##### Table of Contents



SECURITIES AND EXCHANGE
    COMMISSIONWashington, 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, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 0-28178
 CARBO Ceramics Inc.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE(State or other
    jurisdiction of
    incorporation or organization)

72-1100013(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:
    Securities registered pursuant to Section 12(g) of the
    Act:
 None
  þ o
  o þ
  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




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESMANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL  CONTROL OVER FINANCIAL REPORTINGREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSExhibit IndexSubsidiariesConsent of Independent Registered Public Accounting FirmRule 13a-14(a)/15d-14(a) Certification by Gary A. KolstadRule 13a-14(a)/15d-14(a) Certification by Paul G. VitekCertification Pursuant to Section 906    Table of Contents  
  PART I
 
  Item 1.
    Business  General
              HSP ® PROP ® HSP ® HSP ® PROP ® HSP ® HSP ®
  LITE ® ECONOPROP ® LITE ® LITE ® ECONOPROP ®
 1




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##### Table of Contents



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




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Customers
    and Marketing
  just-in-time and/or
  and/or
 3




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For the Years Ended December 31,2006


2005


2004($ in millions)LocationUnited States

$
205.0


$
152.6


$
118.7International


107.1



100.1



104.4Total

$
312.1


$
252.7


$
223.1   Distribution
  just-in-time
 4




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##### Table of Contents



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




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LITE ® ECONOPROP ® ULTRALITE ® 2 PROP ®
    and/or
  and/or
   6




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Production
    Capacity
    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
    2006


2005


2004($ in millions)Long-lived assets:United States

$
200.0


$
173.9


$
134.2International (primarily China and
    Russia)


58.8



31.6



17.0Total

$
258.8


$
205.5


$
151.2  7




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Environmental
    and Other Governmental Regulations
    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, such as
    extraction of oil or gas without fracturing;
    the development of alternative proppants for use in hydraulic
    fracturing;
    general global economic and business conditions;
    fluctuations in foreign currency exchange rates; and 8




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
    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. http://www.sec.gov
 
  Item 1A
    Risk
    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.
   9




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We
    rely upon, and receive a significant percentage of our revenues
    from, a limited number of key customers.
  just-in-time
  We
    rely on certain patents.
  ®
  We
    operate in an increasingly competitive market.
    Significant
    increases in fuel prices for any extended periods of time will
    increase our operating expenses.
   10




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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.
      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 rate fluctuations, 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.   11




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and/or
  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;
    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




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786-acre
         
  Item 3.
    Legal
    Proceedings     13




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Item 4.
    Submission
    of Matters to a Vote of Security Holders    Executive
    Officers of the Registrant
             
  PART II
 
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Common
    Stock Market Prices, Dividends and Stock Repurchases
   14




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##### Table of Contents



three-for-two
  2006


2005Cash








CashSales Price


Dividends


Sales Price


DividendsQuarter Ended

High


Low


Declared


High


Low


DeclaredMarch 31

$
67.67


$
50.71


$
0.10


$
50.20


$
40.74


$
0.08June 30


65.83



44.37



0.10



52.40



42.40



0.08September 30


50.20



34.21



0.12



67.99



51.91



0.10December 31


39.81



32.16



0.12



66.43



51.45



0.10       Securities
    Authorized for Issuance Under Equity Compensation
    Plans
   
  Item 6.
    Selected
    Financial Data  Form 10-K.
  Years Ended December 31,2006


2005


2004


2003


2002($ in thousands, except per share data)Statement of Income
    Data:Revenues

$
312,126


$
252,673


$
223,054


$
169,936


$
126,308Cost of sales


196,133



153,941



131,648



103,769



79,425Gross profit


115,993



98,732



91,406



66,167



46,883Selling, general and
    administrative expenses(1)


