##### 



SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
   Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2005oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the transition period
    from          
    to   Commission File
    Number 0-28178
 CARBO Ceramics Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

72-1100013(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number.)   6565 MacArthur Boulevard
 Suite 1050
 Irving, Texas 75039
 (Address of principal executive
    offices)
  (972) 401-0090
 (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:
 Common Stock, par value $0.01 per share
 Preferred Stock Purchase Rights
  þ o
  o þ
  Note
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 



PART I
  Item 1.
    Business  General
          1
      Products
  HSP ® PROP ® HSP ® HSP ® PROP ®
    ®
 1




---



##### 



HSP ® HSP ®
  LITE ® ECONOPROP ® LITE ® LITE ® ECONOPROP ® ECONOPROP ® ECONOPROP ® 2
  Competition
  HSP ® PROP ®
    HSP ® PROP ® LITE ® ECONOPROP ®
      HSP ® PROP ® LITE ® ECONOPROP ®
 2




---



##### 



Customers
    and Marketing
  just-in-time
         3




---



##### 



For the Years Ended
    December 31,2005


2004


2003($ in millions)LocationUnited States

$
152.6


$
118.7


$
108.0International


100.1



104.4



61.9Total

$
252.7


$
223.1


$
169.9   Distribution
  just-in-time
  Raw
    Materials
    HSP ® PROP ® PROP ®
  LITE ® ECONOPROP ®
 4




---



##### 



ECONOPROP ® LITE ® ECONOPROP ®
  PROP ® LITE ®
  Production
    Process
      Patent
    Protection and Intellectual Property
    ® ® ® ® ® ® ®
     5




---



##### 



and/or
  and/or
    Production
    Capacity
  LITE ® ECONOPROP ® HSP ® PROP ®
   6




---



##### 



ECONOPROP ®
    AnnualLocation

Capacity


Products(Millions of pounds)New Iberia, Louisiana


120


CARBOHSP®
    and
    CARBOPROP®Eufaula, Alabama


260


CARBOLITE®
    and
    CARBOECONOPROP®McIntyre, Georgia


275


CARBOLITE®,
    CARBOECONOPROP®
    CARBOHSP®
    and
    CARBOPROP®Toomsboro, Georgia


250


CARBOECONOPROP®Luoyang, China


100


CARBOPROP®
    and
    CARBOLITE®Total current capacity


1,005   just-in-time
  Long-Lived
    Assets By Geographic Area
    2005


2004


2003($ in millions)Long-lived assets:United States

$
169.7


$
130.2


$
124.1International (primarily China and
    Russia)


31.6



17.0



14.4Total

$
201.3


$
147.2


$
138.5     Environmental
    and Other Governmental Regulations
   7




---



##### 



Employees
    Forward-Looking
    Information
  Form 10-K, Form 10-Q Form 8-K
    
    a potential decline in the demand for oil and natural gas;
    potential declines or increased volatility in oil and natural
    gas prices that would adversely affect our customers, the energy
    industry or our production costs;
    potential reductions in spending on exploration and development
    drilling in the oil and natural gas industry that would reduce
    demand for our products and services;
    an increase in competition in the proppant market;
    the development of alternative stimulation techniques;
    the development of alternative proppants for use in hydraulic
    fracturing;
    general global economic and business conditions;
    fluctuations in foreign currency exchange rates; and
    the potential expropriation of assets by foreign governments.    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K http://www.carboceramics.com
  1-800-SEC-0330.
 8




---



##### 



http://www.sec.gov
  Item 1ARisk
    Factors
  Form 10-K
  Our
    business and financial performance depend on the level of
    activity in the natural gas and oil industries.
    Our
    business and financial performance could suffer if new processes
    are developed to replace hydraulic fracturing.
    We may
    be adversely affected by decreased demand for ceramic proppant
    or the development by our competitors of effective alternative
    proppants.
    We
    operate in a competitive market.
    We
    rely upon, and receive a significant percentage of our revenues
    from, a limited number of key customers.
   9




---



##### 



just-in-time
  We
    rely on certain patents.
      Significant
    increases in fuel prices for any extended periods of time will
    increase our operating expenses.
    We are
    exposed to increased costs associated with complying with
    increasing and new regulation of corporate governance and
    disclosure standards
    Environmental
    compliance costs and liabilities could reduce our earnings and
    cash available for operations.
   10




---



##### 



Our
    international operations subject us to risks inherent in doing
    business on an international level that could adversely impact
    our results of operations.
    
