clay, bauxite, bauxitic clay or kaolin.  The raw material is ground, pelletized and screened.  The manufacturing process is completed by firing the product in a rotary kiln.

Our plants in Eufaula, Alabama Toomsboro, Georgia, and Millen,Toomsboro, Georgia use a wet process, which starts with kaolin that is formed into slurry.  The slurry is then pelletized in a dryer and the pellets are then fired in a rotary kiln.

The portion of our plant in New Iberia, Louisiana that manufactures ceramic proppant, as well as one line at our Eufaula, Alabama facility, uses a newproprietary manufacturing process associated with the Company’s KRYPTOSPHERE product line.  

Our rotary kilns are primarily heated by the use of natural gas.

Due to market conditions, the Company’s current forecast is to only operate its McIntyre, Georgia and New Iberia, Louisiana plants.

Patent Protection and Intellectual Property

We make ceramic proppant and ceramic media used in foundry, grinding and scouring processes (the latter two items comprising a minimal volume of overall sales) by processes and techniques that involve a high degree of proprietary technology, some of which is protected by patents.

We own multiple patents in the United States and various foreign countries that relate to different types of ceramic proppant and production methods used for ceramic proppant and ceramic media; however, depending on market conditions, production of products pursuant to these patents may not necessarily constitute a material portion of our output.  We also own multiple U.S. and foreign patents that relate to methods for the detection of subterranean fractures and material, including gravel packs, in the near-borehole region.  We also own multiple U.S. patents that relate to detectable proppant.

During 2014 and 2015, we obtained three U.S. patents relating to our KRYPTOSPHERE manufacturing process, and during 2017, we obtained one U.S. patent covering the KRYPTOSPHERE product.  We expect theseproduct, and during 2018, we obtained another U.S. patent covering the KRYPTOSPHERE product, each of which expire in 2031, and another U.S. patent relating to our KRYPTOSPHERE manufacturing process, which expires in 2036.  Also, during 2018, we obtained two U.S. patents relating to provide assistanceour GUARD product lines, which expire in the future sales of this2035 and one U.S. patent relating to our FUSION product line.line, which expires in 2037.  In 2019, we obtained one U.S. patent relating to our CARBOAIR product line, which expires in 2036, one U.S. patent relating to our SCALEGUARD product line, which expires in 2036, and two U.S. patents relating to our FUSION product line, which expire in 2036.  During 2015, 2016, 2017, 2018, and 2017,2019 we obtained fournine U.S. patents, relatingwhich expire in 2033, 2034, 2035 and 2036 and relate to our far-field proppant detection products, systems and methods which relate to our iON™iON product line and the QUANTUM™QUANTUM service line, which are still under development.line.   We expect at least a portion of these patents to aid in the future sales of these product and service lines. 

We own multipleadditional U.S. patents and pending U.S. patent applications (together with a number of counterpart applications pending in foreign jurisdictions).  A portion of the U.S. patents and patent applications relating to our Oil and Gas business cover ceramic proppant, detectable proppant, processes for making ceramic proppant and detectable proppant, tracers for detecting produced

fluids, diversion particles, detection of subterranean fractures, and our KRYPTOSPHERE, GUARD,^TM, FUSION, CARBOAIR, and AIR™NANOMITE product lines and methods for making and using these products.  Another portion of the U.S. patents and patent applications cover non-oilfield or industrial products, such as water treatment compositions, foundry media, grinding media, building materials, particulates designed for agricultural uses, and ceramic media for use in solar power plants.  The pending applications are in various stages of the patent prosecution process, and patents may not issue on such applications in any jurisdiction for some time, if they issue at all.

AGPI (formerly Falcon) owns threefour U.S. patents relating to secondary containments, which expire in 2026, 2027 and 2034, and relate to construction of secondary containment areas.  In addition, AGPI owns four U.S. patents relating to polyurea-encapsulated tank bases, which expire in 2030 and 20312031.  One of the tank base patents is subject to an ex parte reexamination proceeding.  In addition, AGPI owns one U.S. patent related to its polyurea-encapsulated equipment platforms, which expires in 2037, and relateone U.S. design patent related to its polyurea-encapsulated tank bases.portable containment product line, which expires in 2034.  AGPI also owns multiple U.S. patent applications, (together with a number of counterpart applications pending in foreign jurisdictions), each of which relates to tank bases, equipment bases, portable containments, or methods of constructing secondarycomponents useful in containment areas.areas in upstream, midstream and downstream environments.

We believe that our patents have historically been important in enabling us to compete in the market to supply proppant to the natural gas and oil industry.  We intend to enforce, and have in the past vigorously enforced, our patents.  We may from time to time be involved in litigation to determine the enforceability, scope and validity of our patent rights.  In addition to patent rights, and perhaps more notably, we use a significant amount of trade secrets, or “know-how,” and other proprietary information and technology in the conduct of our business.  None of this “know-how” and technology is licensed from third parties.  However, we have negotiated a long termlong-term license for some third partythird-party intellectual property used or jointly developed in connection with our QUANTUM service line.

Seasonality

Historically, our business has not been subject to regular material seasonality fluctuations.  However, with the activity in resource plays in the northern and eastern United States, we have experienced higher levels of proppant and environmental sales activities during warmer weather periods and less during colder weather months.months in the northern and eastern United States.  In addition, sales activities can be decreased by the spring snow and ice “break-up” in Canada, North Dakota, Montana, and the Northeast U.S., as well as the winter holidays in December and January.  Our industrial ceramic media products are not typically impacted by seasonality.

Environmental and Other Governmental Regulations

We believe that our operations are in substantial compliance with applicable domestic and foreign federal, state and local environmental and safety laws and regulations.

Existing federal environmental requirements such as the Clean Air Act and the Clean Water Act, as amended, impose certain restrictions on discharge of air and water pollutants from our operations via permits and regulations.  Those pollutants include volatile organic compounds, nitrogen oxides, sulfur dioxide, particulate matter, storm water and wastewater discharges and other by-products.  In addition to meeting environmental requirements for existing operations, wethe Company must also demonstrate compliance with environmental regulations in order to obtain any required permits prior to any future expansion.  The United States Environmental Protection Agency (“EPA”) and state programs require covered facilities to obtain individual permits or have coverage under an EPA general permit issued to groups of facilities.  A number of federal and state agencies, including but not limited to, the EPA, the Texas Commission ofon Environmental Quality, the Louisiana Department of Environmental Quality, the Alabama Department of Environmental Management, the Wisconsin Department of Natural Resources, and the Georgia Environmental Protection Division haveof the Georgia Department of Natural Resources promulgate and enforce environmental regulations applicable to our operations in the states in which we do business.  Historically we have been able to obtain permits, where necessary, to build new facilities and modify existing facilities that allow us to continue compliant operations.  Obtaining these permits in a timely manner will continue to be an important factor in our ability to do so in the future.

Employees

As of December 31, 2017,2019, we had 424349 employees worldwide.  In addition to the services of our employees, we employ the services of consultants as required.  Our employees are not represented by labor unions.  There have been no work stoppages or strikes during the last three years that have resulted in the loss of production or production delays.  We believe our relations with our employees are satisfactory.

Our operations require the services of employees having the technical training and experience necessary to achieve proper operational results. As a result, our operations depend, to a considerable extent, on the continuing availability of such personnel. From time to time, shortages of qualified personnel have occurred in our industry. Additionally, we may experience employee attrition as a result of the Chapter 11 Cases. If we should suffer any material loss of personnel or be unable to employ additional or replacement

personnel with the requisite level of training and experience to adequately operate our equipment, our operations could be materially adversely affected.

Executive Officers of the Registrant

Gary A. Kolstad (age 59)61) was elected in June 2006 by our Board of Directors to serve as President and Chief Executive Officer and a Director of the Company.  Mr. Kolstad previously served in a variety of positions over 21 years with Schlumberger.  Mr. Kolstad became a Vice President of Schlumberger in 2001, where he last held the positions of Vice President, Oilfield Services – U.S. Onshore and Vice President, Global Accounts.

Ernesto Bautista III (age 46) joined the Company as a48) was appointed Vice President and Chief Financial Officer in January 2009.  From July 2006 until joining the Company, Mr. Bautista served as Vice President and Chief Financial Officer of W-H Energy Services, Inc., a Houston, Texas based diversified oilfield services company (“W-H Energy”).  From July 2000 to July 2006, he served as Vice President and Corporate Controller of W-H Energy.  From September 1994 to May 2000, Mr. Bautista served in various positions at Arthur Andersen LLP, most recently as a manager in the assurance practice, specializing in emerging, high growth companies.  Mr. Bautista is a certified public accountant in the State of Texas.

Don P. Conkle (age 53)55) was appointed Vice President, Marketing and Sales in October 2012.  Mr. Conkle previously held a variety of domestic and international managerial positions in engineering, marketing and sales, and technology development over a 26 year period with Schlumberger.  He served in the positions of Vice President of Stimulation Services from 2007 until 2009, as GeoMarket Manager (Qatar & Yemen) from 2009 until 2011 and as Production Group Marketing and Technology Director from 2011 until he joined the Company.

Roger Riffey (age 59) joined the Company in July 2006 as Director of Logistics and Customer Service.  He was appointed Plant Manager of the Toomsboro, Georgia, facility in July 2010, and was named Vice President, Manufacturing in May 2013.  Previously, Mr. Riffey held positions with Rio Tinto Energy in Special Projects, U.S. Borax as Global Logistics Manager and Kerr-McGee Coal Corporation as Manager of Marketing.

Robert J. Willette (age 42) joined the Company in October 2017 as44) was appointed Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer.Officer in October 2017.  Prior to his current role, Mr. Willette served as General Counsel and Corporate Secretary for Texon Distributing L.P. beginning in 2009.  From 2006 to 2009, Mr. Willette served as Corporate Counsel for Ferrellgas L.P.

All officers are elected for one-year terms or until their successors are duly elected.  There are no arrangements between any officer and any other person pursuant to which he was selected as an officer.  There is no family relationship between any of the named executive officers or between any of them and the Company’s directors.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.  This Form 10-K, our Annual Report to Shareholders, any Form 10-Q or any Form 8-K of the Company or any other written or oral statements made by or on behalf of the Company may include forward-looking statements which reflect the Company’s current views with respect to future events and financial performance.  The words “believe”, “expect”, “anticipate”, “project”, “estimate”, “forecast”, “plan” or “intend” and similar expressions identify forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, each of which speaks only as of the date the statement was made.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Our forward-looking statements are based on assumptions that we believe to be reasonable but that may not prove to be accurate.  All of our forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected.  Although it is not possible to identify all factors, these risks and uncertainties include the risk factors discussed below.

Our results of operations could be adversely affected if our business assumptions do not prove to be accurate or if adverse changes occur in our business environment, including but not limited to:

Our results of operations could also be adversely affected as a result of worldwide economic, political and military events, including, but not limited to, war, terrorist activity or initiatives by the Organization of the Petroleum Exporting Countries (“OPEC”).  For further information, see “Item 1A. Risk Factors.”

Available Information

Our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) are made available free of charge on our internet website at http://www.carboceramics.com as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, Room 1580, N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

You should consider carefully the trends, risks and uncertainties described below and other information in this Form 10-K and subsequent reports filed with the SEC before making any investment decision with respect to our securities.  If any of the following trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment.

Risks Relating to Our Chapter 11 Proceedings

On March 29, 2020, the Company and certain of its U.S. subsidiaries filed voluntary petitions commencing the Chapter 11 Cases under the Bankruptcy Code. The Chapter 11 Cases and the Restructuring may have a material adverse impact on our business, financial condition, results of operations, and cash flows. In addition, the Chapter 11 Cases and the Restructuring are likely to have a material adverse impact on the trading price of our common stock and ultimately are expected to result in the cancellation of our common stock.

In the fall of 2019, we engaged an investment bank and financial and legal advisors to assist us in, among other things, exploring strategic alternatives, forecasting cash flow, analyzing and preserving liquidity, and implementing contingency planning for a potential

in-court process were the Company unsuccessful in consummating a strategic alternative out of court solution. These restructuring efforts led to the execution of the RSA and commencement of the Chapter 11 Cases in the Bankruptcy Court on March 29, 2020.

The Chapter 11 Cases could have a material adverse effect on our business, financial condition, results of operations and liquidity. Bankruptcy Court protection also may make it more difficult to retain management and the key personnel necessary to our business. In addition, during the period of time we are involved in a bankruptcy proceeding, our clients and suppliers might lose confidence in our ability to reorganize our business successfully and may discontinue conducting business with us or seek to establish alternative commercial relationships.