35,206



28,432



26,008



19,153



16,203Operating profit


80,787



70,300



65,398



47,014



30,680Other, net


3,027



1,783



824



73



563Income before income taxes


83,814



72,083



66,222



47,087



31,243Income taxes


29,561



25,463



24,549



17,518



11,529Net income

$
54,253


$
46,620


$
41,673


$
29,569


$
19,714Earnings per shareBasic

$
2.23


$
1.94


$
1.75


$
1.27


$
0.86Diluted

$
2.22


$
1.93


$
1.73


$
1.26


$
0.85   15




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##### Table of Contents



December 31,2006


2005


2004


2003


2002($ in thousands, except per share data)Balance Sheet Data:Current assets

$
143,925


$
148,287


$
146,282


$
92,709


$
64,867Current liabilities excluding bank
    borrowings


34,246



36,309



29,192



16,432



17,940Bank borrowings-current


















Property, plant and equipment, net


231,748



179,500



125,385



116,664



111,797Total assets


404,665



355,796



297,517



235,124



199,610Total shareholders equity


342,859



293,366



244,367



200,139



168,585Cash dividends per share

$
0.44


$
0.36


$
0.29


$
0.25


$
0.24     (1)
    
    Selling, general and administrative (SG&A) expenses for
    2006, 2005, 2004, 2003 and 2002 include costs of
    start-up
    activities of $474,000, $1,092,000, none, $80,000, and
    $1,099,000, respectively.
    Start-up
    costs for 2006 and 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 Luoyang, China
    facility.
    Start-up
    costs for 2002 are related to the Luoyang, China facility,
    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. 
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Executive
    Level Overview
       16




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
    increasing marketing activities globally,
    improving and expanding its distribution capabilities, and
    focusing on new product development   17




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General
    Business Conditions
        Critical
    Accounting Policies
       18




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##### Table of Contents



Results
    of Operations
  Net
    Income
  Percent





Percent2006


Change


2005


Change


2004($ in thousands)Net Income

$
54,253



16
%

$
46,620



12
%

$
41,673   start-up start-up
   19




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##### Table of Contents



Revenues
  Percent





Percent2006


Change


2005


Change


2004($ in thousands)Consolidated revenues

$
312,126



24
%

$
252,673



13
%

$
223,054Revenues by operating segment:Proppant

$
278,020



23
%

$
225,751



12
%

$
201,039Fracture and Reservoir Diagnostics

$
34,106



27
%

$
26,922



22
%

$
22,015          20




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##### Table of Contents



Gross
    Profit
  Percent





Percent2006


Change


2005


Change


2004($ in thousands)Consolidated gross profit

$
115,993



17
%

$
98,732



8
%

$
91,406Consolidated gross profit %


37
%






39
%






41
%Gross profit by operating segment:Proppant

$
100,739



14
%

$
88,488



9
%

$
81,548Proppant %


36
%






39
%






41
%Fracture and Reservoir Diagnostics

$
15,254



49
%

$
10,244



4
%

$
9,858Fracture and Reservoir Diagnostics
    %


45
%






38
%






45
%          21




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##### Table of Contents



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





Percent2006


Change


2005


Change


2004($ in thousands)Consolidated SG&A and other

$
35,206



24
%

$
28,432



9
%

$
26,008As a % of revenues


11
%






11
%






12
%SG&A and other by operating
    segment:Proppant

$
24,959



19
%

$
20,922



7
%

$
19,480Proppant %


9
%






9
%






10
%Fracture and Reservoir Diagnostics

$
10,247



36
%

$
7,510



15
%

$
6,528Fracture and Reservoir
    Diagnostics %


30
%






28
%






30
%       start-up
    Income
    Tax Expense
  Percent





Percent2006


Change


2005


Change


2004($ in thousands)Income Tax Expense

$
29,561



16
%

$
25,463



4
%

$
24,549Effective Income Tax Rate


35.3
%






35.3
%






37.1
%    22




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Liquidity
    and Capital Resources
          Off-Balance
    Sheet Arrangements
   23




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##### Table of Contents



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


19,187



3,501



5,511



3,732



6,443Purchase obligations: Natural gas contracts


21,927



21,118



809







 Raw materials contracts


8,100



8,100











 Equipment purchases


7,290



7,290











Other long-term obligations


















Total contractual obligations

$
56,504


$
40,009


$
6,320


$
3,732


$
6,443         and/or
 
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     
  Item 8.
    Financial
    Statements and Supplementary Data   24