    economic and political instability (including as a result of the
    threat or occurrence of armed international conflict or
    terrorist attacks);
    changes in regulatory requirements, tariffs, customs, duties and
    other trade barriers;
    transportation delays;
    power supply shortages and shutdowns;
    difficulties in staffing and managing foreign operations and
    other labor problems;
    currency convertibility and repatriation;
    taxation of our earnings and the earnings of our personnel;
    potential expropriation of assets by foreign
    governments; and
    other risks relating to the administration of or changes in, or
    new interpretations of, the laws, regulations and policies of
    the jurisdictions in which we conduct our business.    The
    market price of our common stock will fluctuate, and could
    fluctuate significantly.
    
    the liquidity of the market for our common stock;
    differences between our actual financial or operating results
    and those expected by investors and analysts;
    changes in analysts recommendations or projections;
    new statutes or regulations or changes in interpretations of
    existing statutes and regulations affecting our business; 11




---



##### 




    changes in general economic or market conditions; and
    broad market fluctuations.  Our
    actual results could differ materially from results anticipated
    in forward-looking statements we make.
  Form 10-K Form 10-K.
  Item 1B.Unresolved
    Staff Comments
    Item 2.
    Properties           12




---



##### 



786-acre
            Item 3.
    Legal
    Proceedings      Item 4.
    Submission
    of Matters to a Vote of Security Holders    Executive
    Officers of the Registrant
     13




---



##### 



PART II
  Item 5.
    Market
    for Registrants Common Equity and Related Stockholder
    Matters  Common
    Stock Market Prices and Dividends
    three-for-two
  2005


2004Cash








CashSales Price


Dividends


Sales Price


DividendsQuarter Ended

High


Low


Declared


High


Low


DeclaredMarch 31

$
50.20


$
40.74


$
0.08


$
43.72


$
32.89


$
0.07June 30


52.40



42.40



0.08



48.76



40.22



0.07September 30


67.99



51.91



0.10



48.33



42.27



0.08December 31


66.43



51.45



0.10



51.49



44.79



0.08     Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   14




---



##### 



Item 6.
    Selected
    Financial Data  Form 10-K.
  Years Ended
    December 31,2005


2004


2003


2002


2001($ in thousands, except per
    share data)Statement of Income
    Data:Revenues

$
252,673


$
223,054


$
169,936


$
126,308


$
137,226Cost of sales


153,941



131,648



103,769



79,425



82,919Gross profit


98,732



91,406



66,167



46,883



54,307Selling, general and
    administrative expenses (1)


28,432



26,008



19,153



16,203



14,732Operating profit


70,300



65,398



47,014



30,680



39,575Other, net


1,783



824



73



563



1,106Income before income taxes


72,083



66,222



47,087



31,243



40,681Income taxes


25,463



24,549



17,518



11,529



14,483Net income

$
46,620


$
41,673


$
29,569


$
19,714


$
26,198Earnings per shareBasic

$
1.94


$
1.75


$
1.27


$
0.86


$
1.17Diluted

$
1.93


$
1.73


$
1.26


$
0.85


$
1.16   December 31,2005


2004


2003


2002


2001($ in thousands, except per
    share data)Balance Sheet Data:Current assets

$
148,287


$
146,282


$
92,709


$
64,867


$
76,502Current liabilities excluding bank
    borrowings


36,309



29,192



16,432



17,940



11,127Bank borrowings-current


















Property, plant and equipment, net


179,500



125,385



116,664



111,797



82,527Total assets


355,796



297,517



235,124



199,610



159,029Total shareholders equity


293,366



244,367



200,139



168,585



136,942Cash dividends per share

$
0.36


$
0.29


$
0.25


$
0.24


$
0.23     (1)
    
    Selling, general and administrative (SG&A) expenses for
    2005, 2004, 2003, 2002 and 2001 include costs of
    start-up
    activities of $1,092,000, none, $80,000, $1,099,000 and $35,000,
    respectively.
    Start-up
    costs for 2005 are related primarily to the new production
    facility in Toomsboro, Georgia.
    Start-up
    costs for 2003 are related to expansion of the McIntyre and New
    Iberia facilities and initial operation of the new China
    facility.
    Start-up
    costs for 2002 and 2001 are related to the new production
    facility in China, including organizational and administrative
    costs associated with plant construction plus labor, materials
    and utilities expended to bring installed equipment to operating
    condition. SG&A expenses in 2002 also include the accrual of
    a $993,000 reserve related to a legal judgment against the
    Company. SG&A expenses in 2005, 2004 and 2003 also include
    losses of $95,000, $1,144,000 and $717,000, respectively,
    associated with the disposal of certain equipment and impairment
    of certain Pinnacle software. 15