Other significant risks include or relate to the following:

Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 Cases may have on our business, cash flows, liquidity, financial condition and results of operations, nor can we predict the ultimate impact that events occurring during the Chapter 11 Cases may have on our corporate or capital structure, although we expect such proceedings to result in the cancellation of our common stock.

Delays in the Chapter 11 Cases may increase the risks of our being unable to reorganize our business and emerge from bankruptcy and may increase our costs associated with the bankruptcy process.

The RSA contemplates the consummation of the Plan through an orderly pre-negotiated plan of reorganization, but there can be no assurance that we will be able to consummate the Plan. A prolonged Chapter 11 proceeding could adversely affect our relationships with customers, suppliers, service providers, and employees, among other third parties, which in turn could adversely affect our

business, competitive position, financial condition, liquidity and results of operations and our ability to continue as a going concern. A weakening of our financial condition, liquidity and results of operations could adversely affect our ability to implement the Plan (or any other plan of reorganization). If we are unable to consummate the Plan, we may be forced to liquidate our assets.

In addition, the occurrence of the effective date of the Plan is subject to certain conditions and requirements that may not be satisfied or waived.

The Plan may not become effective.

The Plan may not become effective because it is subject to the satisfaction of certain conditions precedent, some of which are beyond our control. There can be no assurance that such conditions will be satisfied or waived and, therefore, that the Plan will become effective and that we will emerge from the Chapter 11 Cases as contemplated by the Plan. If the effective date of the Plan is delayed, we may not have sufficient cash available to operate our business. In that case, we may need new or additional post-petition financing, which may increase the cost of consummating the Plan. There is no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by the Plan are not completed, it may become necessary to amend the Plan. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays to the Chapter 11 Cases.

We may not be able to obtain Bankruptcy Court confirmation of the Plan or may have to modify the terms of the Plan.

Even if the Plan is approved by each class of holders of claims and interests entitled to vote (a “Voting Class”), the Bankruptcy Court, which, as a court of equity, may exercise substantial discretion and may choose not to confirm the Plan. Section 1129 of the Bankruptcy Code requires, among other things, a showing that confirmation of the Plan will not be followed by liquidation or the need for further financial reorganization for us, and that the value of distributions to dissenting holders of claims and interests will not be less than the value such holders would receive if we, the debtors, liquidated under Chapter 7. Although we believe that the Plan will satisfy such tests, there can be no assurance that the Bankruptcy Court will reach the same conclusion.

Confirmation of the Plan will also be subject to certain conditions. These conditions may not be met and there can be no assurance that the Supporting Lenders will agree to modify or waive such conditions. Further, changed circumstances may necessitate changes to the Plan. Any such modifications could result in less favorable treatment than the treatment currently anticipated to be included in the Plan based upon the agreed terms of the RSA. Such less favorable treatment could include a distribution of property (including the new common stock that would be issued to the Supporting Lenders upon our emergence from bankruptcy) to the class affected by the modification of a lesser value than currently anticipated to be included in the Plan or no distribution of property whatsoever under the Plan. Changes to the Plan may also delay the confirmation of the Plan and our emergence from bankruptcy, which could result in, among other things, incurred costs and expenses to the estates of the debtors.

Even if a Chapter 11 plan of reorganization is consummated, we may not be able to achieve our stated goals and continue as a going concern.

Even if the Plan, or any other plan of reorganization, is consummated, we may continue to face a number of risks, such as further deterioration or other changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Accordingly, we cannot guarantee that the Plan, or any other plan of reorganization, will achieve our stated goals.

Furthermore, even if our debts are reduced through a plan of reorganization, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms.

The Plan or another plan of reorganization that we may implement will be based upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, we may not be able to successfully execute such plan.

The Plan or any other plan of reorganization that we may implement will affect both our capital structure and the ownership, structure and operation of our business and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to substantially change our capital structure; (ii) our ability to obtain adequate liquidity and financing sources; (iii) our ability to maintain customers’ confidence in our viability as a continuing entity and to attract and retain sufficient business from them; (iv) our ability to retain key employees, and (v) the overall strength and stability of general economic conditions and conditions of the our industry. The failure of any of these factors could materially adversely affect the successful reorganization of our business.

In addition, the Plan or any other plan of reorganization, will rely upon financial projections, including with respect to revenues, capital expenditures, debt service and cash flow. Financial forecasts are necessarily speculative, and it is possible that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. In our case, the forecasts are even more speculative than normal, because they involve fundamental changes in the nature of our capital structure. Accordingly, we expect that our actual financial condition and results of operations may differ, perhaps materially, from what we have anticipated. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us or our business or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of our plan of reorganization.

Our cash flows may not provide sufficient liquidity during the Chapter 11 Cases. Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.

Our ability to fund our operations and our capital expenditures requires a significant amount of cash. Our current principal sources of liquidity include the available borrowing capacity under the DIP Facility and cash flow generated from operations. If our cash flow from operations decreases, we may not have the ability to expend the capital necessary to maintain our current operations, negatively impacting our future revenues.

We face uncertainty regarding the adequacy of our liquidity and capital resources and have limited, if any, access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with preparation for the Chapter 11 proceedings and expect that we will continue to incur significant professional fees and costs throughout our Chapter 11 proceedings. As a result, we may not be able to comply with the covenants of the DIP Facility, and our cash on hand and cash flow from operations may not be sufficient to continue to fund our operations and allow us to satisfy our obligations related to the Chapter 11 Cases until we are able to emerge from the Chapter 11 Cases.

Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to comply with the terms and conditions of the DIP Facility agreements, (ii) our ability to comply with the terms and conditions of any cash collateral order that may be entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (iii) our ability to maintain adequate cash on hand, (iv) our ability to generate cash flow from operations, (v) our ability to confirm and consummate the Plan or another alternative restructuring transaction and (vi) the cost, duration and outcome of the Chapter 11 Cases.

We may be unable to comply with restrictions or with budget, liquidity, or other covenants imposed by the agreements governing the DIP Facility. Such non-compliance could result in an event of default under the terms of the DIP Facility that, if not cured or waived, would have a material adverse effect on our business, financial condition and results of operations.

The DIP Facility requires that we comply with general affirmative and negative covenants such as prohibiting us from incurring or permitting debt, investments, liens or dispositions unless specifically permitted. Our ability to comply with these provisions may be affected by events beyond our control and our failure to comply, or obtain a waiver in the event we cannot comply with a covenant, could result in an event of default under the DIP Facility and permit the lenders thereunder to accelerate the loans and otherwise exercise remedies allowable by the agreements governing the DIP Facility.

Competing plans of reorganization, which could have less favorable terms or result in significant litigation and expenses.

Parties in interest may seek to file alternative plans of reorganization. An alternative plan of reorganization could contemplate us continuing as a going concern, us being broken up, us or our assets being acquired by a third party, us being merged with a competitor, or some other proposal. There can be no assurances that recoveries under any such alternative plan would be as favorable to creditors as the Plan. In addition, the proposal of competing plans of reorganization may entail significant litigation and significantly increase the expenses of administration of the Chapter 11 Cases, which could deplete creditor recoveries under any plan.

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to the Plan. We expect that we will be required to adopt the fresh start accounting rules, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets and our financial results after the application of fresh start accounting may be different from historical trends.

Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. The Plan will result in the cancellation of our common stock.

Under the Plan, all existing equity interests in the Company will be extinguished. Amounts invested by the holders of our common stock will not be recoverable and such securities will have no value. Trading prices for our common stock bear no relationship to the actual recovery, if any, by the holders thereof in the Chapter 11 Cases. Accordingly, we urge extreme caution with respect to existing and future investments in our existing common stock.

If the RSA is terminated, our ability to confirm and consummate the Plan could be materially and adversely affected.

The RSA contains a number of termination events, upon the occurrence of which certain parties to the RSA may terminate the agreement. If the RSA is terminated as to all parties thereto, each of the parties thereto will be released from its obligations in accordance with the terms of the RSA. Such termination may result in the loss of support for the Plan by the parties to the RSA, which could adversely affect our ability to confirm and consummate the Plan. If the Plan is not consummated, there can be no assurance that the Chapter 11 Cases would not be converted to Chapter 7 liquidation cases or that any new Plan would be as favorable to holders of claims against the Debtors as contemplated by the RSA.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

Upon a showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to a case under Chapter 7. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in smaller distributions being made to our creditors than those provided for in the Plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of executory contracts in connection with a cessation of operations.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims that arose prior to March 29, 2020 or before consummation of the Plan (i) would be subject to compromise and/or treatment under the Plan and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the Plan. Any claims not ultimately discharged pursuant to the Plan could be asserted against the reorganized entities and may have an adverse effect on our financial condition and results of operations on a post‑reorganization basis.

The Chapter 11 Cases limit the flexibility of our management team in running our business.

While we operate our business as debtor-in-possession under supervision by the Bankruptcy Court, we are required to obtain the approval of the Bankruptcy Court and, in some cases, the Supporting Lenders, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with the creditors’ committee (if any) and other parties-in-interest and one or more hearings. The creditors’ committees and other parties-in interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions.

This process may delay such-non ordinary course transactions and limit our ability to respond in a timely manner to adapt to changing market or industry conditions or to take advantage of certain opportunities. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, we would be prevented from engaging in activities and transactions that we believe to be beneficial to us.

The commencement of the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of our management and will impact how our business is conducted, which may have an adverse effect on our business and results of operations.

The requirements of the Chapter 11 Cases have consumed and will continue to consume a substantial portion of our management’s time and attention and leave them with less time to devote to the operation of our business. This diversion of attention may materially adversely affect the conduct of our business and, as a result, our financial condition and results of operations.

We may experience employee attrition as a result of the Chapter 11 Cases.

As a result of the Chapter 11 Cases, we may experience employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which could have a material adverse effect on our financial condition, liquidity and results of operations.

On the effective date of the Plan, the composition of our board of directors will change substantially.

Under the Plan, the composition of our board of directors will change substantially. Pursuant to the Plan, our new board of directors will be appointed by the Supporting Lenders under the RSA in consultation with our management, and the numbers of directors will also be determined by the Supporting Lenders. Accordingly, almost all of our board members will be new to the Company. Any new directors are likely to have different backgrounds, experiences and perspectives from those individuals who previously served on the board of directors and, thus, may have different views on the issues that will determine our future. As a result, our future strategy and plans may differ materially from those of the past.

Adverse publicity in connection with the Chapter 11 Cases or otherwise could negatively affect our businesses.

Adverse publicity or news coverage relating to us, including, but not limited to, publicity or news coverage in connection with the Chapter 11 Cases, may negatively impact our efforts to establish and promote name recognition and a positive image after emergence from the Chapter 11 Cases.

Risks Related to Our Business, Capital Resources and Organization

Our business and financial performance largely depends on the level of activity in the natural gas and oil industries.

Our operations are materially dependent upon the levels of activity in natural gas and oil exploration, development and production. More specifically, the demand for our products is closely related to the number of natural gas and oil wells completed in geologic formations where ceramic or sand proppants are used in fracture treatments. These activity levels are affected by both short-term and long-term trends in oil and natural gas prices. In recent years, oil and natural gas prices and, therefore, the level of exploration, development and production activity, have experienced significant fluctuations. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by OPEC, have contributed, and are likely to continue to contribute, to price volatility. Despite recent initiatives to curb supply, the global supply of oil is currently at historically

high levels, and there is potential for geopolitical and regulatory events, such as normalization of trade relations with the Islamic Republic of Iran, to further increase the supply of oil. Additionally, warmer than normal winters in North America and other weather patterns may adversely impact the short-term demand for natural gas and, therefore, demand for our products and services. Natural gas prices experienced a significant decline during 2012 and, although they have increased since then, remain relatively low on a historic basis, resulting in generally lower gas drilling activity. Further, the price of oil declined precipitously from the second half of 2014 through mid-2016 and, although the price has rebounded from its low in the first half of 2018, it stilldecreased again in the second half and moreover, in the first quarter of 2020, oil prices fell approximately 20% in a single day. In March 2020, the price of oil fell even further due to a dispute over production levels between Russia and Saudi Arabia, as a result of which Saudi Arabia increased its production to record levels. While an agreement as to production cuts was reached, the global crude oil market remains significantly oversupplied, and oil prices could remain at weakenedcurrent levels, or decline further, for industry activity.an extended period of time. These events, combined with the continued outbreak of COVID-19 resulting in significant storage constraints due to lack of demand, contributed to a sharp drop in prices for oil in 2020 to-date.  This reduction in oil and natural gas prices has depressed the level of natural gas and oil exploration, development, production and well completions activity, resulting in significantly reduced demand and pricing for our base ceramic and sand products. In addition and because of the depressed commodity prices, we have seen a significant increase in the use of very low quality in-basin sand at the expense of lower production for unconventional wells, which have extremely low quality reservoirs. This decline has had, and continues to have, a significant adverse impact on our results. If oil and natural gas prices and well completion activity do not materially improve and/or demand for our products does not otherwise increase, this decline could reasonably be expected to have a material adverse effect on our financial condition or operations, including, but not limited to, the temporary idling of all, or a portion of all, of our facilities utilized for this sector of our business until such time as market conditions improve.