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Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures          page F-1
    page F-2
     
  Item
    9B.
    Other
    Information   
  PART III
   
  Item 10.
    Directors
    and Executive Officers of the Registrant  Regulation S-K Form 10-K.
 25




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##### Table of Contents



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




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SIGNATURES
    CARBO Ceramics Inc.
  By:
    /s/  GARY
    A. KOLSTAD   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 1, 2007/s/  GARY
    A. KOLSTADGary
    A. Kolstad

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

March 1, 2007/s/  PAUL
    G. VITEKPaul
    G. Vitek

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

March 1, 2007/s/  CLAUDE
    E. COOKE, JR.Claude
    E. Cooke, Jr.

Director

March 1, 2007/s/  CHAD
    C. DEATONChad
    C. Deaton

Director

March 1, 2007/s/  H.E.
    LENTZ, JR.H.E.
    Lentz, Jr.

Director

March 1, 2007 27




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##### Table of Contents



Signature

Title

Date/s/  JOHN
    J. MURPHYJohn
    J. Murphy

Director

March 1, 2007/s/  JESSE
    P. ORSINIJesse
    P. Orsini

Director

March 1, 2007/s/  ROBERT
    S. RUBINRobert
    S. Rubin

Director

March 1, 2007  28




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




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##### Table of Contents



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




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                   F-3




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##### Table of Contents



CARBO
    CERAMICS INC.
  CONSOLIDATED BALANCE SHEETS
  December 31,2006


2005($ in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
24,973


$
19,695Short-term investments


7,500



41,975Trade accounts and other
    receivables, net


63,461



53,918Inventories:Finished goods


26,181



17,981Raw materials and supplies


14,602



8,490Total inventories


40,783



26,471Prepaid expenses and other current
    assets


2,558



2,433Deferred income taxes


4,650



3,795Total current assets


143,925



148,287Property, plant and equipment:Land and land improvements


8,659



2,812Land-use and mineral rights


6,101



5,271Buildings


26,209



15,051Machinery and equipment


207,341



154,785Construction in progress


71,744



72,074Total


320,054



249,993Less accumulated depreciation


88,306



70,493Net property, plant and equipment


231,748



179,500Goodwill


21,840



21,840Intangible and other assets, net


7,152



6,169Total assets

$
404,665


$
355,796LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
12,939


$
11,277Accrued payroll and benefits


8,115



6,941Accrued freight


2,061



1,356Accrued utilities


3,166



3,389Accrued income taxes


3,172



9,998Retainage related to construction
    in progress


117



337Other accrued expenses


4,676



3,011Total current liabilities


34,246



36,309Deferred income taxes


27,560



26,121Shareholders 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;
    24,391,214 and 24,286,388 shares issued and outstanding at
    December 31, 2006 and 2005, respectively


244



243Additional paid-in capital


104,784



102,536Unearned stock compensation






(2,135
)Retained earnings


235,732



192,196Accumulated other comprehensive
    income


2,099



526Total shareholders equity


342,859



293,366Total liabilities and
    shareholders equity

$
404,665


$
355,796    F-4




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##### Table of Contents



CARBO
    CERAMICS INC.
  CONSOLIDATED STATEMENTS OF INCOME
  Years Ended December 31,2006


2005


2004($ in thousands, except per share data)Revenues

$
312,126


$
252,673


$
223,054Cost of sales


196,133



153,941



131,648Gross profit


115,993



98,732



91,406Selling, general and
    administrative expenses


34,732



27,245



24,864Start-up
    costs


474



1,092



Loss on disposal or impairment of
    assets






95



1,144Operating profit


80,787



70,300



65,398Other income (expense):Interest income, net


1,590



1,756



570Other, net


1,437



27



2543,027



1,783



824Income before income taxes


83,814



72,083



66,222Income taxes


29,561



25,463



24,549Net income

$
54,253


$
46,620


$
41,673Earnings per share:Basic

$
2.23


$
1.94


$
1.75Diluted

$
2.22


$
1.93


$
1.73    F-5




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##### Table of Contents



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, 2004

$
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



293,366Net income














54,253







54,253Foreign currency translation
    adjustment


















1,573



1,573Comprehensive income






















55,826Exercise of stock options






1,024















1,024Tax benefit from stock based
    compensation






554















554Stock based compensation


1



2,805















2,806Adoption of SFAS 123(R)
    (Note 7)