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Executive
    Level Overview
           16




---



##### 




    increasing marketing activities,
    improving and expanding its distribution capabilities,
    focusing on new product development, and
    increasing international activities.    General
    Business Conditions
       17




---



##### 



Critical
    Accounting Policies
            Results
    of Operations
  Net
    Income
  Percent





Percent2005


Change


2004


Change


2003($ in thousands)Net Income

$
46,620



12
%

$
41,673



41
%

$
29,569  18




---



##### 



Revenues
  Percent





Percent2005


Change


2004


Change


2003($ in thousands)Consolidated revenues

$
252,673



13
%

$
223,054



31
%

$
169,936Revenues by operating segment:Proppant

$
225,751



12
%

$
201,039



29
%

$
155,760Fracture and Reservoir Diagnostics

$
26,922



22
%

$
22,015



55
%

$
14,176      19




---



##### 



Gross
    Profit
  Percent





Percent2005


Change


2004


Change


2003($ in thousands)Consolidated gross profit

$
98,732



8
%

$
91,406



38
%

$
66,167Consolidated gross profit %


39
%






41
%






39
%Gross profit by operating segment:Proppant

$
88,488



9
%

$
81,548



36
%

$
60,039Proppant %


39
%






41
%






39
%Fracture and Reservoir Diagnostics

$
10,244



4
%

$
9,858



61
%

$
6,128Fracture and Reservoir Diagnostics
    %


38
%






45
%






43
%      20




---



##### 



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





Percent2005


Change


2004


Change


2003($ in thousands)Consolidated SG&A and other

$
28,432



9
%

$
26,008



36
%

$
19,153As a % of revenues


11
%






12
%






11
%SG&A and other by operating
    segment:Proppant

$
20,922



7
%

$
19,480



31
%

$
14,850Proppant %


9
%






10
%






10
%Fracture and Reservoir Diagnostics

$
7,510



15
%

$
6,528



52
%

$
4,303Fracture and Reservoir Diagnostics
    %


28
%






30
%






30
%   start-up
     21




---



##### 



Income
    Tax Expense
  Percent





Percent2005


Change


2004


Change


2003($ in thousands)Income Tax Expense

$
25,463



4
%

$
24,549



40
%

$
17,518Effective Income Tax Rate


35.3
%






37.1
%






37.2
%       Liquidity
    and Capital Resources
      three-for-two
 22




---



##### 



Off-Balance
    Sheet Arrangements
    Contractual
    Obligations
    Payments Due in PeriodLess Than


1-3


4-5


More ThanTotal


1 Year


Years


Years


5 Years($ in thousands)Long-term debt

$



$



$



$



$
Capital lease obligations


















Operating lease obligations: Primarily railroad
    equipment


14,515



2,752



4,056



2,321



5,386Purchase obligations: Natural gas contracts


21,177



20,455



722







 Raw materials contracts


16,020



7,920



8,100







 Equipment purchases


15,848



15,848











 Other purchase
    obligations


3,367



1,116



2,251







Other long-term obligations


















Total contractual obligations

$
70,927


$
48,091


$
15,129


$
2,321


$
5,386        23




---



##### 



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk      Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures          page F-1
    page F-2
 24




---



##### 



Item 9B.Other
    Information
    PART III
    Item 10.
    Directors
    and Executive Officers of the Registrant  Regulation S-K Form 10-K.
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accounting Fees and Services   25




---



##### 



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  Exhibits, Financial Statements and Financial
    Statement Schedules:
                  page S-1
     26




---



##### 



SIGNATURES
    CARBO Ceramics Inc.
  By:
    /s/  JESSE P. ORSINI    President and Chief Executive Officer
  By:
    /s/  PAUL G. VITEK    Sr. Vice President, Finance and
 Chief Financial Officer
    POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K, attorneys-in-fact,
    Signature

Title

Date/s/  WILLIAM
    C. MORRISWilliam
    C. Morris

Chairman of the Board

March 7, 2006/s/  JESSE
    P. ORSINIJesse
    P. Orsini

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 7, 2006/s/  PAUL
    G. VITEKPaul
    G. Vitek

Sr. Vice President, Finance and
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

March 7, 2006/s/  CLAUDE
    E. COOKE, JR.Claude
    E. Cooke, Jr.

Director

March 7, 2006/s/  CHAD
    C. DEATONChad
    C. Deaton

Director

March 7, 2006 27




---



##### 



Signature

Title

Date/s/  H.E.
    LENTZ, JR.H.E.
    Lentz, Jr.