Recent declines in crude oil prices to record low levels as a result of the outbreak of the novel strain of coronavirus (“COVID-19”) and a significantly oversupplied crude oil market have negatively impacted, and are expected to continue to negatively impact, demand for our products and services resulting in a material negative impact on our results of operations, financial position and liquidity.

In December 2019, COVID-19 was reported to have surfaced in Wuhan, China and has since spread to other parts of the world. The outbreak of COVID-19 in the United States and globally, together with government and private sector responsive actions, have, and are expected to continue to, adversely affect both the price of and demand for crude oil, the demand for certain of our products and services and the continuity of our and our customers’ business operations.

It is currently impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving. In March 2020, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. A significant majority of states as well as local jurisdictions have imposed, and others in the future may impose, “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Such orders or restrictions, and the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects.

While the U.S. Department of Homeland Security and various local orders have identified the energy industry as critical to the U.S. infrastructure, generally allowing certain of our and our customers’ operations to continue, our operations, and those of our customers, have been and will likely continue to be disrupted in various ways.  For example, in an effort to minimize the spread of illness, we and our customers have implemented various worksite restrictions in order to minimize contact among personnel, and have also required employees to quarantine who have become ill or experienced COVID-19-related symptoms.  Travel restrictions and flight cancellations have also slowed personnel travel and equipment delivery to certain customer locations.  In addition, the COVID-19 outbreak poses a risk of disruptions to our supply chain if a supplier were to experience production or delivery constraints due to the effects of COVID-19.  Disruptions of this type and others could continue and increase for the foreseeable future.  For example, cases of COVID-19 in the workplace environments of our customers have occurred, and a widespread outbreak of COVID-19 in such an environment could result in a cessation of operations which would further depress demand for our products and services.  Finally, although our non-idled manufacturing and service facilities generally remain open and operational as of the date of filing of this Annual Report on Form 10-K, governmental mandates or the illness or absence of a substantial number of employees could require that we temporarily close one or more of such facilities, or may prohibit or significantly restrict us, our customers and third-party providers upon whom we and they rely from remaining operational.

In addition, we have implemented work-from-home policies for certain employees. The effects of shelter-in-place orders and our work-from-home policies may negatively impact productivity and disrupt our business, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

Contemporaneously with the widespread outbreak of COVID-19 in the United States, Saudi Arabia announced a material increase in crude oil production in response to a dispute with Russia over crude oil production levels, resulting in global oil markets being significantly oversupplied, particularly in light of the reduced demand resulting from the COVID-19 pandemic. As a result, the price of West Texas Intermediate crude oil declined precipitously beginning in the middle of March, reaching a low price of beneath $0.00 per barrel on April 20, 2020. In response, a number of our exploration and production company customers announced significant reductions in capital spending for drilling and other projects on which our products and services would be used. These reductions in spending and activity levels have negatively impacted, and we expect they will continue to negatively impact, demand for our products and services, the prices we can charge for those products and services and, as a result, our results of operations, liquidity and financial condition. While an agreement as to production cuts was reached, the global crude oil market remains significantly oversupplied, and whether the agreed production cuts will be sufficient to realign supply and demand in light of the COVID-19 pandemic and the impact on crude oil prices.  

The effect of the COVID-19 pandemic has also resulted in significant disruption of global financial markets.  For companies like ours in the energy industry, this disruption has been exacerbated by the global crude oil supply and demand imbalance and resulting decline in crude oil prices, and has significantly impacted the value of our common stock and which may reduce our ability to access capital in the bank and capital markets, which could in the future negatively affect our liquidity. In addition, a recession or long-term market correction, resulting from the COVID-19 pandemic could in the future further materially impact the value of our common stock, impact our access to capital and affect our business in the near and long-term.

The COVID-19 pandemic continues to rapidly evolve.  The extent to which COVID-19 and depressed crude oil prices impacts our results, financial position and liquidity will depend on future developments, which are highly uncertain and cannot be predicted.

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.

OurPrior to filing the Chapter 11 Cases, our primary sources of liquidity arewere 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 any of our New Credit Agreement,existing or future debt arrangements, or obtain replacement or additional financing, or an event of default under our New Credit Agreement,existing or future debt arrangements, could have a material adverse effect on our financial condition. Further, for the duration of the Chapter 11 Cases, we will be subject to various additional risks, including the inability to maintain or obtain sufficient financing sources for operations, to fund the plan of reorganization and to meet future obligations, including increased legal and other professional costs associated with the Chapter 11 Cases and our reorganization. Further, if the transactions contemplated by the Plan are not completed such that the effective date of the Plan occurs prior to the maturity of the DIP Facility, we may need to refinance the DIP Facility. We may not be able to obtain any such financing on acceptable terms, or at all.

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 do not qualify as a “well-known seasoned issuer,” which otherwise would allow 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 us to significant delays when compared with previous periods.

Our business and financial performance has suffered and could suffer further if the levels of hydraulic fracturing continue to decline or cease as a result of the low commodity price of oil and natural gas, development of new processes, increased regulation or a continued decrease in drilling activity.

Substantially allA large portion of our products are proppants used in the completion and re-completion of natural gas and oil wells through the process of hydraulic fracturing.  Completion activity is directly impacted by the price of oil and natural gas.  In addition, demand for our proppants is substantially higher in the case of horizontally drilled wells, which allow for multiple hydraulic fractures within the same well bore but are more expensive to develop than vertically drilled wells.  A reduction in horizontal drilling or the development of new processes for the completion of natural gas and oil wells leading to a reduction in, or discontinuation of the use of, hydraulic fracturing could cause a decline in demand for our products.  Additionally, increased regulation or environmental restrictions on hydraulic fracturing or the materials used in this process could negatively affect our business by increasing the costs of compliance or resulting in operational delays, which could cause operators to abandon the process due to commercial impracticability.  Moreover, future federal, state, local or foreign laws or regulations could otherwise limit or ban hydraulic fracturing.  Several states in which our customers operate have adopted, or are considering adopting, regulations that have imposed, or could impose, more stringent permitting, transparency, disposal and well construction requirements on hydraulic fracturing operations.  Some states, such as New York, have banned the process of hydraulic fracturing altogether.  Any of these events could have a material adverse effect on our results of operations and financial condition.  As stated elsewhere, the upstream oil and natural gas industry is in the midst of a severe contraction, resulting in a significant reduction in horizontal drilling and further resulting in a material decline in demand for our products and services.Oil and natural gas prices have recently experienced record declines and are currently at record low levels in response to dramatic supply and demand uncertainty. In response, several exploration and production companies have recently announced plans to reduce their capital budgets and activity levels. We expect these changes will adversely affect the revenue, profitability, and cash flow from and, ultimately the financial position of, our business. A significant downturn in the oil and gas industry could cause a reduction in demand for oilfield services and could hurt our financial condition, results of operations and cash flows.

We face distribution and logistical challenges in our businessbusiness.

As oil and natural gas prices fluctuate, our customers may shift their focus back and forth between different resource plays, some of which can be located in geographic areas that do not have well-developed transportation and distribution infrastructure systems.  Transportation and logistical operating expenses continue to comprise a significant portion of our total delivered cost of sales.  Therefore, serving our clients in these less-developed areas presents distribution and other operational challenges that affect our sales and negatively impact our operating costs.  Disruptions in transportation services, including shortages of rail cars or a lack of rail transportation services or developed infrastructure, could affect our ability to timely and cost effectively deliver products to our customers and could provide a competitive advantage to competitors located in closer proximity to customers.  Additionally, increases in the price of diesel fuel could negatively impact operating costs if we are unable to pass those increased costs along to our customers.  Failure to find long-term solutions to these logistical challenges could adversely affect our ability to respond quickly to the needs of our customers or result in additional increased costs, and thus could negatively impact our results of operations and financial condition. 

We operate in an increasingly competitive market.

The proppant market is highly competitive.  We compete with other domestic and international suppliers of ceramic proppant, as well as with suppliers of sand for use as proppant, in the hydraulic fracturing of natural gas and oil wells.  The expiration of key patents owned by the Company has resulted in additional competition in the market for ceramic proppant.  The entry of additional competitors into the market, to supply ceramic proppant and/or a surge in the level of ceramic proppant imports into North America from existing competitors, could have a material adverse effect on our results of operations and financial condition.

Our industrial products have competitors across several industries we sell into.  Competition for products in the North American foundry market includes several ceramic media manufacturers.  There are also a number of competitors in the grinding market that primarily manufacture their ceramic grinding products in China.  We believe our industrial products are competitively priced, are of higher quality and our customer experience is better than the competition.

Our environmental products have a large number of competitors across the United States.  There are few barriers to entry in this market, however we do own key patents for some of our environmental products.  We believe there are several key factors that drive customers to purchase our environmental products over the competition including centralized manufacturing, on time delivery, competitive pricing, a focus on customer satisfaction, and excellent technical support.  

Adverse changes to these key factors or a shift in customer preferences to our competitor's products could have a material adverse effect on our results of operations and financial condition.

We have been and may continue to be adversely affected by decreased demand for our proppant or the development by our competitors of alternative proppants.

Ceramic proppant is a premium product capable of withstanding higher pressure and providing more highly conductive fractures than mined sand, which is the most commonly used proppant type.  We continue to see operators that have traditionally used ceramic proppant shifting to use mined sand instead.  Despite recently improving commodity prices in the oil and natural gas industry, continued pressure on operators to reduce cost or to evaluate returns on a shorter horizon has had a detrimental impact on the demand for ceramic proppant, which is a higher cost product than mined sand.  Although we believe that the use of quality ceramic proppant in appropriate geologic formations typically generates higher production rates and more favorable long-term production economics than mined sand, the shifting of customer demand to lower cost products, such as mined sand, has had an adverse effect on our results of operations and its continuation could have a material adverse effect on our financial condition. The development and use of alternative proppant could also cause a decline in demand for our products, and could have a material adverse effect on our results of operations and financial condition.

The success of our business depends on achieving our strategic objectives, including the diversification of our product and service portfolio.

As we continue to expand our portfolio of product and service offerings to industrial and other new markets, we face certain risks associated with these new business strategies, including unknown regulatory changes and product acceptance by these new markets, that could affect our future financial results.  In addition, lower than expected sales in these new markets could have a material adverse effect on our results from operations and financial condition.

We have no current plans to pay cash dividends on our new common stock for the foreseeable future and our Amended Credit Agreementthe DIP Facility contains restrictions on our ability to pay dividends; therefore, you maywill not receive any return on investment unless you sell your common stock for a price greater than you paid.

We do not plan to declare dividends on shares of our new common stock in the foreseeable future.  In addition, our Amended Credit Agreementthe DIP Facility generally prohibits us from paying such dividends.  We currently intend to retain any future earnings to finance the operation of our business and meet our debt obligations.  As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. Further, one of our financing options involves the issuance of equity securities, which would dilute current stockholders and could reduce our stock price.

The outstanding indebtedness under our NewAmended Credit Agreement and the DIP Facility is, and any Exit Facility or other future debt arrangements would most likely be, secured by a substantial portionsubstantially all of our domestic assets and guaranteed by our two domestic operating subsidiaries, subject to certain exceptions. We may be unable to repay or refinance our debt as it becomes due, whether at maturity or as a result of acceleration.

The outstanding indebtedness under our NewAmended Credit Agreement is, subject to limited exceptions, secured by a first-priority lien on a substantial amount of our assets, including (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.minerals, and the outstanding indebtedness under the DIP Facility is secured by all of our assets, subject to limited exceptions.  We are in default under the Amended Credit Agreement as a result of filing the Chapter 11 Cases, but the Supporting Lenders are not able to pursue remedies thereunder as a result of the automatic stay under the Bankruptcy Code.  In the event of a default our lendersunder the DIP Facility, the DIP Lenders may, subject to the order of the Bankruptcy Court approving the DIP Facility, (1) elect to declare all outstanding borrowings made under the New Credit AgreementDIP Facility 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,would, individually or in the aggregate, have a substantial negative impact on our financial condition and results of operations.