(2,135
)


2,135











Cash dividends ($0.44 per
    share)














(10,717
)






(10,717
)Balances at December 31, 2006

$
244


$
104,784


$



$
235,732


$
2,099


$
342,859    F-6




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##### Table of Contents



CARBO
    CERAMICS INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended December 31,2006


2005


2004($ in thousands)Operating activitiesNet income

$
54,253


$
46,620


$
41,673Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation


18,712



12,949



11,762Amortization


805



675



415Provision for doubtful accounts


507



682



666Deferred income taxes


584



920



4,930Excess tax benefits from stock
    based compensation


(360
)






Loss on disposal or impairment of
    assets






95



1,144Foreign currency transaction
    (gain) loss


(1,387
)


147



Non-cash stock compensation expense


2,806



816



433Earnings in equity-method investee


(84
)


(208
)


Changes in operating assets and
    liabilities:Trade accounts and other
    receivables


(9,726
)


(13,347
)


(11,462
)Inventories


(14,104
)


(5,203
)


(755
)Prepaid expenses and other current
    assets


(76
)


(1,199
)


(146
)Long-term prepaid expenses


92



(1,107
)


Accounts payable


1,634



794



4,855Accrued payroll and benefits


1,169



753



1,502Accrued freight


702



(23
)


302Accrued utilities


(227
)


1,323



420Accrued income taxes


(6,272
)


8,116



8,538Payment of legal judgment










(975
)Other accrued expenses


1,636



(55
)


908Net cash provided by operating
    activities


50,664



52,748



64,210Investing activitiesCapital expenditures, net


(70,460
)


(67,811
)


(21,950
)Investment in equity-method
    investee






(611
)


Purchases of short-term investments


(26,765
)


(72,175
)


(70,125
)Proceeds from maturities of
    short-term investments


61,240



76,325



24,000Net cash used in investing
    activities


(35,985
)


(64,272
)


(68,075
)Financing activitiesProceeds from exercise of stock
    options


1,024



6,053



6,131Dividends paid


(10,717
)


(8,759
)


(7,001
)Excess tax benefits from stock
    based compensation


360







Net cash used in financing
    activities


(9,333
)


(2,706
)


(870
)Net increase (decrease) in cash
    and cash equivalents


5,346



(14,230
)


(4,735
)Effect of exchange rate changes on
    cash


(68
)


(65
)


11Cash and cash equivalents at
    beginning of year


19,695



33,990



38,714Cash and cash equivalents at end
    of year

$
24,973


$
19,695


$
33,990Supplemental cash flow
    informationInterest paid

$



$
9


$
10Income taxes paid

$
35,249


$
16,427


$
11,081    F-7




---



##### Table of Contents



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
 F-8




---



##### Table of Contents



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


15 to 30 yearsMachinery and equipment


3 to 30 yearsLand-use rights


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




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Split
  three-for-two
  Revenue
    Recognition
    Shipping
    and Handling Costs
    Cost
    of Start-Up
    Activities
  Start-up Start-up Start-up
  Use of
    Estimates
    Research
    and Development Costs
    Stock-Based
    Compensation
  Accounting for Stock Issued to Employees Accounting for
    Stock-Based Compensation
 F-10




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Share-Based Payment
    Foreign
    Subsidiaries
    New
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes
  Fair Value Measurements
 F-11




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Intangible
    and Other Assets    2006