Director

March 7, 2006/s/  JOHN
    J. MURPHYJohn
    J. Murphy

Director

March 7, 2006/s/  ROBERT
    S. RUBINRobert
    S. Rubin

Director

March 7, 2006  28




---



##### 



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  Rules 13a-15(f) 15d-15(f)
       F-1




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
    INTERNAL CONTROL OVER FINANCIAL REPORTING
                     F-2




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 F-3




---



##### 



CARBO
    CERAMICS INC.
 CONSOLIDATED BALANCE SHEETS
  December 31,2005


2004($ in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
19,695


$
33,990Short-term investments


41,975



46,125Trade accounts receivable, net


53,918



41,191Inventories:Finished goods


17,981



12,878Raw materials and supplies


8,490



8,314Total inventories


26,471



21,192Prepaid expenses and other current
    assets


2,433



1,232Deferred income taxes


3,795



2,552Total current assets


148,287



146,282Property, plant and equipment:Land and land improvements


2,812



1,958Land-use and mineral rights


5,271



5,248Buildings


15,051



14,604Machinery and equipment


154,785



145,043Construction in progress


72,074



16,278Total


249,993



183,131Less accumulated depreciation


70,493



57,746Net property, plant and equipment


179,500



125,385Goodwill


21,840



21,840Intangible and other assets, net


6,169



4,010Total assets

$
355,796


$
297,517LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
11,277


$
10,454Accrued payroll and benefits


6,941



6,182Accrued freight


1,356



1,378Accrued utilities


3,389



2,065Accrued income taxes


9,998



5,595Retainage related to construction
    in progress


337



456Other accrued expenses


3,011



3,062Total current liabilities


36,309



29,192Deferred income taxes


26,121



23,958Shareholders equity:Preferred stock, par value
    $0.01 per share, 5,000 shares authorized, none
    outstanding






Common stock, par value
    $0.01 per share, 40,000,000 shares authorized;
    24,286,388 and 23,973,814 shares issued and outstanding at
    December 31, 2005 and 2004, respectively


243



240Additional paid-in capital


102,536



90,766Unearned stock compensation


(2,135
)


(943
)Retained earnings


192,196



154,335Accumulated other comprehensive
    income (loss)


526



(31
)Total shareholders equity


293,366



244,367Total liabilities and
    shareholders equity

$
355,796


$
297,517    F-4




---



##### 



CARBO
    CERAMICS INC.
 CONSOLIDATED STATEMENTS OF INCOME
  Years Ended
    December 31,2005


2004


2003($ in thousands, except per
    share data)Revenues

$
252,673


$
223,054


$
169,936Cost of sales


153,941



131,648



103,769Gross profit


98,732



91,406



66,167Selling, general and
    administrative expenses


27,245



24,864



18,374Start-up
    costs


1,092







80Provision for legal judgment










(18
)Loss on disposal or impairment of
    assets


95



1,144



717Operating profit


70,300



65,398



47,014Other income (expense):Interest income


1,765



580



204Interest expense


(9
)


(10
)


(13
)Earnings in equity-method investee


208







Other, net


(181
)


254



(118
)1,783



824



73Income before income taxes


72,083



66,222



47,087Income taxes


25,463



24,549



17,518Net income

$
46,620


$
41,673


$
29,569Earnings per share:Basic

$
1.94


$
1.75


$
1.27Diluted

$
1.93


$
1.73


$
1.26    F-5




---



##### 



CARBO
    CERAMICS INC.
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  Unearned





AccumulatedAdditional


Stock





OtherCommon


Paid-In


Compen-


Retained


ComprehensiveStock


Capital


sation


Earnings


Income (Loss)


Total($ in thousands, except per
    share data)Balances at January 1, 2003

$
233


$
72,925


$
(557
)

$
96,000


$
(16
)

$
168,585Net income














29,569







29,569Foreign currency translation
    adjustment


















(26
)


(26
)Comprehensive income






















29,543Exercise of stock options


3



4,796







(1
)






4,798Tax benefit from exercise of
    options






1,308















1,308Shares issued in acquisition






1,505















1,505Amortization of unearned
    compensation










304











304Cash dividends ($0.25 per
    share)














(5,904
)






(5,904
)Balances at December 31, 2003


236



80,534



(253
)


119,664



(42
)


200,139Net income














41,673







41,673Foreign currency translation
    adjustment


















11



11Comprehensive income






















41,684Exercise of stock options


4



6,128







(1
)






6,131Tax benefit from exercise of
    options






2,981















2,981Stock granted under restricted
    stock plan, net






1,123



(1,123
)