We may not be able to repay our debt as it comes due, or to refinance our debt on a timely basis or on terms acceptable to us and within the limitations contained in the DIP Facility or any Exit Facility or other post-emergence debt arrangement when payment obligations are no longer automatically stayed under the provisions of the Bankruptcy Code. Failure to repay or to timely refinance any portion of our debt could result in a default under the terms of all our debt instruments and the acceleration of all indebtedness outstanding.

We rely upon, and receive a significant percentage of our revenues from, a limited number of key customers and end users.

During 2017,2019, our key customers included several of the largest participants in the worldwide petroleum pressure pumping industry.  Twoindustry, as well as certain operators of natural gas and oil wells.  One of these customers each accounted for more than 10% of our 20172019 revenues.  However, theThe end users of our products are numerous operators of natural gas and oil wells that hire pressure pumping service companies to hydraulically fracture wells.  During 2017,2019, a majority of our ceramic proppant sales were directed to a concentrated number of end users.  We generally supply our domestic pumping service customers with products on a just-in-time basis, with transactions governed by individual purchase orders and/or a master supply agreement.  Because of their purchasing power, our key customers may have greater bargaining leverage than us with respect to the negotiation of prices and other terms of the sale in their supply contracts with us, which in turn, could adversely affect our profit margins associated with those contracts.  Disparities in bargaining leverage, when combined with the Company’s desire to maintain long-term relationships with key customers, could limit our practical ability to assert certain terms of our supply agreements with them.  Continuing sales of our products depend on our direct customers and the end user well operators being satisfied with product quality, pricing, availability, and delivery performance.  While we believe we have satisfactory relations with our customers and our end users, a material decline in the level of sales to any one of our major customers or loss of a key end user due to unsatisfactory product performance, pricing, delivery delays or any other reason could have a material adverse effect on our results of operations and financial condition.

The operations of our customers, and thus the results of our operations, are subject to a number of operational risks, interruptions and seasonal trends.

As hydraulic fracturing jobs have increased in size and intensity, common issues such as weather, equipment delays or changes in the location and types of oil and natural gas plays can result in increased variability in proppant sales volumes.  Our business operations and those of our customers involve a high degree of operational risk.  Natural disasters, adverse weather conditions, collisions and operator error could cause personal injury or loss of life, severe damage to and destruction of property, equipment and the environment, and suspension of operations.  Our customers perform work that is subject to unexpected or arbitrary interruption or termination.  The occurrence of any of these events could result in work stoppage, loss of revenue, casualty loss, increased costs and

significant liability to third parties.  With the increase in resource plays in the northern and eastern United States, as well as our operations in Marshfield, Wisconsin, our results of operations are increasingly exposed to seasonal variations and inclement weather.  Operations in certain regions involve more seasonal risk in the winter months, and work is hindered during other inclement weather events.  This variability makes it more difficult to predict sales and can result in greater fluctuations to our quarterly financial results.  These quarterly fluctuations could result in operating results that are below the expectations of public market analysts and investors, and therefore may adversely affect the market price for our common stock.

The ability of our customers to complete work, as well as our ability to mine sand from cold climate areas, could be affected during the winter months.  Our revenue and profitability could decrease during these periods, as well as in other severe weather conditions, because work is either prevented or more costly to complete.  If a substantial amount of production is interrupted, our cash flow and, in turn, our results of operations could be materially and adversely affected.

Our North American ceramic proppantentire oilfield and industrial production isare expected to be manufactured at twoour McIntyre, Georgia and New Iberia, Louisiana plants.  The vast majority of our mined sand is processed at one plant.  Any adverse developments at thosethese plants could have a material adverse effect on our financial condition and results of operations.

With the mothballingWe expect to produce all of our Millen plantoilfield ceramic and the very limitedindustrial ceramic media production atfrom our McIntyre, plant, we are producing the majority of our North American ceramic production from two plants, our EufaulaGeorgia and our Toomsboro plant.  Our Marshfield, Wisconsin plant represents the vast majority of our annual mined sand processing capacity.New Iberia, Louisiana plants.  Any adverse developments at these plants, including a material disruption in production, an inability to supply the plant with raw materials at a competitive cost, or adverse developments due to catastrophic events, could have a material adverse effect on our financial condition and results of operations.

We provide environmental warranties on certain of our containment and spill prevention products.

AGPI’s tank liners, secondary containments and related products and services are designed to contain or avoid spills of hydrocarbons and other materials.  If a release of these materials occurs, it could be harmful to the environment.  Although we attempt to negotiate appropriate limitations of liability in the applicable terms of sale, some customers have required expanded warranties, indemnifications or other terms that could hold AGPI responsible in the event of a spill or release under particular circumstances.  If AGPI is held responsible for a spill or release of materials from one of its customer’s facilities, it could have a material adverse effect on our results of operations and financial condition.

We rely upon intellectual property to protect our proprietary rights.  Failure to protect our intellectual property rights may affect our competitive position, and protecting our rights or defending against third-party allegations of infringement may be costly.

The Company uses a significant amount of trade secrets, or “know-how,” and other proprietary information and technology in the conduct of its business.  In some cases, we rely on trade secrets, trademarks or contractual restrictions to protect intellectual property rights that are not patented.  The steps we take to protect the non-patented intellectual property may not be sufficient to protect it and any loss or diminishment of such intellectual property rights could negatively impact our competitive advantage.  Additionally, our competitors could independently develop the same or similar technologies that are only protected by trade secret and thus do not prevent third parties from competing with us.  Furthermore, even protected intellectual property rights can be infringed upon by third parties.  Monitoring unauthorized use of Company intellectual property can be difficult and expensive, and adequate remedies may not be available.

Although the Company does not believe that it is infringing upon the intellectual property rights of others by using such proprietary information and technology, it is possible that such a claim might be asserted against the Company in the future.  In the event any third party makes a claim against us for infringement of patents or other intellectual property rights of a third party, such claims, with or without merit, could be time-consuming and result in costly litigation.  In addition, the Company could experience loss or cancellation of customer orders, experience product shipment delays, or be subject to significant liabilities to third parties.  If our products or services were found to infringe on a third party’s proprietary rights, the Company could be required to enter into royalty or licensing agreements to continue selling its products or services.  Royalty or licensing agreements, if required, may not be available on acceptable terms, if at all, which could seriously harm our business.  Involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and expertise could have a material adverse effect on the Company’s business.

Significant increases in fuel prices for any extended periods of time will increase our operating expenses.

The price and supply of natural gas are unpredictable, and can fluctuate significantly based on international, political and economic circumstances, as well as other events outside of our control, such as changes in supply and demand due to weather conditions, actions by OPEC and other oil and gas producers, regional production patterns and environmental concerns.  Natural gas is a significant component of our direct manufacturing costs and price escalations will likely increase our operating expenses and can

have a negative impact on income from operations and cash flows.  We operate in a competitive marketplace and may not be able to pass through all of the increased costs that could result from an increase in the cost of natural gas.

Environmental compliance costs and liabilities could reduce our earnings and cash available for operations.

We are subject to increasingly stringent laws and regulations relating to environmental protection, including laws and regulations governing air emissions, water discharges and waste management.  The technical requirements of complying with these environmental laws and regulations are becoming increasingly expensive and complex, and may affect the Company’s ability to expand its operations.  Our ability to continue the expansion of our manufacturing capacity to meet market demand is contingent upon obtaining required environmental permits and compliance with their terms, which continue to be more restrictive and require longer lead times to obtain in anticipation of any efforts to expand and increase capacity.  We incur, and expect to continue to incur, capital and operating costs to comply with environmental laws and regulations.

In addition, we use some hazardous substances and generate certain industrial wastes in our operations.  Many of our current and former properties are, or have been, used for industrial purposes.  Accordingly, we could become subject to potentially material liabilities relating to the investigation and cleanup of contaminated properties, and to claims alleging personal injury or property damage as the result of exposures to, or releases of, hazardous substances.  These laws also may provide for “strict liability” for damages to natural resources or threats to public health and safety.  Strict liability can render a party liable for environmental damage without regard to negligence or fault on the part of the party.  Some environmental laws provide for joint and several strict liability for remediation of spills and releases of hazardous substances.

Stricter enforcement of existing laws and regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased requirements could restrict our expansion efforts, require us to incur costs, or become the basis of new or increased liabilities.  Any of these events could reduce our earnings and our cash available for operations.

Our international operations subject us to risks inherent in doing business on an international level that could adversely impact our results of operations.

International revenues accounted for approximately 21%, 34%27% and 29%19% of our total revenues in 2017, 20162019 and 2015,2018, respectively.  We may not succeed in overcoming the risks that relate to or arise from operating in international markets.  Risks inherent in doing business on an international level include, among others, the following:

Undetected defects in our fracture simulation software could adversely affect our business.

Despite extensive testing, our software could contain defects, bugs or performance problems.  If any of these problems are not detected, the Company could be required to incur extensive development costs or costs related to product recalls or replacements.  The existence of any defects, errors or failures in our software products may subject us to liability for damages, delay the development or release of new products and adversely affect market acceptance or perception of our software products or related services, any one of which could materially and adversely affect the Company’s business, results of operations and financial condition.

TheOur shares of common stock are not listed for trading on a national securities exchange and thus the market pricefor our common stock is limited, sporadic, and volatile which may impact the value of our shares and your ability to sell your shares.

Our common stock is quoted on the OTC Pink marketplace under the trading symbol “CRRTQ” and is not traded or listed on a national securities exchange. Investments in securities quoted on the OTC Pink marketplace are generally less liquid than investments in securities trading on a national securities exchange. We can provide no assurance that our common stock will continue to be quoted on the OTC Pink marketplace, whether broker-dealers will continue to provide public quotes of our common stock on the OTC Pink marketplace, or whether the trading volume of our common stock will fluctuate,be sufficient to provide for an efficient trading market.

This may result in limited shareholder interest, including that of institutional investors, and could fluctuate significantly.

Theit may be difficult for our stockholders to sell their shares, without depressing the market price for shares of the Company’sour common stock, will fluctuate, andor at all, which could fluctuate significantly, in response to various factors and events,further depress the trading price of our common stock. In addition, the trading of our common stock on the OTC Pink marketplace could have other negative implications, including the following:potential loss of confidence in us by suppliers, customers and employees.

Our actual results could differ materially from results anticipated in forward-looking statements we make.

Some of the statements included or incorporated by reference in this Form 10-K are forward-looking statements.  These forward-looking statements include statements relating to trends in the natural gas and oil industries, the demand for ceramic proppant and our performance in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections of this Form 10-K.  In addition, we have made and may continue to make forward-looking statements in other filings with the SEC, and in written material, press releases and oral statements issued by us or on our behalf.  Forward-looking statements include statements regarding the intent, belief or current expectations of the Company or its officers.  Our actual results could differ materially

from those anticipated in these forward-looking statements, and our financial forecasts are particularly sensitive to changes in the current market conditions.  Further, our financial forecasts have been less accurate during the recent downturn.  See "Business–Forward-Looking Information."

The success of our business depends on achieving our strategic objectives, including the diversification of our product and service portfolio

As we continue to expand our portfolio of product and service offerings to industrial and other new markets, we face certain risks associated with these new business strategies, including unknown regulatory changes and product acceptance by these new markets, that could affect our future financial results.  In addition, lower than expected sales in these new markets could have a material adverse effect on our results from operations and financial condition.

Not applicable.

We maintain our corporate headquarters in leased office space in Houston, Texas and also lease space for our technology center in Houston.  We own our manufacturing facilities, land and substantially all of the related production equipment in New Iberia, Louisiana, and Eufaula, Alabama, and lease our McIntyre Toomsboro, and Millen,Toomsboro, Georgia, facilities.  We own the buildings and production equipment at our facility in Luoyang, China, and have been granted use of the land on which the facility is located through 2051 under the terms of a land use agreement with the People’s Republic of China.  The Luoyang, China facility was shut down during 2015, and we do not intend to resume production.

The facilities in McIntyre and Toomsboro, Georgia, include real property, plant and equipment that we lease from the Development Authority of Wilkinson County.  The original lease was executed in 1997 and was last amended in 2008.  The term of the current lease, which covers both locations was automatically extended through November 1, 2021.  Under the terms of the lease, we are responsible for all costs incurred in connection with the premises, including costs of construction of the plant and equipment.  At the termination of the lease, title to all of the real property, plant and equipment is to be conveyed to us in exchange for nominal consideration.  We have the right to purchase the property, plant and equipment at any time during the term of the lease for a nominal price.