2005Gross


Accumulated


Gross


AccumulatedAmount


Amortization


Amount


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

$
3,113


$
1,248


$
2,676


$
934Hardware designs


1,148



595



818



488Software


3,496



748



2,494



364$
7,757


$
2,591


$
5,988


$
1,786         3.
    Bank
    Borrowings   F-12




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Leases    2007

$
3,5012008


3,0052009


2,5062010


2,0342011


1,698Thereafter


6,443Total

$
19,187     5.
    Income
    Taxes    2006


2005($ in thousands)Deferred tax assets:Employee benefits

$
2,021


$
1,375Inventories


708



718Foreign tax credits


912



868Other


1,009



834Total deferred tax assets


4,650



3,795Deferred tax
    liabilities:Depreciation


21,624



22,181Goodwill


2,052



1,583Foreign earnings and other


3,884



2,357Total deferred tax liabilities


27,560



26,121Net deferred tax liabilities

$
22,910


$
22,326  F-13




---



##### Table of Contents



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


2005


2004($ in thousands)Current:Federal

$
25,464


$
21,815


$
16,803State


3,513



2,728



2,816Total current


28,977



24,543



19,619Deferred:Federal


1,068



702



4,237State


(484
)


218



693Total deferred


584



920



4,930$
29,561


$
25,463


$
24,549     2006


2005


2004Amount


Percent


Amount


Percent


Amount


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

$
29,335



35.0
%

$
25,229



35.0
%

$
23,178



35.0
%State income taxes, net of federal
    tax benefit


1,969



2.3



1,950



2.7



2,281



3.4ETI Exclusion, Section 199
    Manufacturing Benefit and other


(1,743
)


(2.0
)


(1,716
)


(2.4
)


(910
)


(1.3
)$
29,561



35.3
%

$
25,463



35.3
%

$
24,549



37.1
%   6.
    Shareholders
    Equity  Common
    Stock
    three-for-two
   F-14




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Preferred
    Stock
    Shareholder
    Rights Plan
    7.
    Stock-Based
    Compensation  Share-Based Payment
     F-15




---



##### Table of Contents



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


2004Net income, as reported

$
46,620


$
41,673Add: Stock-based employee
    compensation expense included in reported net income, net of
    related tax effects


514



273Deduct: Total stock-based
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(1,157
)


(1,255
)Pro forma net income

$
45,977


$
40,691Earnings per share:Basic  as reported

$
1.94


$
1.75Basic  pro forma

$
1.92


$
1.70Diluted  as reported

$
1.93


$
1.73Diluted  pro forma

$
1.90


$
1.69       AggregateWeighted-Average


IntrinsicOptions


Exercise Price


ValueOutstanding at January 1, 2006


291,248


$
22.16Granted


Exercised


(49,848
)

$
20.55Forfeited


Outstanding at December 31,
    2006


241,400


$
22.49


$
3,592Exercisable at December 31,
    2006


213,146


$
21.28


$
3,430    F-16




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Weighted-AverageGrant-DateShares


Fair ValueNonvested at January 1, 2006


58,634


$
47.03Granted


57,510


$
57.52Vested


(33,539
)

$
50.62Forfeited


(2,522
)

$
50.26Nonvested at December 31, 2006


80,083


$
52.96     8.
    Earnings
    Per Share    2006


2005


2004($ in thousands, except per share data)Numerator for basic and diluted
    earnings per share:Net income

$
54,253


$
46,620


$
41,673Denominator:Denominator for basic earnings per
    share  weighted-average shares


24,280,778



24,004,563



23,868,138Effect of dilutive securities:Employee stock options (See
    Note 7)


100,640



166,141



189,487Nonvested stock awards (See
    Note 7)


19,113



6,660



7,023Dilutive potential common shares


119,753



172,801



196,510Denominator for diluted earnings
    per share  adjusted weighted-average shares


24,400,531



24,177,364



24,064,648Basic earnings per share

$
2.23


$
1.94


$
1.75Diluted earnings per share

$
2.22


$
1.93


$
1.73  F-17




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  9.
    Quarterly
    Operating Results  (Unaudited)    Three Months Ended,March 31


June 30


September 30


December 31($ in thousands, except per share data)2006Revenues

$
74,278


$
73,485


$
77,410


$
86,953Gross profit


27,366



27,390



28,865



32,372Net income


12,984



12,862



13,452



14,955Earnings per share:Basic

$
0.54


$
0.53


$
0.55


$
0.62Diluted

$
0.53


$
0.53


$
0.55


$
0.612005Revenues

$
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


$
0.43     10.
    Segment
    Information  Disclosures about Segments of an
    Enterprise and Related Information
       F-18