Amortization of unearned
    compensation










433











433Cash dividends ($0.29 per
    share)














(7,001
)






(7,001
)Balances at December 31, 2004


240



90,766



(943
)


154,335



(31
)


244,367Net income














46,620







46,620Foreign currency translation
    adjustment


















557



557Comprehensive income






















47,177Exercise of stock options


3



6,050















6,053Tax benefit from exercise of
    options






3,712















3,712Stock granted under restricted
    stock plan, net






2,008



(2,008
)










Amortization of unearned
    compensation










816











816Cash dividends ($0.36 per
    share)














(8,759
)






(8,759
)Balances at December 31, 2005

$
243


$
102,536


$
(2,135
)

$
192,196


$
526


$
293,366    F-6




---



##### 



CARBO
    CERAMICS INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended
    December 31,2005


2004


2003($ in thousands)Operating activitiesNet income

$
46,620


$
41,673


$
29,569Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation


12,949



11,762



9,921Amortization


675



415



472Provision for doubtful accounts


682



666



160Deferred income taxes


920



4,930



4,414Loss on disposal or impairment of
    assets


95



1,144



717Foreign currency transaction loss


147







Non-cash stock compensation expense


816



433



304Earnings in equity-method investee


(208
)






Changes in operating assets and
    liabilities:Trade accounts receivable


(13,347
)


(11,462
)


(7,588
)Inventories


(5,203
)


(755
)


(4,607
)Prepaid expenses and other current
    assets


(1,199
)


(146
)


(486
)Long-term prepaid expenses


(1,107
)






Accounts payable


794



4,855



1,880Accrued payroll and benefits


753



1,502



1,699Accrued freight


(23
)


302



322Accrued utilities


1,323



420



584Accrued income taxes


8,116



8,538



(194
)Payment of legal judgment






(975
)


(18
)Other accrued expenses


(55
)


908



1,134Net cash provided by operating
    activities


52,748



64,210



38,283Investing activitiesCapital expenditures, net


(67,811
)


(21,950
)


(21,975
)Purchase of Pinnacle Technologies,
    Inc.










(909
)Investment in equity-method
    investee


(611
)






Purchases of short-term investments


(72,175
)


(70,125
)


Proceeds from maturities of
    short-term investments


76,325



24,000



Net cash used in investing
    activities


(64,272
)


(68,075
)


(22,884
)Financing activitiesProceeds from exercise of stock
    options


6,053



6,131



4,798Dividends paid


(8,759
)


(7,001
)


(5,904
)Net cash used in financing
    activities


(2,706
)


(870
)


(1,106
)Net increase (decrease) in cash
    and cash equivalents


(14,230
)


(4,735
)


14,293Effect of exchange rate changes on
    cash


(65
)


11



(26
)Cash and cash equivalents at
    beginning of year


33,990



38,714



24,447Cash and cash equivalents at end
    of year

$
19,695


$
33,990


$
38,714Supplemental cash flow
    informationInterest paid

$
9


$
10


$
13Income taxes paid

$
16,427


$
11,081


$
13,298    F-7




---



##### 



CARBO
    CERAMICS INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Significant
    Accounting Policies  Description
    of Business
    Principles
    of Consolidation
    Concentration
    of Credit Risk and Accounts Receivable
    Cash
    Equivalents
    Short-Term
    Investments
  available-for-sale
  Inventories
  (first-in,
 F-8




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Property,
    Plant and Equipment
    Buildings and improvements

15 to 30 yearsMachinery and equipment

3 to 30 yearsLand-use rights

30 years   50-year 30-year
  units-of-production
  Impairment
    of Long-Lived Assets and Intangible Assets
    Capitalized
    Software Costs
    Goodwill
   F-9




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Split
  three-for-two
  Revenue
    Recognition
    Shipping
    and Handling Costs
    Reclassifications
      Cost
    of Start-Up
    Activities
  Start-up Start-up Start-up Start-up
 F-10




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Use of
    Estimates
    Research
    and Development Costs
    Stock-Based
    Compensation
        2005


2004


2003($ in thousands, except per
    share data)Net income, as reported

$
46,620


$
41,673


$
29,569Add: stock-based employee
    compensation expense included in reported net income, net of
    related tax effects


514



273



191Deduct: total stock-based
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(1,157
)


(1,255
)