In November 2012, we entered into a lease with the Development Authority of Jenkins County for the land and improvements associated with the construction of a plant in Millen, Georgia.  The lease term continues until the tenth anniversary of the completion of the last phase of the facility.  Similar to lease terms of the two other Georgia facilities, the Millen lease requires us to be responsible for all costs (including construction costs) incurred in connection with the premises.  Moreover, title to the real property, plant and equipment of the facility is to be conveyed to us at the end of the lease term for nominal consideration, and may be purchased by us at any time for a nominal price.  We completed construction and commenced operations of the first 250 million pound ceramic production line in Millen during 2014.  We began the construction on a second 250 million pound production line in Millen.  However, due to current market conditions, the construction and completion of this second line has been suspended until market conditions warrant completion.

The Marshfield, Wisconsin sand processing plant, which became operational during 2012, is located on land owned by us.  We decidedThis plant was idled in the fourth quarter of 2019, and we do not expect to move forward with construction of a resin coating plant in Marshfield, Wisconsin for which we had previously developed engineering plans and procured certain equipment that had long-lead delivery times.resume operations.

We own or otherwise utilizelease distribution facilities in multiple locations around the world.  See “Item 1. Business – Distribution.”

We own approximately 4,6182,288 acres of land and leasehold interests near our plants in Georgia and Alabama.  The land contains raw material for use in the production of our lightweight ceramic proppants.  We also hold approximately 113313 acres of land and leasehold interests in Wisconsin.

AGPI owns its service facility located in Decatur, Texas, and leases other regional service facilities within the United States.

From time to time, we are the subject of legal proceedings arising in the ordinary course of business.  We do not believe that any of these proceedings will have a material adverse effect on our business or our results of operations.

On March 29, 2020, the Debtors filed a voluntary petition under chapter 11 of the United States Bankruptcy Code. For information on the Chapter 11 Cases, see “Business—Recent Developments.”

Several of 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 annual report.

PART II

Common Stock Market Prices, Dividends and Stock Repurchases

Our common stock ispreviously traded on the New York Stock Exchange (tickerNYSE under the symbol CRR).  The number of record and beneficial holders of our common stock as of February 1, 2018 was approximately 11,515.

The following table sets forth the high and low sales prices of“CRR” until December 20, 2019, at which time trading in our common stock on the New York Stock ExchangeNYSE was suspended due to our inability to satisfy the continued listing requirements of the NYSE. Trades in our common stock began being quoted on the OTCQB Market on December 23, 2019 under the symbol “CRRT.” As a result of the filing of the Chapter 11 Cases, our stock was removed from the OTCQB Market on March 31, 2020 and dividends foris currently quoted on the last two fiscal years:OTC Pink marketplace under the trading symbol “CRRTQ”.

In January 2016, our BoardAs of Directors suspended our policy of paying quarterly cash dividends, and there can be no assurance as to the payment of future dividends because they depend on future earnings, capital requirements and financial condition.

On January 28, 2015, our Board of Directors authorized the repurchase of up to two millionMarch 24, 2020, 29,238,368 shares of our common stock. Shares are effectively retired atstock were outstanding, held by 211 stockholders of record. The number of record holders does not necessarily bear any relationship to the timenumber of purchase.  Asbeneficial owners of March 7, 2018, we hadour common stock.

We have not repurchasedpaid or declared any shares under this plan.

Securities Authorized for Issuance Under Equity Compensation Plans

For information regarding securities authorized for issuance under equity compensation plans, refer to “ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” and “NOTE 10 — Stock Based Compensation” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

The following table provides information aboutdividends on our repurchases of common stock and do not intend to do so. Additionally, our debt arrangements include provisions that generally prohibit us from paying dividends on our capital stock.

We did not make any unregistered sales of equity securities during the quarter ended December 31, 2017, all of which represent shares surrendered to us for tax withholding obligations upon2019.

As discussed in “Business—Recent Developments,” in connection with the vesting of restricted stock:

ISSUER PURCHASES OF EQUITY SECURITIES

Stock Performance Graph

The graph below compares the cumulative shareholder return onChapter 11 Cases, our common stock withwill be extinguished without recovery on the cumulative returnseffective date of the the S&P 500 index, and the S&P SmallCap 600 - Oil & Gas Equipment & Services index.  Plan.

Annual Meeting

The graph tracks the performanceCompany previously disclosed that it intended to hold its 2020 Annual Meeting of a $100 investment in our common stock and in eachStockholders (the “2020 Annual Meeting”) on May 1, 2020. In consideration of the indexes (withChapter 11 Cases, the reinvestment of all dividends) from December 31, 2012Company has determined to December 31, 2017.cancel the 2020 Annual Meeting, with a new date for such meeting to be set at a later date, as required.

The following selected financial data are derived from our audited consolidated financial statements.  The data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included elsewhere in this Form 10-K.Not required.

Statements we make in the following discussion that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements made in good faith that are subject to risks, uncertainties and assumptions. These forward-looking statements are based on our current beliefs, intentions, and expectations and are not guarantees or indicators of future performance. Our actual results, performance or achievements, or industry results, could differ materially from those we express in the following discussion as a result of a variety of factors, including risks related to our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases, including maintaining strategic control as debtor-in-possession, and the outcomes of Bankruptcy Court rulings and the Chapter 11 Cases in general, delays in the Chapter 11 Cases, our ability to consummate the Plan, our ability to achieve our stated goals and continue as a going concern, risks that our assumptions and analyses in the Plan are incorrect, our ability to fund our liquidity requirements during the Chapter 11 Cases, our ability to comply with the covenants under the DIP Facility, the effects of the filing of the Chapter 11 Cases on our business and the interest of various constituents, the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases, restrictions imposed on us by the Bankruptcy Court, general economic and business conditions and industry trends, levels and volatility of oil and gas prices, the continued demand for products and services we provide and in the geographic areas where we operate, the highly competitive nature of our business, technological advancements and trends in our industry and improvements in our competitors’ equipment, the loss of one or more of our major clients or a decrease in their demand for our services, operating hazards inherent in our operations, the supply of raw materials and equipment within the industry, the continued availability of qualified personnel, the political, economic, regulatory and other uncertainties encountered by our operations, and changes in, or our failure or inability to comply with, governmental regulations, including those relating to the environment, the occurrence of cybersecurity incidents, the success or failure of future dispositions or acquisitions, future compliance with our debt agreements, and the impact of not having our common stock listed on a national securities exchange. We have discussed many of these factors in more detail elsewhere in this report and, including under the headings “Forward-Looking Information” in the Introductory Item I and “Risk Factors” in Item 1A. These factors are not necessarily all the important factors that could affect us. Other unpredictable or unknown factors could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. All forward-looking statements speak only as of the date on which they are made and we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. We advise our shareholders that they should (i) recognize that important factors not referred to above could affect the accuracy of our forward-looking statements and (i) use caution and common sense when considering our forward-looking statements.

Recent Developments

Reorganization, Chapter 11 Proceedings, and Going Concern

The Debtors filed the Chapter 11 Cases under the Bankruptcy Code on March 29, 2020.

Since the commencement of the Chapter 11 Cases, each of the Debtors has continued to operate its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. At the conclusion of the Chapter 11 Cases, we expect the Supporting Lenders to exchange certain claims against us that they hold for 100% of the equity interests in Reorganized CARBO and that our existing common stock will be cancelled.

The risks and uncertainties surrounding the Chapter 11 Cases, the defaults under our Credit Agreement, the depressed condition of the oil and natural gas industry and broader economic conditions raise substantial doubt as to our ability to continue as a going concern. Accordingly, the audit report issued by our independent registered public accounting firm on our financial statements as of and for the year ended December 31, 2019 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.  For additional information concerning our bankruptcy proceedings under Chapter 11, see Note 1 to the Consolidated Financial Statements, “Item 1— Business—Recent Developments—Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code” and “Item 1A—Risk Factors—Risks Relating to Our Chapter 11 Proceedings.”

COVID-19 Update

On March 13, 2020, the United States declared the COVID-19 pandemic a national emergency, and several states, including Texas and other states in which we operate, and municipalities have declared public health emergencies. Along with these declarations, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions across the United States and the

world, including mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. To the extent COVID-19 continues or worsens, governments may impose additional similar restrictions.

Due to a combination of geopolitical and COVID-19 pandemic related pressures on the global supply-demand balance for crude oil and related products, commodity prices have significantly declined in recent months, and oil and gas operators, including certain of our customers, have reduced development budgets and activity. Although the full impact of the decline in commodity prices and the COVID-19 pandemic on our business are currently unknown and continue to evolve as of the date of this report, we expect that demand for our products and services will be adversely affected and we may see ongoing operational interruptions, which would adversely affect our business and financial condition. The Company will continue to work with its customers and suppliers to ensure the protection of our collective workforces when and where they interact.

Executive Level Overview

CARBO Ceramics Inc. is a global technology company that generates revenue primarily through the sale ofprovides products and services to the global oil and natural gas, industry for production enhancementindustrial, and environmental products and services, and through the sale of products and servicesmarkets to industrial market segments.enhance value for its clients.

The Company conducts its business within two operating segments: 1) Oilfield and Industrial Technologies and Services and 2) Environmental ProductsTechnologies and Services.  These two operating segments provide products

The Company’s Oilfield and services to several market segments in the oil and gas, and the industrial markets.  Our Environmental Products and Services segment is limited to production and sales by our AGPI subsidiary.

Our OilfieldIndustrial Technologies and Services segment includesmanufactures and sells ceramic technology products and services and base ceramic proppant for both the oilfield and industrial sectors.  The products have different technology features and product characteristics, which vary based on the application for which they are intended to be used.  The various ceramic products’ manufacturing processes are similar.

Oilfield ceramic technology products and selling ofbase ceramic proppant productsare manufactured and sold to pressure pumping companies and oil and gas operators for use primarily in the hydraulic fracturing of natural gas and oil wells.  Hydraulic fracturing is the most widely used method of increasing production from oil and natural gas wells, FracPro softwarewells.  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.  We believe the higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions typically 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.  During the fourth quarter of 2019, we idled all of our sand operations, and we are currently evaluating alternatives for the sand business.    

Through our wholly-owned subsidiary StrataGen, Inc., we promote 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 enables our clients to optimize stimulation jobs to enhance oil and gas production.  FracPro has been integrated with third-party reservoir simulation software, furthering its reach and utility.

The StrataGen consulting services forteam works with operators around the optimizationworld to help optimize well placement, fracture treatment design and production enhancement.  The broad range of well completions.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 industrial ceramic technology products are manufactured and sold to industrial companies.  These products include ceramic proppant and raw frac sand.  Our manufacturing facilities also produce ceramic pelletsare designed for use in various industrial technology applications, including but not limited to casting and milling.

We also have begun plant trialsproduce industrial products at our manufacturing facilities for third parties under tolling arrangements.  These products so far have been primarily used in industrial, or agricultural applications.  We continue to produce products other than base ceramic proppant.  Those mineral processing plant trials have proven successfuldevelop additional opportunities within the industrial, agricultural and have ledoil and gas industries to increasedgrow revenue, generation.  Throughand reduce our wholly-owned subsidiary StrataGen, Inc., we promote increased operators’ productionplant’s slowing and EUR by providing one of the industry’s most widely used hydraulic fracture simulation software under the brand FracPro, as well as hydraulic fracture design and consulting services under the brand StrataGen.  idling costs.

Our Environmental ProductsTechnologies and Services segment throughis intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”).   AGPI, a wholly-ownedthe 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 providemake products that are 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.  This business is intended to protect operators’ assets, minimize environmental risk, and lower LOE.

Our products and services help oil and gas producers increase production and recovery rates from their wells, thereby lowering overall finding and development costs.  As a result, our business is dependent to a large extent on the level of drilling and hydraulic fracturing activity in the oil and gas industry worldwide.  Although our ceramic proppants are more expensive than alternative non-ceramic proppants, we have been able to demonstrate the cost-effectiveness of our products to numerous operators of oil and gas wells by marketing our technical expertise.  We believe our future prospects benefit from both an increase in drilling and hydraulic fracturing activity worldwide and the desire of industry participants to improve production results and lower their overall development costs.  

Our ceramic media for use in various industrial technology applications improve the quality of end products and industrial processes primarily in the casting and milling markets.  We believe growth in our industrial business will in part benefit from recent changes in the regulatory environment, a corresponding conversion to ceramic media, and our expanded product portfolio.

International revenues represented 21%, 34%27% and 29%19% of total revenues in 2017, 20162019 and 2015,2018, respectively.