---



##### Table of Contents



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


Diagnostics


Total($ in thousands)2006Revenue from external customers

$
278,020


$
34,106


$
312,126Income before income taxes


79,253



4,561



83,814Total assets


362,697



37,632



400,329Capital expenditures, net


60,612



9,848



70,460Depreciation and amortization


15,376



4,141



19,5172005Revenue 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 from external customers

$
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



12,177   Geographic
    Information
    2006


2005


2004($ in thousands)Long-lived assets:United States

$
199,967


$
173,917


$
134,250International (primarily China and
    Russia)


58,787



31,625



16,985Total

$
258,754


$
205,542


$
151,235     2006


2005


2004($ in thousands)Revenues:United States

$
205,029


$
152,595


$
118,665Canada


52,102



38,775



28,236Russia


5,519



17,465



35,214Other international


49,476



43,838



40,939Total

$
312,126


$
252,673


$
223,054  F-19




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Sales
    to Customers
    Major CustomersA


B


C


Others


Total2006


24.5
%


19.2
%


26.2
%


30.1
%


100
%2005


30.5
%


17.3
%


16.9
%


35.3
%


100
%2004


28.3
%


13.5
%


23.6
%


34.6
%


100
%   11.
    Benefit
    Plans    2006


2005


2004($ in thousands)Contributions:Profit sharing

$
1,256


$
941


$
990Savings


710



606



525$
1,966


$
1,547


$
1,515     12.
    Commitments       F-20




---



##### Table of Contents



CARBO
    CERAMICS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      agreed-upon
    and/or
    13.
    Employment
    Agreements     F-21




---



##### Table of Contents



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




---



##### Table of Contents



CARBO
    Ceramics Inc.
    Schedule II  Consolidated Valuation and
    Qualifying Accounts
    For the Years Ended December 31, 2006, 2005 and
    2004
  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, 2006

$
1,335


$
507


$
89


$
1,753December 31, 2005

$
665


$
682


$
12


$
1,335December 31, 2004

$
20


$
666


$
21


$
665  S-1




---



##### Table of Contents



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 Christopher A. Wright (incorporated by
    reference to the registrants
    Form 10-K
    Annual Report for the year ended December 31, 2002)*10
.10

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
.11

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
.12

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
.13(a)

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
.13(b)

Amendment No. 1 to the 2004
    CARBO Ceramics Inc. Long-Term Incentive Plan (incorporated by
    reference to exhibit 10.1 of the registrants
    Form 8-K
    Current Report filed April 24, 2006)*10
.14

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
.15

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)




---



##### Table of Contents



*10
.16

Letter Agreement dated
    December 2, 2005 between CARBO Ceramics Inc. and Jesse P.
    Orsini (incorporated by reference to exhibit 10.18 to the
    registrants
    Form 10-K
    Annual Report for the year ended December 31, 2006)*10
.17

Form of Non-Employee Director
    Restricted Stock Award Agreement (incorporated by reference to
    exhibit 10.2 of the registrants
    Form 8-K
    Current Report filed April 24, 2006)*10
.18

Form of Officer Restricted Stock
    Award Agreement (incorporated by reference to exhibit 10.3
    of the registrants
    Form 8-K
    Current Report filed April 24, 2006)*10
.19

Employment Agreement dated as of
    May 10, 2006 between CARBO Ceramics Inc. and Gary Kolstad
    (incorporated by reference to exhibit 10.1 to the
    registrants
    Form 8-K
    Current Report filed May 16, 2006)*10
.20

Incentive Compensation Plan for
    Key Employees (incorporated by reference to exhibit 10.1 to
    the registrants
    Form 8-K
    Current Report filed January 22, 2007)*10
.21

Incentive Compensation Plan for
    Energy Professional Staff (incorporated by reference to
    exhibit 10.2 to the registrants
    Form 8-K
    Current Report filed January 22, 2007)14


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 Gary A. Kolstad31
.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.