(1,145
)Pro forma net income

$
45,977


$
40,691


$
28,615Earnings per share:Basic  as reported

$
1.94


$
1.75


$
1.27Basic  pro forma

$
1.92


$
1.70


$
1.23Diluted  as
    reported

$
1.93


$
1.73


$
1.26Diluted  pro forma

$
1.90


$
1.69


$
1.22  F-11




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Foreign
    Subsidiaries
    New
    Accounting Pronouncements
  Accounting Changes and Error
    Corrections. Accounting Changes Reporting Accounting Changes in Interim Financial
    Statements.
  Inventory Costs Inventory Pricing
  No. 123-Revised Share-Based Payment Accounting for
    Stock-Based Compensation. Accounting for Stock Issued to Employees Statement of Cash Flows.
 F-12




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2.
    Intangible
    and Other Assets    2005


2004Gross


Accumulated


Gross


AccumulatedAmount


Amortization


Amount


Amortization($ in thousands)Intangibles subject to
    amortization:Patents and licenses

$
2,676


$
934


$
2,526


$
672Hardware designs


818



488



758



331Software


2,494



364



1,836



107$
5,988


$
1,786


$
5,120


$
1,110         3.
    Bank
    Borrowings   F-13




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Leases    2006

$
2,7522007


2,2732008


1,7832009


1,3692010


952Thereafter


5,386Total

$
14,515     5.
    Income
    Taxes    2005


2004($ in thousands)Deferred tax assets:Employee benefits

$
1,375


$
933Inventories


718



803Foreign tax credits


868



283Other


834



533Total deferred tax assets


3,795



2,552Deferred tax
    liabilities:Depreciation


22,181



22,100Goodwill


1,583



1,139Foreign earnings and other


2,357



719Total deferred tax liabilities


26,121



23,958Net deferred tax liabilities

$
22,326


$
21,406  F-14




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004


2003($ in thousands)Current:Federal

$
21,815


$
16,803


$
11,211State


2,728



2,816



1,893Total current


24,543



19,619



13,104Deferred:Federal


702



4,237



3,829State


218



693



585Total deferred


920



4,930



4,414$
25,463


$
24,549


$
17,518     2005


2004


2003Amount


Percent


Amount


Percent


Amount


Percent($ in thousands)U.S. statutory rate

$
25,229



35.0
%

$
23,178



35.0
%

$
16,480



35.0
%State income taxes, net of federal
    tax benefit


1,950



2.7



2,281



3.4



1,611



3.4Extraterritorial Income Exclusion
    and other


(1,716
)


(2.4
)


(910
)


(1.3
)


(573
)


(1.2
)$
25,463



35.3
%

$
24,549



37.1
%

$
17,518



37.2
%   6.
    Shareholders
    Equity  Common
    Stock
    three-for-two
   F-15




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Preferred
    Stock
    Shareholder
    Rights Plan
    7.
    Stock-Based
    Compensation     F-16




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004


2003Options


Weighted-Average


Options


Weighted-Average


Options


Weighted-Average(000)


Exercise Price


(000)


Exercise Price


(000)


Exercise PriceOutstanding-beginning of year


570


$
22



889


$
20



1,167


$
19Granted










36



37



51



23Exercised


272



22



348



17



311



15Forfeited


7



26



7



24



18



17Outstanding-end of year


291


$
22



570


$
22



889


$
20Exercisable at end of year


197


$
20



318


$
20



511


$
18Weighted-average fair value of
    options granted during the year

$







$
15.74






$
9.33     Outstanding OptionsWeighted





Exercisable OptionsAverage


Weighted





WeightedExercise




Remaining


Average





AveragePrice

Number


Contractual


Exercise


Number


ExerciseRange

(000)


Life


Price


(000)


Price$ 5 - 16


41



3 years


$
10



41


$
1020 - 28


222



6 years



23



153



2234 - 41


28



8 years



38



3



40291







22



197



20     GrantDate per





As of December 31,
    2005Share











UnrecognizedNumber of Shares


Fair


Recognition


Shares


Shares


CompensationGrant Date

Granted


Value


Period


Forfeited


Vested


($ in thousands)April 2004


27,645


$
41.39



3 years



3,887



9,021


$
421January 2005


30,167


$
45.80



3 years



4,920






$
789October 2005


18,650


$
53.15



3 years










$
924  F-17




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Earnings
    Per Share    2005


2004


2003($ in thousands, except per
    share data)Numerator for basic and diluted
    earnings per share:Net income

$
46,620


$
41,673


$
29,569Denominator:Denominator for basic earnings per
    share    weighted-average shares


24,004,563



23,868,138



23,339,677Effect of dilutive securities:Employee stock options (See
    Note 7)


166,141



189,487



167,295Nonvested stock awards (See
    Note 7)