Operating profit margin for our ceramic proppant business is principally impacted by sales volume, product mix, sales price, distribution costs, manufacturing costs, including natural gas, and our production levels as a percentage of our capacity.  The level of selling, general and administrative spending, as well as other operating expenses, can also impact operating profit margins.  

As a result of the depressed commodity price for oil during 2017, there has been a negative impact on industry activity levels which has in turn negatively impacted the demand for ceramic proppant, so we continue to focus on cash preservation and cost reduction strategies.  Beginning in 2015, we slowed and idled proppant production to assist in managing cash and inventory levels.  We mothballed our proppant facility in Millen, Georgia and McIntyre, Georgia and shut down our facility in Luoyang, China However, we are now utilizing our McIntyre, Georgia facility only in a limited capacity primarily to supply the industrial market.  These events resulted in significant negative impact to the financial results of our operations.  Additionally, we suspended completion of two large construction projects.  We suspended completion of the second production line at Millen, Georgia indefinitely, and we are exploring ways to monetize these assets.  We also suspended completion of the second phase of the retrofit of our Eufaula, Alabama plant with our new KRYPTOSPHERE^® technology until such time that market conditions improves enough to warrant completion.  During the three months ended September 30, 2017, we recorded an impairment on the Millen, Georgia facility.  As of December 31, 2017, the value of the projects relating to these two assets totaled approximately 85% of the Company’s total construction in progress and we estimate that both projects are over 90% complete.  See “Item 1 - Business” and “Item 1A - Risk Factors”.

Although most direct manufacturing expenses have been relatively stable or predictable over time, we have experienced volatility in the cost of natural gas, which is used in production by our manufacturing facilities.  The cost of natural gas has been a significant component of total monthly direct production expense.  In recent years, the price of natural gas has been low compared to historical

prices, as well as fairly stable from period to period.  However, in an effort to mitigate volatility in the cost of natural gas purchases and reduce exposure to short term spikes in the price of this commodity, we contract in advance for portions of our future natural gas requirements.  Our gas contract commitments can extend several years into the future.  Despite the efforts to reduce exposure to changes in natural gas prices, it is possible that, given the significant portion of manufacturing costs represented by this item, gross margins as a percentage of sales may decline and changes in revenue may not directly correlate to changes in net income.  Due to the severe decline in industry activity beginning in early 2015, we significantly reduced production levels and consequently did not take delivery of all of the contracted natural gas quantities.  As a result, we have accounted for the relevant contracts as derivative instruments.

General Business Conditions

Our Oilfield Technologies and Services segment is impacted by the number of natural gas and oil wells drilled in North America, and the need to hydraulically fracture these wells.  In markets outside North America, sales of our products are also influenced by the overall level of drilling and hydraulic fracturing activity.  Furthermore, because the decision to use ceramic proppant is based on comparing the higher initial costs to the future value derived from increased production and recovery rates, our business is influenced by the current and expected prices of natural gas and oil.

Beginning in late 2014, a severe decline in oil and continued decline in natural gas prices led to a significant decline in oil and natural gas industry drilling activities and capital spending.  During 2017, however, the average price of West Texas Intermediate (“WTI”) crude oil rose 18% to $50.88 per barrel compared to $43.14 per barrel in 2016.  The average North American rig count also rose 69% in 2017 to 1,081 rigs compared to 640 rigs in 2016.  Despite these improvements, E&P operators continued to use lowest-cost completions, a trend that we expect to continue in 2018, as our customers remain under pressure to consider lower cost alternatives, notwithstanding the superior performance results of our products.  These events, along with an oversupplied ceramic proppant market and depressed oil and natural gas prices, kept demand and average prices low for our proppants.

Current demand for proppant is extremely dynamic.  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) completion activity, which is not necessarily correlated with rig count, (b) customer preferences, (c) new product and technology adoption, (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.

Beginning early in 2015, we implemented a number of initiatives to preserve cash and lower costs, including: (1) reducing workforce across our organization, (2) lowering our production output levels in order to align with lower demand, including through idling and mothballing of some of our production facilities (3) limiting capital expenditures and (4) eliminating dividends.  In 2016, we idled the majority of the production activities at our New Iberia, Louisiana plant until such time as market conditions warrant bringing them back online.  Our facility in Millen, Georgia remains idled due to market conditions.  However, in late 2016 we recommenced processing at our Marshfield, Wisconsin sand processing facility.  Our remaining plants remain at reduced output levels.  As a result of operating some of our plants below their normal production capacity, we expensed $40.7 million of production overhead costs in excess of amounts that would have been allocated to each unit of production at normal production levels.  We continue to rationalize headcount as needed.  

During the third quarter of 2017, we closed on the sale of our Russian proppant business and received gross proceeds of $22.0 million.  We expect to receive additional proceeds on the sale of approximately $4.0 million related to net debt and net working capital purchase price adjustments.  Although we remain in active discussions with the buyer regarding the purchase price adjustments, in January 2018, we filed a Notice of Arbitration related to this purchase price adjustment against the buyer.  Loss on the sale was $26.7 million, which included the reclassification of $33.3 million of foreign currency cumulative translation loss from shareholders’ equity and approximately $1.6 million expenses related to the sale.  Net assets included in the calculation of the loss on the sale were $17.8 million.

The Company’s Environmental Products and Services segment is also impacted by the global drilling and hydraulic fracturing activity, and has been negatively impacted by the significant decline in oil and natural gas industry drilling activities and capital spending.

Critical Accounting Policies

Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the U.S., which require us to make estimates and assumptions (see Note 1 to the Consolidated Financial Statements).  We believe that, of our significant accounting policies, the following may involve a higher degree of judgment and complexity.

The accompanying financial statements have been prepared assuming that we will continue as a going concern. The Debtors filed Chapter 11 Cases under the Bankruptcy Code on March 29, 2020. The risks and uncertainties surrounding the Chapter 11 Cases, the defaults under our Credit Agreement, the depressed condition of the oil and natural gas industry and broader economic conditions raise substantial doubt as to our ability to continue as a going concern. Accordingly, the audit report issued by our independent registered public accounting firm on our financial statements as of and for the year ended December 31, 2019 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.  For additional information concerning our bankruptcy proceedings under Chapter 11, see Note 1 to the Consolidated Financial Statements.

Revenue is recognized when title passes to the customer (generally upon delivery of products) or at the time services are performed.  We generate a significant portion of our revenues and corresponding accounts receivable from sales to the petroleum pressure pumping industry.industry and end users.  In addition, during 2019, we generategenerated a significant portion of our revenues and corresponding accounts receivable from sales to twoone major customers, both of which are in the petroleum pressure pumping industry.  Ascustomer, an exploration and production company.  However, as of December 31, 2017, approximately 26%2019, less than 1% of the balance in trade accounts receivable was attributable to those two customers.that customer, as we recently mutually terminated the purchase agreement with that customer.  We record an allowance for doubtful accounts based on our assessment of collectability risk and periodically evaluate the allowance based on a review of trade accounts receivable.  Trade accounts receivable are periodically reviewed for collectability based on customers’ past credit history and current financial condition, and the allowance is adjusted, if necessary.  If the economic downturn in the petroleum pressure pumping industry worsens or does not materially improve or, for some other reason, any of our primary customers were to experience significant adverse conditions, our estimates of the recoverability of accounts receivable could be reduced by a material amount and the allowance for doubtful accounts could be increased by a material amount.  As of December 31, 2017,2019, the allowance for doubtful accounts totaled $1.6$2.2 million.

We value inventory using the weighted average cost method.  Assessing the ultimate realization of inventories requires judgments about future demand and market conditions.  We regularly review inventories to determine if the carrying value of the inventory exceeds marketnet realizable value and we record an adjustment to reduce the carrying value to marketnet realizable value, as necessary.  Future changes in demand and market conditions could cause us to be exposed to additional obsolescence or slow moving inventory. If actual market conditions are less favorable than those projected by management, lower of cost or marketnet realizable value adjustments may be required.  During the year ended December 31, 2019, the Company recognized a $4.3 million lower of cost or net realizable value adjustment in cost of sales.  There waswere no lower of cost or marketnet realizable value inventory adjustmentadjustments for the year ended December 31, 2017.  We recorded a $1.5 million lower of cost or market inventory adjustment for the year ended December 31, 2016.2018.

Income taxes are provided for in accordance with ASC Topic 740, “Income Taxes”.  This standard takes into account the differences between financial statement treatment and tax treatment of certain transactions.  Deferred tax assets (“DTAs”) and liabilities (“DTLs”) are recognized for the future tax consequences attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date.  This calculation requires us to make certain estimates about our future operations.  Changes in state, federal and foreign tax laws, as well as changes in the Company’s financial condition, could affect these estimates.

Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, provides the carrying value of DTAs 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 no longer 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 year ending December 31, 2017 thatWe believe it wasis more likely than not that a portion of our deferred tax assets will not be realized in the future.  Accordingly, we establishedhave a $52.7$143.4 million valuation allowance against 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.  Income tax benefit was $2.0$2.2 million, or 0.8%0.7% of pretax loss, for the year ending December 31, 20172019 compared to income tax benefitexpense of $51.1$0.9 million, or 38.9%1.2% of pretax loss, for the same period in 2016.  The decrease was primarily due to the valuation allowance recorded against our deferred tax assets.2018.  

Long-lived assets, which include net property, plant and equipment, goodwill, intangibles and other long-term assets, comprise a significant amount of the Company’s total assets.  The Company makes judgments and estimates in conjunction with the carrying values of these assets, including amounts to be capitalized, depreciation and amortization methods and useful lives.  Additionally, the carrying values of these assets are periodically reviewed for impairment or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.  An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable.  This requires the Company to make long-term forecasts of its future revenues and costs related to the assets subject to review.  These forecasts require assumptions about demand for the Company’s products and services, future market conditions and technological developments.  Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period.

AsDue to worsening market conditions and outlook and the loss of September 30, 2017,a key customer during the Company concluded that the Company’sfourth quarter of 2019, we evaluated essentially all of our long-lived assets for possible impairment and in doing so recognized an impairment charge totaling $169.9 million primarily related to (1) our Toomsboro, Georgia manufacturing plant, (2) our technology assets, including our Eufaula, Alabama and Millen, Georgia facilities shouldNew Iberia, Louisiana manufacturing plants, (3) our sand assets, including our Marshfield, Wisconsin facility and (4) various general corporate assets primarily related to distribution centers we no longer be evaluated togetherintend to utilize in our business. In addition, as a group of assets because the facilities are no longer interchangeable and will no longer manufacture like products.  As a result of the sustainedchange in the outlook of our business and long-term shift away from base ceramic proppantthe idling of our Marshfield sand facility, we have an excess number of railcars that we no longer expect to less expensive fracutilize in our business and efforts to locate sublessees have not been successful.  In addition, we previously utilized a leased distribution center in our sand the

Company has madebusiness, and as a strategic decision to focus on growing technology, industrial and mineral processing revenue streams.  Our Toomsboro, Georgia plant is being repurposed to produce technology and industrial products, as well as for use in toll processingresult of minerals.  Our Millen, Georgia facility is currently only able to produce base ceramic proppants, but giventhe idling of our current long-term outlook on base ceramic proppant demand,sand business, we do notno longer expect to utilize this plantleased distribution center, and efforts to produce base ceramic proppant.  We are currently evaluating opportunities to monetize our assets at our Millen facility.locate a sublessee have not been successful.  As a result, we evaluated the ToomsboroCompany concluded to abandon the assets and Millen, Georgia plants separately for indicatorshas recorded an impairment of the excess railcar operating lease right of use assets, as well as the distribution center operating lease right of use asset.  In addition, the Company made the decision that it will vacate certain leased office space during 2020, and as a result has recorded an additional impairment to operating lease right of use assets.  The total amount of right of use asset impairments recorded during the thirdfourth quarter of 2017.2019 was approximately $35.2 million.

Given the change in the asset groupings of the two facilities and lack of estimated future cash flows associated with the base ceramic production at the Millen, Georgia facility,In addition, the Company identified indicators of impairment at the Millen, Georgia facility as of September 30, 2017.  The Company determined that the projected cash flows attributablerelating to our Millen, Georgia facility did not exceed the carrying value of the assets; therefore the Company concluded there was an impairment at that facility.  The Company engaged the services of a third party consulting firm to assist with the determination of the fair value of the related assetsPicOnyx investment, and concluded that the assets were impaired.  The key assumptions and inputs impacting the fair value include third party commentary with respect to the property and equipment at our Millen, Georgia facility.  For machinery and equipment and construction in progress, we used a cost approach to estimate the valuation.  We applied a 65 percent downward adjustment to calculated replacement cost based on an analysis of construction documents and historical expenditures to remove non-saleable soft costs such as engineering and installation that would have no value to a market participant.  Based on discussions with market participants, a salvage value multiplier ranging from 12 percent to 50 percent of the remaining replacement cost basis was applied to arrive at the estimated fair value for the machinery and equipment and construction in progress subject to impairment.  For real property, the value of comparable property ranged from approximately $30 to $40 per square foot, and the concluded value of the property at the Millen, Georgia facility was approximately $35 per square foot.  We applied a 94% downward adjustment to the calculated value from a cost approach for the buildings and site improvements as a representation of economic obsolescence.  As a result, during the three months ended September 30, 2017, we recognized a $125.8 million impairment of long-lived assets, primarily relating to machinery and equipment and construction in progress.  As of December 31, 2017, the remaining carrying value of the impaired assets at the Millen facility was approximately $18.5 million.