6,660



7,023



Contingent stock acquisition










27,069Dilutive potential common shares


172,801



196,510



194,364Denominator for diluted earnings
    per share    adjusted weighted-average
    shares


24,177,364



24,064,648



23,534,041Basic earnings per share

$
1.94


$
1.75


$
1.27Diluted earnings per share

$
1.93


$
1.73


$
1.26   9.
    Quarterly
    Operating Results  (Unaudited)    Three Months Ended,March 31


June 30


September 30


December 31($ in thousands, except per
    share data)2005Revenues

$
61,168


$
63,834


$
64,104


$
63,567Gross profit


24,821



25,632



24,949



23,330Net income


11,594



12,177



12,452



10,397Earnings per share:Basic

$
0.48


$
0.51


$
0.52


$
0.43Diluted

$
0.48


$
0.50


$
0.51


$
0.432004Revenues

$
50,011


$
52,350


$
58,482


$
62,211Gross profit


20,344



21,461



24,858



24,743Net income


9,568



9,857



11,497



10,751Earnings per share:Basic

$
0.40


$
0.41


$
0.48


$
0.45Diluted

$
0.40


$
0.41


$
0.48


$
0.45    F-18




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Segment
    Information  Disclosures about Segments of an
    Enterprise and Related Information
          Fracture andReservoirProppant


Diagnostics


Total($ in thousands)2005Revenue from external customers

$
225,751


$
26,922


$
252,673Income before income taxes


69,415



2,668



72,083Total assets


319,573



27,799



347,372Capital expenditures, net


60,983



6,828



67,811Depreciation and amortization


10,520



3,104



13,6242004Revenue

$
201,039


$
22,015


$
223,054Income before income taxes


62,984



3,238



66,222Total assets


264,342



21,360



285,702Capital expenditures, net


17,386



4,564



21,950Depreciation and amortization


9,986



2,191



12,1772003Revenue

$
155,760


$
14,176


$
169,936Income before income taxes


45,422



1,665



47,087Total assets


204,711



16,146



220,857Capital expenditures, net


18,589



3,386



21,975Depreciation and amortization


8,670



1,723



10,393  F-19




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Geographic
    Information
    2005


2004


2003($ in thousands)Long-lived assets:United States

$
173,917


$
134,250


$
128,059International (primarily China and
    Russia)


31,625



16,985



14,356Total

$
205,542


$
151,235


$
142,415     2005


2004


2003($ in thousands)Revenues:United States

$
152,595


$
118,665


$
107,992Canada


38,775



28,236



18,085Russia


17,465



35,214



9,799Other international


43,838



40,939



34,060Total

$
252,673


$
223,054


$
169,936   Sales
    to Customers
    Major CustomersA


B


C


Others


Total2005


30.5%



17.3%



16.9%



35.3%



100%2004


28.3%



13.5%



23.6%



34.6%



100%2003


30.1%



16.5%



24.3%



29.1%



100%   11.
    Benefit
    Plans    2005


2004


2003($ in thousands)Contributions:Profit sharing

$
941


$
990


$
719Savings


606



525



431$
1,547


$
1,515


$
1,150  F-20




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     12.
    Commitments           F-21




---



##### 



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        13.
    Employment
    Agreements      14.
    Legal
    Proceedings and Judgment    15.
    Subsequent
    Event   F-22




---



##### 



CARBO
    Ceramics Inc.
 Schedule II  Consolidated Valuation and
    Qualifying Accounts
    For the Years Ended December 31, 2005, 2004 and 2003
  Balance at


Charged to





Balance atBeginning of


Costs and





End ofYear Ended

Year


Expenses


Write-offs


Year($ in thousands)Allowance for doubtful accounts:December 31, 2005

$
665


$
682


$
12


$
1,335December 31, 2004

$
20


$
666


$
21


$
665December 31, 2003

$



$
160


$
140


$
20  S-1




---



##### 



Exhibit Index
  3
.1

Certificate of Incorporation of
    CARBO Ceramics Inc. (incorporated by reference to
    exhibit 3.1 to the registrants
    Form S-1
    Registration Statement
    No. 333-1884)3
.2

Bylaws of CARBO Ceramics Inc.
    (incorporated by reference to exhibit 3.2 to the
    registrants
    Form S-1
    Registration Statement
    No. 333-1884
    and exhibit 99.2 to the Companys
    form 8-K
    Current Report filed July 20, 2005)4
.1

Form of Common Stock Certificate
    of CARBO Ceramics Inc. (incorporated by reference to
    exhibit 4.1 to the registrants
    Form S-1
    Registration Statement
    No. 333-1884)4
.2

Certificate of Designations of
    Series A Preferred Stock (incorporated by reference to
    exhibit 2 to registrants
    Form 8-A
    Registration Statement No.
    001-15903)10
.1

Second Amended and Restated Credit
    Agreement dated as of December 31, 2000, as amended
    December 23, 2003 and as further amended December 10,
    2004, between Brown Brothers Harriman & Co. and CARBO
    Ceramics Inc. (incorporated by reference to exhibit 10.1 to
    the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2000)10
.2

Form of Tax Indemnification
    Agreement between CARBO Ceramics Inc. and William C. Morris,
    Robert S. Rubin, Lewis C. Glucksman, George A. Wiegers, William
    A. Griffin, and Jesse P. Orsini (incorporated by reference to
    exhibit 10.2 to the registrants
    Form S-1
    Registration Statement
    No. 333-1884)10
.3

Purchase and Sale Agreement dated
    as of March 31, 1995, between CARBO Ceramics Inc. and GEO
    Specialty Chemicals, Inc., as amended (incorporated by reference
    to exhibit 10.5 to the registrants
    Form S-1
    Registration Statement
    No. 333-1884)10
.4

Raw Material Requirements
    Agreement dated as of June 1, 2003, between CARBO Ceramics
    Inc. and C-E Minerals Inc. (incorporated by reference to
    exhibit 10.4 the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2003)*10
.5

CARBO Ceramics Inc. 1996 Stock
    Option Plan for Key Employees (incorporated by reference to
    exhibit 10.9 to the registrants
    Form S-1
    Registration Statement
    No. 333-1884)*10
.6

Amendment No. 1 to the CARBO
    Ceramics Inc. 1996 Stock Option Plan for Key Employees
    (incorporated by reference to exhibit 4.5 to the
    registrants
    Form S-8
    Registration Statement
    No. 333-88100)*10
.7

Form of Stock Option Award
    Agreement (incorporated by reference to exhibit 10.10 to
    the registrants
    Form S-1
    Registration Statement
    No. 333-1884)10
.8

Mining Agreement dated as of
    January 1, 2003 between CARBO Ceramics Inc. and Arcilla
    Mining and Land Co. (incorporated by reference to
    exhibit 10.8 to the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2002)*10
.9

Employment Agreement between CARBO
    Ceramics Inc. and C. Mark Pearson (incorporated by reference to
    exhibit 10.9 to the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2003)*10
.10

Employment Agreement between CARBO
    Ceramics Inc. and Christopher A. Wright (incorporated by
    reference to the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2002)*10
.11

1996 Stock Option Plan of Pinnacle
    Technologies, Inc., as amended and restated May 31, 2002
    (incorporated by reference to exhibit 4.1 to
    registrants
    Form S-8
    Registration Statement
    No. 333-91252)10
.12

Lease Agreement dated as of
    November 1, 2003, between the Development Authority of
    Wilkinson Count and CARBO Ceramics Inc. (incorporated by
    reference to exhibit 10.12 the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2003)*10
.13

CARBO Ceramics Inc. Incentive
    Compensation Plan (incorporated by reference to
    exhibit 99.1 of the registrants
    Form 8-K
    Current Report filed January 24, 2005)*10
.14

2004 CARBO Ceramics Inc. Long-Term
    Incentive Plan (incorporated by reference to exhibit 99.2
    of the registrants
    Form 8-K
    Current Report filed January 24, 2005)*10
.15

Form of Officer Restricted Stock
    Award Agreement (incorporated by reference to exhibit 99.3
    of the registrants
    Form 8-K
    Current Report filed January 24, 2005)*10
.16

CARBO Ceramics Inc. Director
    Deferred Fee Plan (incorporated by reference to
    exhibit 99.1 of the registrants
    Form 8-K
    Current Report filed December 19, 2005)*10
.17

Separation Agreement dated as of
    December 2, 2005 between CARBO Ceramics Inc. and C. Mark
    Pearson




---



##### 



*10
.18

Letter Agreement dated
    December 2, 2005 between CARBO Ceramics Inc. and Jesse P.
    Orsini14


Code of Ethics (incorporated by
    reference to exhibit 14 to the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2003)21


Subsidiaries23
.1

Consent of Independent Registered
    Public Accounting Firm31
.1

Rule 13a-14(a)/15d-14(a)
    Certification by Jesse P. Orsini31
.2

Rule 13a-14(a)/15d-14(a)
    Certification by Paul G. Vitek32


Certification pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Management contract or compensatory plan or arrangement filed as
    an exhibit pursuant to Item 15(b) of the requirements for
    an Annual Report on
    Form 10-K.