As of December 31, 2017, there were no indicators of additional impairment.  We continue to monitor whether or not events or circumstances would indicate that the carrying value of any of our long-lived assets might not be recoverable.  

At December 31, 2016, as a result recorded an impairment of the continued 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.  During the year ended December 31, 2015, as a result of worsening conditions in the oil and natural gas industry$4.1 million during the fourth quarter of 2015, we recorded2019.

The Company evaluated goodwill during the fourth quarter of 2019.  The Company has been marketing for sale all or a $43.7 million impairmentportion of long-lived assets, primarily relatingthe Company to machineryvarious parties.  As a result of this marketing effort and equipment at our McIntyre, Georgia manufacturing plant and our Marshfield, Wisconsin sand processing facility.  Asvarious indications of December 31, 2017,interest, the remaining carrying value of machinery and equipment relating to those previously impaired facilities was approximately $3.1 million.

We account for certain natural gas contracts as derivative instruments, which requires us to recognize the gas contracts as either assets or liabilities at fair value with an offsetting entry in earnings.  We use the income approach in determiningCompany estimated that the fair value of our derivative instruments.  The model used considersStrataGen, Inc. was less than the difference,carrying value of identifiable assets, and as a result a $3.5 million impairment was recorded to goodwill.

As of each balance sheet date, betweenSeptember 30, 2019, the contracted prices andCompany determined that 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 naturecarrying amount of the contractsassets located at one of its proppant distribution centers would not be recoverable as efforts to lease or sell the assets have not been successful due to its location. These assets are located on leased land.  The land lease was renegotiated during the third quarter of 2019 to reduce our monthly cost, as well as to revise the timinglease term to end in December 2020.  The Company does not expect to exercise the company renewal options.  At the expiration of the lease term in December 2020, any remaining assets would become the property of the lessor.  These distribution center assets were previously considered a general corporate asset that was evaluated for impairment in aggregate with other long-lived assets because it was built to distribute various products manufactured from multiple asset groups and risk of estimated cash flows associatedwas not built to service any one single asset group.  When the Company made the decision to abandon the facility, we then evaluated these distribution center assets separately as opposed to aggregated with other long-lived assets.  When the Company built this distribution center several years ago, it was originally intended to primarily distribute ceramic proppant in the Permian Basin.  Since then, the market for ceramic proppant in that region deteriorated with the contracts.  The discount rate hadmajority of operators instead using inexpensive sand proppants.  Given that the Company was no longer able to utilize this distribution center for ceramic proppant, the Company leased the facility in 2017 to a third party who used it for transloading sand in the region.  During 2019, the market in the Permian Basin further shifted to very inexpensive in-basin

sand that does not require the use of a distribution center, as the sand is trucked directly to the wellsite from the mine.  Further, during the third quarter of 2019, the lease with the third party expired and was not renewed.  Given these developments and the expectation for them to continue indefinitely, there is no business need for these distribution center assets in the region.  As we do not expect to renew the lease and efforts to locate a buyer have not been successful, the Company concluded to abandon the assets and has recorded an immaterial impactimpairment of $8.1 million, recorded within other operating expenses on the fairstatement of operations.  The Company wrote the assets down to a salvage value of $0 given that no interested buyers were identified while marketing the contracts forassets at scrap values.  In addition, during the year ended December 31, 2017.  The last natural gas contract will expirethird quarter of 2019, the Company abandoned and wrote off $0.5 million in December 2018.  inventory at this leased facility that we do not anticipate selling and expect to leave on site at the end of the lease term as it would be too costly to relocate, recorded within other operating expenses on the statement of operations.  In addition, several right of use operating lease assets were abandoned during the third quarter of 2019, and as a result we recorded an impairment to the right of use assets totaling $3.9 million. 

During the year ended December 31, 2017fourth quarter of 2019, we evaluated the carrying value of inventories and 2016,concluded that for certain inventory, the net realizable value had fallen below its carrying value, and as a result, we recognizedrecorded a loss on derivative instruments of $0.9$4.3 million and a gain on derivative instruments of $1.9 million, respectively, ininventory adjustment within cost of sales.  Assales on the consolidated statements of December 31, 2017, gas contracts covering 1,680,000 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 subject to accounting as derivatives.operations.

Low production levels triggered the component of our inventory accounting policy relating to operating at production levels below normal capacity.  To determine the amount of production costs that we expense during each period, the Company allocates fixed production overheads to the costs of conversion based on the normal capacity of each production facility, generally considered to be 65% of a facility's stated capacity or higher.

When a production facility operates at normal capacity, all of its fixed production overheads are allocated to costs of conversion of each product manufactured, based on the actual level of production.  This determination is made facility-by-facility on a monthly basis in order to calculate the initial measurement value to recognize as cost of goods produced in a month by a given facility.

When a facility's total production in a month drops below 65% of its normal capacity, it is considered to be operating at an abnormally low production level.  In such cases, each unit of production receives an allocation of fixed overheads in the amount that would have been allocated at the lower-end of normal capacity.  The remaining unallocated excess fixed overhead cost for the facility is recognized as expense in the period and classified as Cost of Sales.

Materials are the only variable component of production.  Plant labor and all other overhead costs incurred in the production of the Company's products are either semi-fixed or fixed in nature, therefore all are included in the monthly evaluation of costs allocable to costs of conversion at normal capacity.

The Company maintains a rate for each production facility that represents the maximum fixed production overhead cost per unit of production allocable to costs of conversion.  The rates are based on an analysis of a recent historical period considered representative of a normal operating environment in which the facility operated at normal capacity.  The maximum rate is calculated by recasting the fixed production overhead cost per unit of production on a pro forma basis as if the facility had operated at the lower-end threshold of its range of normal capacity, generally 65% of stated capacity.  The current rates are based on 2014 as the representative year.  Implied in this method is the assumption that 2014 production costs relative to sales prices yield a normal profit margin.  A significant, permanent deterioration in the average selling prices of the Company’s products could result in a significant lowering of the rates, thereby increasing the periodic charge.  The most recent period in which normal capacity was achieved was the year-ended December 31, 2014.

Results of Operations

Net Loss

For the year ended December 31, 2017,2019, we reported net loss of $253.1$304.2 million, which was 216% larger than303% worse compared to the $80.1$75.4 million net loss reported in the previous year.  Net lossThis increase in 2017 was driven by a $125.8 million loss on disposal or impairment of assets and a $26.7 million loss on the sale of our Russian proppant business.  Excluding the impact of income taxes, the loss on disposal or impairment of assets, and the loss on the sale of our Russian proppant business, net loss in 2017 improved by $29.5 million, or 22%,was primarily due to a 69% increasedecreases in the North American rig count which resulted in highersales of technology products and services, base ceramic proppant sales volumes, including an increase in technology sales volumes.and sand proppants, and environmental technologies and services.  In addition, slowing and idling costs were reduced by $6.7 million, and severance costs were $6.1 million lower as compared to 2016.  Forduring the year ended December 31, 2016, there was also a $1.52019, we recorded impairments of various long-lived assets totaling approximately $225 million, railcar lease termination fee and $1.5 millionas well as lower of cost or market inventory adjustment , neither of which reoccurred in 2017.

For the year ended December 31, 2016, we reported net loss of $80.1 million, a decrease of 27% compared to the $109.5 million net loss reported in the previous year.  Operations in 2016 continued to be negatively impacted by the severe decline in the oil and natural gas industry.  Net loss in 2016 was impacted by a 45% reduction in the North American rig count which resulted in lower ceramic proppant sales volumes, a decrease in the average selling price of ceramic proppant, and $47.3 million in production costs expensed as a result of low production levels and idled and mothballed facilities.  Further impacting net loss were $6.4 million in severance costs, $1.5 million of lower of cost or marketrealizable value inventory adjustments and a $1.5 million railcar lease termination fee.  Net loss was partially offset by actions taken throughout 2016 to reduce our cost base and a $1.9 million gain on natural gas derivative instruments.of $4.3 million.

Individual components of financial results by reportable operating segment are discussed below.

Revenues

Oilfield and Industrial Technologies and Services segment revenues of $165.6$135.6 million for the year ended December 31, 2017 increased 85%2019 decreased 24% compared to $89.4$178.6 million in 2016.2018.  The increasedecrease was mainly attributable to ana 38% decrease in technology products and services sales, and a 25% decrease in base ceramic and sand proppants.  These decreases were partially offset by a 3% increase in industrial products and services and $4.2 million of sublease and rental income.   As a result of the adoption of ASC 842 as of January 1, 2019, sublease and rental income was classified within revenues during the year ended December 31, 2019.  These amounts were classified as a reduction of costs for the same period in 2018.  Despite the overall decrease in base ceramic technology product sales and an

increaserevenue, our international base ceramic revenue increased to 60% of total base ceramic revenue for the year ended December 31, 2019 compared to 39% for the same period in frac sand sales.  These increases were largely attributable to a 69% increase in the North American rig count and an 18% increase in oil prices.2018.

OilfieldEnvironmental Technologies and Services segment revenues of $89.4$26.2 million for the year ended December 31, 20162019 decreased 65%19% compared to $257.4$32.1 million in 2015.  The decrease was2018.  These decreases were mainly attributable to a decrease in proppant sales volumes, in conjunction with market-driven declines in the average selling prices of proppant, both which are presented in the table below.  The decline in ceramic sales volume was largely attributable to a 45% reduction in the North American rig countoil and depressed oil prices and the resulting negative impact onnatural gas industry activity levels, along with E&P operators continuing to use a higher percentage of raw frac sand as an alternative to proppant due to its lower cost.

Worldwide proppant sales volumes were as follows.

North American (defined as Canada and the U.S.) ceramic proppant sales volume increased 25% in 2017 compared to 2016.  International (excluding Canada) ceramic proppant sales volume decreased 13% in 2017 compared to 2016, primarily due to decreases in Russia.

North American (defined as Canada and the U.S.) ceramic proppant sales volume decreased 67% in 2016 compared to 2015.  International (excluding Canada) ceramic proppant sales volume decreased 19% in 2016 compared to 2015, primarily due to decreases in Europe, Latin America, and China, partially offset by an increase in Russia.

All of our Northern White Sand sales are in North America.

Environmental Products and Services segment revenues of $23.2 million for the year ended December 31, 2017 increased 69% compared to $13.7 million in 2016.  These increases were mainly attributable to a strengthening commodity price environment and the resulting positive impact on industry activity levels.  Environmental Products and Services segment revenues of $13.7 million for the year ended December 31, 2016 decreased 38% compared to $22.2 million in 2015.  The decrease was mainly attributable to the depressed commodity price environment and the resulting negative impact on industry activity levels.competition.  

Gross (Loss) Profit

Our cost of sales related to our Oilfield and Industrial Technologies and Services segment consists of manufacturing costs, packaging and transportation expenses associated with the delivery of our products to our customers and handling costs related to maintaining finished goods inventory and operating our remote stocking facilities.  Variable manufacturing costs include raw materials, while labor, utilities and repair and maintenance supplies are semi-fixed.  Fixed manufacturing costs include depreciation, property taxes on production facilities, insurance and factory overhead.

Oilfield and Industrial Technologies and Services segment gross loss for the year ended December 31, 20172019 was $56.4$36.5 million, or (34)(27)% of revenues, compared to gross loss of $84.9$28.4 million, or (95)(16)% of revenues, for 2016.2018.  The improvement inworsening of gross loss in 20172019 was primarily attributable to the strengthening commodity price environment and the resulting positive impact on industry activity levels.  Improved gross loss was further impacted by lower slowing and idling production costs, lower severance and other charges, and a

railcar lease termination fee and inventory adjustment reduction in 2016 that did not reoccur in 2017.  more profitable technology products within our sales mix.  We expect to incur slowing and idling production costs in the future until our production levels return to normal capacity.  

Oilfield Technologies and Services segment gross loss forIn addition, during the year ended December 31, 2016 was $84.9 million, or (95)%fourth quarter of revenues, compared to gross loss of $58.8 million, or (23)% of revenues, for 2015.  Gross loss in 2016 was primarily2019, the result ofCompany recorded a 56% decline in worldwide ceramic proppant sales volumes and a decrease in the average selling price of ceramic proppant, resulting in a 65% decrease in revenues.  Also negatively affecting gross loss during 2016 was $47.3 million in production costs that were not offset by increases in revenue, as a result of low production levels and idled and mothballed facilities.   Gross loss was further impacted by $6.2 million in severance costs, a $1.5$4.3 million lower of cost or marketnet realizable value inventory adjustment andas a $1.5 million railcar lease termination fee to preserve cashresult of certain inventories in future years for unused railcars.  Gross loss was partially offset by a $1.9 million gain on natural gas derivative instruments.which net realizable value fell below book value.  

Environmental ProductsTechnologies and Services segment gross profit for the year ended December 31, 20172019 was $3.1$3.0 million, or 13% of revenues, compared to gross loss of $0.1 million, or (1)% of revenues, for 2016.  This increase in gross profit were primarily the result of the strengthening commodity price environment and the resulting positive impact on industry activity levels.  Environmental Products and Services segment gross loss for the year ended December 31, 2016 was $0.1 million, or (1)%12% of revenues, compared to gross profit of $2.7$5.8 million, or 12%18% of revenues, for 2015.  2018.  This decrease in gross profit werewas primarily the result of the depressed commodity price environmentdecrease in sales.  

Depreciation and the resulting negative impact on industry activity levels.

Consolidated cost of salesamortization was $29.2 million for the yearsyear ended December 31, 2017, 2016 and 2015 included2019 compared to $32.3 million for the following:same period in 2018.  This decrease was largely due to the sale of the Millen facility in December 2018.

Selling, General & Administrative (SG&A) and Other Operating Expenses

n/m - not meaningful

Oilfield and Industrial Technologies and Services segment SG&A was $39.4$36.7 million for the year ended December 31, 20172019 compared to $36.9$36.5 million for 2016.2018.  Environmental Technologies and Services segment SG&A was $2.4 million for the year ended December 31, 2019 compared to $2.7 million for 2018.  The increasedecrease in environmental segment SG&A expenses primarily resulted from an increasea decrease in sales and marketing expensesexpenses.

Depreciation and amortization was $1.5 million for the year ended December 31, 2019 compared to support$2.3 million for 2018.  This decrease was the growthresult of this segment.  Consolidated loss on disposal or impairment ofcertain assets becoming fully depreciated and fully amortized.  Other operating expense in 2017 consisted of a $125.8 million impairment of our Millen, Georgia proppant manufacturing facility.  Consolidated loss on sale of Russian proppant business of $26.7 million2019 was related to the sale of our Russian proppant business.various asset impairments.  See Critical Accounting Policies section.  Other operating income in 2018 was primarily related to gain on asset sales partially offset by other operating expenses.  As a percentage of revenues, Oilfield and Industrial Technologies and Services segment SG&A expenses for 2017 decreased2019 increased to 24%27% compared to 41%20% in 2016, primarily due to the increase in revenues.

Oilfield Technologies and Services segment SG&A and start-up expenses was $36.9 million for the year ended December 31, 2016 compared to $57.7 million for 2015.  The decrease in SG&A expenses primarily resulted from actions we took during 2015 to reduce our cost base and preserve cash in light of the severe decline in the oil and natural gas industry.  These savings were partially offset by $0.2 million in SG&A related severance costs in 2016.  Consolidated loss on disposal or impairment of assets in 2016 consisted of $1.1 million impairment of the long-term portion of bauxite raw materials partially offset by $0.2 million gain on disposal

of assets.  As a percentage of revenues, Oilfield Technologies and Services segment SG&A and start-up expenses for 2016 increased to 41% compared to 22% in 2015,2018, primarily due to the decrease in revenues.

Environmental Products and Services segment SG&A of $3.1 million for the year ended December 31, 2017 was flat compared to 2016.  Environmental Products and Services segment SG&A of $3.1 million for the year ended December 31, 2016 decreased 41% compared to $5.3 million in 2015.  This decrease was primarily the result of actions we took, beginning in 2015, to reduce our cost base and preserve cash in light of the severe decline in the oil and natural gas industry.

Income Tax BenefitExpense (Benefit)

Income taxes are not allocated between our operating segments.  Consolidated income tax benefit was $2.0$2.2 million, or 0.8%(0.7)% of pretax loss, for the year ended December 31, 20172019 compared to $51.1income tax expense of $0.9 million, or 38.9%1.2% of pretax loss for 2016 and $54.2 million, or 33.1% of pretax loss for 2015.2018.  Net operating losses generated in 2015 were carried back to 2013 and 2014.  Net operating losses generated in 2016 and 2017 are carried forward, a portionthe substantial majority of which are reserved by a valuation allowance in 2017.  As a result of the net operating loss in 2015, we lost the benefit of our Section 199 manufacturing deduction, which negatively impacted the effective tax rate for 2015.  In 2016, the effective tax rate increased as it normalized and due to a change in election for certain foreign tax credits.  In 2017, the effective tax rate was significantly lower due to the application of the valuation allowance.

Outlook

A key goal in 2018 is continued progress on our transformation strategy to diversify revenue streams.  It is our belief that execution on this transformation strategy will result in profitable growth and positive cash from operating activities.  Although we expect that weather will impact the first half of 2018, we believe our revenue and operating cash will show improvement in the first half of 2018 compared to the first half of 2017.  

We believe revenues will grow in 2018.  We expect revenues from both of our operating segments should follow industry activity.  Within both segments, we believe revenue from industrial markets should see strong double-digit growth year over year.

If the recent strengthening in oil price continues in 2018, we believe base ceramic demand could improve in 2018.  In addition, based on early indications from clients, we believe ceramic technology sales will increase in our KRYPTOSPHERE and GUARD family of products. We anticipate KRYPTOSPHERE HD sales will be down slightly in 2018 due to a decrease in Gulf of Mexico activity, while KRYPTOSPHERE LD sales should exhibit steady growth globally.  SCALEGUARD, a scale-inhibiting production assurance product, continues to be successful due to its ability to prevent scale buildup and lower lease operating expense for E&P operators.  The pipeline of opportunities is promising and we have been awarded additional work in 2018 for a customer’s Permian basin wells, which should result in increased revenues compared to 2017.

Regarding our sand business, first sales for our North East project began in January.  We will continue to utilize various business models, including an ‘asset-lite’ model like this, to serve client demand.

We achieved steady growth in our industrial ceramics business during 2017, and we believe we will, while we continue to seek opportunities to monetize other businesses, continue to grow this business significantly in 2018 and well into the foreseeable future.  It is important that we continue to expand in the markets we serve today as well as develop new markets and continue to develop new products specifically designed for industrial markets.  We expect to add additional resources in 2018 to meet our objectives to grow this business by strong double digits again in 2018.

We expect to develop additional contract manufacturing opportunities in mineral processing during 2018 for our underutilized manufacturing plants.  Recently, we signed a multi-year agreement to toll process an agricultural product.

Our Environmental Products and Services segment bounced back from the weather impacts of the third quarter of 2017.  Given that the results in this segment tend to correlate to results in the Oil and Gas sector, we believe it should also follow industry activity in 2018.  In addition, we are targeting revenue streams in the Industrial sector and expect strong year-over-year growth in those sales.

We believe growth of industrial ceramic and technology sales, broader sources of revenue, an improving commodity price environment and a corresponding increase in industry activity will improve our results of operations in 2018.  This view, including increased demand for our products, is based on changing industry conditions and interactions with our customers.  Despite our outlook for an improved operating environment in 2018, we have found generating accurate financial forecasts in the industry downturn has been difficult.

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

Liquidity and Capital Resources

Overview

At December 31, 2017,2019, we had cash and cash equivalents and restricted cash of $78.4$34.3 million compared to cash and cash equivalents and restricted cash of $91.7$72.8 million at December 31, 2016.2018.  In addition, at December 31, 2019, we had total restricted cash of $9.7 million compared to $10.6 million at December 31, 2018.  During the year ended December 31, 2017,2019, we received proceeds of $4.6 million from issuances of common stock under our ATM program and net proceeds from asset sales of $21.2 million relating to the sale of our Russian proppant business, and net cash provided by financing activities was $6.3$1.1 million.  Uses of cash included $38.8$11.5 million in operating activities, and $2.2 million for capital expenditures.expenditures, $1.6 million in cash outflows relating to our investment in PicOnyx, $1.5 million in cash outflows relating to certain post-closing matters relating to the 2018 sale of our Millen plant, $27.7 million in repayments of various notes, and $0.5 million in other financing outflows.  There were no major capital spending projects in 2017.2019.  Capital spending in 20172019 primarily related to various plant maintenance as well as equipment purchases for our consulting andthe environmental businesses.business.

We estimate our total capital expenditures in 20182020 will be less than $5.0 million.  Due to market conditions,$2.0 million and may be limited by the completionChapter 11 Cases.

Chapter 11 Cases

Since the commencement of the second line atChapter 11 Cases, each of the manufacturing facilityDebtors has continued to operate its business as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in Millen, Georgiaaccordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. At the conclusion of the Chapter 11 Cases, we expect the Supporting Lenders to exchange certain

claims against us that they hold for 100% of the equity interests in Reorganized CARBO and that our existing common stock will be cancelled.

The commencement of the Chapter 11 Cases also constituted an event of default under our Credit Agreement that accelerated our obligations thereunder. Under the Bankruptcy Code, the Supporting Lenders are stayed from taking any action against us as a result of this event of default.

Principal Sources and Uses of Capital Resources

Our principal sources of liquidity consist of (i) cash and cash equivalents; (ii) cash generated from operations; and (iii) following the filing of the Chapter 11 Cases, borrowing capacity under the DIP Facility. Our principal liquidity requirements are currently for: (i) working capital needs; (ii) debt service and (iii) professional fees associated with the Chapter 11 Cases.

Debtor-in-Possession Financing and Exit Facility

On March 30, 2020, the Debtors entered into the DIP Credit Agreement with the DIP Facility Lenders providing for a $15 million DIP Facility. On March 30, 2020, the Bankruptcy Court granted interim approval of the Debtors’ motion to approve the DIP Facility, including the DIP Credit Agreement, and the second phaseborrowing by CARBO of up to $5 million of loans thereunder between March 30, 2020 and the Bankruptcy Court’s entry of a plant retrofit with new KRYPTOSPHERE^® technology have been suspended until such time that market conditions warrant completion.  Currently, we do not intend to completefinal order approving the second line at the Millen, Georgia facility.DIP Facility and DIP Credit Agreement.

The Company anticipates that cashDebtors’ obligations under the DIP Credit Agreement are secured by first priority priming liens on handsubstantially all of the Debtors’ assets, subject to certain customary exclusions and carve-outs. Borrowings under the DIP Facility will be sufficientmature August 29, 2020 (the “Maturity Date”) and will bear interest at a rate of 8.00% per annum.  For more information regarding the DIP Credit Agreement and DIP Facility, see ““Item 1―Business―Recent Developments―Debtor-in-Possession Financing”.  

Going Concern and Financial Reporting in Reorganization

As a result of our financial condition, the defaults under our Credit Agreement and the risks and uncertainties surrounding the Chapter 11 Cases, substantial doubt exists regarding to meet planned operating expenses and other cash needs forour ability to continue as a going concern. Accordingly, the next 12 months from the date of this Form 10-K.  The Company’s view regarding sufficiency of cash and liquidity is primarily based audit report issued by our independent registered public accounting firm on our financial forecaststatements as of and for 2018, which is impacted by various assumptions regarding demand and sales prices forthe year ended December 31, 2019 contains an explanatory paragraph expressing substantial doubt about our products.  Generally, we expect demand for our products and the sales pricesability to increasecontinue as a going concern. The accompanying consolidated financial statements have been prepared in 2018 compared to 2017.  Although we have observed certain factorsaccordance with accounting principles generally accepted in the fourth quarter 2017United States of America, which contemplate our continuation as a going concern.  As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that support improving industry conditions,may result should the Company be unable to continue as a going concern.  For additional information concerning our financial forecasts are based on estimates of customer demand, which is highly volatile inbankruptcy proceedings under Chapter 11, see Note 1 to the current operating environment, and we have no committed sales backlog with our customers.  As a result, there is inherent uncertainty in our forecasts.Consolidated Financial Statements).

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2017.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2017: