SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File No. 0-28178

CARBO Ceramics Inc.

(Exact name of registrant as specified in its charter)

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

      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 þ          No o

      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 an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      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, 2004 as reported on the New York Stock Exchange, was approximately $881,384,732. Shares of Common Stock held by each officer and director and by 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 25, 2005, Registrant had outstanding 16,007,797 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Proxy Statement for Registrant’s Annual Meeting of Shareholders to be held April 19, 2005 are incorporated by reference in Parts II and III.

PART I

General

      CARBO Ceramics Inc. (the “Company”) is the world’s largest producer and supplier of ceramic proppant for use in the hydraulic fracturing of natural gas and oil wells. In addition, the Company is the largest provider of fracture diagnostic services through its subsidiary, Pinnacle Technologies, Inc. (“Pinnacle”).

      Hydraulic fracturing is the most widely used method of increasing production from oil and 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-filled fracture creates a permeable 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 highest cost. The higher initial cost of ceramic proppant is justified by the fact that the use of these proppants in certain well conditions results in an increase in the production rate of oil and gas, an increase in the total oil or 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.

      Based on the Company’s internally generated market information, the Company estimates that it supplies approximately 48% of the ceramic proppant and 8% of all proppant used worldwide. During the year ended December 31, 2004, the Company generated approximately 53% of its revenues in the U.S. and 47% in international markets.

      Pinnacle provides fracture diagnostic services, sells fracture simulation software and provides fracture design services to oil and gas companies worldwide. Pinnacle’s fracture simulation software FracproPT® is the most widely used model in the world. Using proprietary technology and software, Pinnacle can map fractures as they are created, providing well operators with key information regarding the dimensions and orientation of the fracture. This information is vital in optimizing the design of individual fracture treatments and well placement within a reservoir. The Company currently estimates that less than 3% of wells fractured worldwide utilize fracture diagnostics. For the year ended December 31, 2004, Pinnacle accounted for less than 10% of the Company’s total revenues, net income and operating assets.

      Demand for ceramic proppant and fracture diagnostic services depends primarily upon the demand for natural gas and oil and on the number of natural gas and oil wells drilled, completed or re-completed worldwide. More specifically, the demand for the Company’s products and services is dependent on the number of oil and gas wells that are hydraulically fractured to stimulate production.

Products

      The Company manufactures four distinct ceramic proppants. CARBOHSP^tm and CARBOPROP® are premium priced, high strength proppants designed primarily for use in deep gas wells. CARBOHSP^tm was the original ceramic proppant and was introduced in 1979. The Company continues to manufacture and sell an improved version of this original product. CARBOHSP^tm has the highest strength of any of the ceramic proppants manufactured by the Company and is used primarily in the fracturing of deep gas wells. CARBOPROP®, which was introduced by the Company in 1982, is slightly lower in weight and strength than

      ¹ FracproPT® is a registered trademark of Gas Technology Institute and is used under license by Pinnacle.

CARBOHSP^tm and was developed for use in deep gas wells that do not require the strength of CARBOHSP^tm.

      CARBOLITE® and CARBOECONOPROP® are lightweight proppants designed for use in gas wells of moderate depth and shallower oil wells. CARBOLITE®, introduced in 1984, is used in medium depth oil and gas wells, where the additional strength of ceramic proppant may not be essential, but where higher production rates can be achieved due to the product’s uniform size and spherical shape. CARBOLITE®, is the Company’s product most commonly used in oil wells. CARBOECONOPROP®, introduced in 1992 to compete directly with sand-based proppant, is the Company’s lowest priced product and sales volume of this product has grown at a faster rate than the Company’s other ceramic proppants. The introduction of CARBOECONOPROP® has resulted in ceramic proppant being used by operators of oil and gas wells that had not previously used ceramics. The Company believes that many of the users of CARBOECONOPROP® had previously used sand or resin-coated sand.(2)

Competition

      The Company’s chief worldwide competitor is Saint-Gobain Proppants (“Saint-Gobain”), formerly Norton Proppants. Saint-Gobain Proppants is a division of Compagnie de Saint-Gobain, a large French glass and materials company. Saint-Gobain manufactures ceramic proppants that directly compete with each of the Company’s products. Saint-Gobain’s primary manufacturing facility is located in Fort Smith, Arkansas. In addition, Mineracao Curimbaba (“Curimbaba”), based in Brazil, manufactures a sintered bauxite product similar to the Company’s CARBOHSP^tm, which is marketed in the United States under the name “Sinterball”. Curimbaba has notified the Company that it intends to introduce an intermediate strength ceramic proppant similar to the Company’s CARBOPROP®. The Company believes that it would be difficult for Curimbaba to introduce such a product without infringing patents held by the Company and, as described below under “Item 3. Legal Proceedings,” the Company and Curimbaba are currently involved in litigation to determine if Curimbaba’s product infringes a Company patent. The Company believes that Curimbaba has not expanded its U.S. product line to include a lightweight ceramic proppant and is unlikely to do so in light of patents held by the Company.

      In recent years, there has been an increase in the number of competitors based overseas. Borovichi Refractory Plant (“Borovichi”) is a manufacturer of ceramic proppant located in Borovichi, Russia that began producing proppant in 1996. The Company has recently learned of a second competitor in Russia, FORES Refractory Plant (“FORES”). While the Company has limited information about Borovichi and FORES, the Company believes that each of these companies currently manufactures only an intermediate strength ceramic proppant and markets its products primarily within Russia. In addition, the Company is aware of three small manufacturers located in Russia that have not produced volumes significant to impact the market to date. The Company is also aware of two principal manufacturers of ceramic proppant in China; Yixing Orient Petroleum Proppant Company, Ltd. and GuiZhou LinHai New Material Company, Ltd. Each of these companies produces intermediate strength ceramic proppants that are marketed primarily in China.

      Competition for CARBOHSP^tm and CARBOPROP® principally includes ceramic proppant manufactured by Saint-Gobain, Curimbaba and Borovichi. The Company’s CARBOLITE® and CARBOECONOPROP® products compete primarily with ceramic proppant produced by Saint-Gobain and with sand-based proppant for use in the hydraulic fracturing of medium depth natural gas and oil wells. The leading suppliers of mined sand are Unimin Corp., Badger Mining Corp., Fairmount Minerals Limited, Inc., Ogelbay-Norton Company, and US Silica Company. The leading suppliers of resin-coated sand are Borden Chemical, Inc. Oilfield Products Group and Santrol, a subsidiary of Fairmount Minerals.

      The Company believes that the most significant factors that influence a customer’s decision to purchase the Company’s products are (i) price/performance ratio, (ii) on-time delivery performance, (iii) technical support and (iv) proppant availability. The Company believes that its products are competitively priced and

      (2) CARBOHSP^tm, CARBOPROP®, CARBOLITE®, and CARBOECONOPROP® are registered marks of CARBO Ceramics Inc.

that its delivery performance is excellent. The Company also believes that its superior technical support has enabled it to persuade customers to use ceramic proppant in an increasingly broad range of applications and thus increased the overall market for the Company’s products. Since 1993, the Company has consistently expanded its manufacturing capacity and plans to continue its strategy of adding capacity to meet anticipated future increases in sales demand.

      The Company continually conducts testing and development activities with respect to alternative raw materials to be used in the Company’s existing and alternative production methods. The Company is not aware of the development of alternative products for use as proppant in the hydraulic fracturing process that would significantly impact the use of ceramic proppants. The Company believes that the main barriers to entry into the ceramic proppant industry are the patent rights held by the Company and certain of its current competitors, the “know-how” and trade secrets necessary to manufacture a competitive product and the capital costs involved in building production facilities of sufficient size to be operated efficiently.

Customers and Marketing

      The Company’s largest customers are, in alphabetical order, BJ Services Company, Halliburton Energy Services, Inc. and Schlumberger Limited, the three largest participants in the worldwide petroleum pressure pumping industry. These companies collectively accounted for approximately 65% of the Company’s 2004 revenues and approximately 71% of the Company’s 2003 revenues. However, the end users of the Company’s products are the operators of natural gas and oil wells that hire the pressure pumping service companies to hydraulically fracture wells. The Company works both with the pressure pumping service companies and directly with the operators of natural gas and oil wells to present the technical and economic advantages of using ceramic proppant. The Company generally supplies its customers with products on a just-in-time basis, with transactions governed by individual purchase orders. Continuing sales of product depend on the Company’s direct customers and the well operators being satisfied with both product quality and delivery performance.

      The Company recognizes the importance of a technical marketing program when selling a product that offers financial benefits over time but is initially more costly than alternative products. The Company markets its products both to its direct customers and to owners and operators of natural gas and oil wells. The Company’s sales and marketing staff regularly calls on and keeps close contact with the people who are influential in the proppant purchasing decision: production companies, regional offices of oilfield service companies that offer pressure pumping services and various completion engineering consultants. Beginning in 1999, the Company increased its marketing efforts to production companies and has continued to expand its relationships with production companies. The Company increased the size of its technical sales force in recent years and plans to continue to increase its efforts to educate end users on the benefits of using ceramic proppant. While the Company’s products have historically been used in very deep wells that require high-strength proppant, the Company believes that there is economic benefit to well operators of using ceramic proppant in shallower wells that do not necessarily require a high-strength proppant. The Company believes that its education-based technical marketing efforts have allowed it to capture a greater portion of the market for sand-based proppant in recent years and will continue to do so in the future.

      The Company provides a variety of technical support services and has developed computer software that models the return on investment achievable by using the Company’s ceramic proppant versus other proppant in the hydraulic fracturing of a natural gas or oil well. In addition to the increased technical marketing effort, the Company has engaged in large-scale field trials to demonstrate the economic benefits of its products and validate the findings of its computer simulations. Occasionally, the Company will sell its products on a discounted basis in exchange for a production company’s agreement to provide production data for direct comparison of the results of fracturing with ceramic proppant as compared to alternative proppants.

      The Company’s worldwide sales and marketing activities are coordinated by its North American and international marketing managers. The Company’s international marketing efforts in 2004 were conducted through its sales offices in Aberdeen, Scotland, and Moscow, Russia and through commissioned sales agents located in South America, China and Australia.

      The Company’s 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 47%, 36% and 30% of the Company’s sales for 2004, 2003 and 2002, respectively. The increase in international sales in 2004 was primarily attributable to increased demand for the Company’s products in Russia. The distribution of the Company’s international and domestic revenues is shown below, based upon the region in which the customer used the products and services:

Distribution

      The Company maintains finished goods inventories at its plants in New Iberia, Louisiana; Eufaula, Alabama; McIntyre, Georgia; and Luoyang, China; and at 11 remote stocking facilities located in Rock Springs, Wyoming; Oklahoma City, Oklahoma; San Antonio, Texas; Edmonton, Alberta, Canada; Grande Prairie, Alberta, Canada; Rotterdam, The Netherlands; Jebel Ali, United Arab Emirates; Adelaide, Australia; Tianjin, China; Tyumen, Russia; and Singapore. The North American remote stocking facilities consist of bulk storage silos with truck trailer loading facilities. The Company owns the facilities in San Antonio, Rock Springs, Edmonton and Grande Prairie and subcontracts the operation of the facilities and transportation to a local trucking company in each location. The remaining North American stocking facilities are owned and operated by local companies under contract with the Company. 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, the Company leases 279 rail cars for use in the distribution of its products and has plans to increase this total to approximately 440 rail cars in 2005. The increase in railcars will be necessary to support the increased volume of domestic shipments anticipated upon completion of the Company’s new manufacturing facility in Wilkinson County, Georgia. The price of the Company’s products sold for delivery in the lower 48 United States and Canada includes just-in-time delivery of proppant to the operator’s well site, which eliminates the need for customers to maintain an inventory of ceramic proppant.

Raw Materials

      Ceramic proppant is 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. Bauxite is largely used in the production of aluminum metal, refractory material and abrasives. The main deposits of alumina-bearing ores in the United States are in Arkansas, Alabama and Georgia; other economically mineable deposits are located in Australia, Brazil, China, Gabon, India, Jamaica, Russia and Surinam.

      For the production of CARBOHSP^tm in the Company’s New Iberia, Louisiana, and McIntyre, Georgia, facilities, the Company uses calcined, abrasive-grade bauxite imported from Australia, and typically purchases its annual requirements at the seller’s current prices. The Company has entered into an agreement with a foreign supplier to supply its anticipated need for this ore at a fixed price through 2005. While prices for the material are fixed through 2005, the Company has seen recent increases in the cost (which is borne by the Company) of transporting this material to the U.S. For the production of CARBOPROP®, also produced in both New Iberia and McIntyre, the Company uses a variety of materials that meet specific chemical and mineralogical requirements. Raw material for the production of CARBOPROP® may be either as-mined bauxitic clays or a blend of bauxite and kaolin, either of which is readily available to the Company at sellers’ current prices or through long-term contracts.

      The Company’s Eufaula facility uses primarily locally mined kaolin for the production of CARBOLITE® and CARBOECONOPROP®. The Company has entered into a contract that requires a supplier to sell to the Company up to 200,000 net tons of kaolin per year and the Company to purchase from the supplier 70% of the Eufaula facility’s annual kaolin requirements through 2010.

      The Company’s production facility in McIntyre, Georgia, uses locally mined uncalcined kaolin for the production of CARBOECONOPROP®. During 2002 and 2003, the Company acquired on both a fee simple and leasehold basis, acreage in Wilkinson County, Georgia, which contains approximately 12 million tons of raw material suitable for production of CARBOLITE® and CARBOECONOPROP®. At current production rates, the acquired raw material would supply the needs of the McIntyre facility for a period in excess of 60 years. Based on anticipated production capacity after the planned construction of a second plant in the area, these raw material reserves would supply the needs of both plants for a period in excess of 30 years. The Company has 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 the Company to utilize the third party to mine and transport at least 80% of the McIntyre facility’s annual kaolin requirement.

      The Company’s production facility in Luoyang, China, uses locally mined kaolin and bauxite for the production of CARBOPROP® and CARBOLITE®. Each of these materials is purchased under long-term contracts with a minimum term of eight years. The contracts stipulate a fixed price subject to periodic adjustment. Under the terms of the agreement covering the purchase of bauxite, the Company has an obligation to purchase, in total, a minimum of 10,000 metric tons of bauxite per year or 100% of its annual requirements for bauxite if it purchases less than 10,000 metric tons per year. Under the terms of the agreement covering the purchase of kaolin, the Company has an obligation to purchase a minimum of 80% of its annual requirement for kaolin from a single supplier. There is no minimum purchase commitment under the terms of either agreement.

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.

      The Company uses two different methods to produce ceramic proppant. The Company’s plants in New Iberia, Louisiana; McIntyre, Georgia; and Luoyang, China, use a dry process (the “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. The Company believes its competitors also use some form of the Dry Process to produce their ceramic proppant.

      The Company’s plant in Eufaula, Alabama, uses a wet process (the “Wet Process”), which starts with kaolin from local mines which is formed into a water slurry. The slurry is then pelletized in a dryer and the pellets are then fired in a rotary kiln. The Company believes that the Wet Process is unique to its plant in Eufaula, Alabama. The Company will utilize the Wet Process in a production facility currently under construction in Wilkinson County, Georgia.

Patent Protection and Intellectual Property

      The Company makes ceramic proppant by processes and techniques that involve a high degree of proprietary technology, some of which are protected by patents.

      The Company owns four U.S. patents and one Argentinean patent. Two of these U.S. patents and the foreign patent relate to the CARBOPROP® product. One of these U.S. patents relates to the CARBOLITE® and CARBOECONOPROP® products. The Company’s U.S. patents relating to the CARBOPROP® product expire in 2006. The Company’s U.S. patent relating to the CARBOLITE® and CARBOECONOPROP® products expires in 2009.

      The Company owns two U.S. patent applications (together with a number of foreign counterparts to one of the applications in foreign jurisdictions) that cover ceramic proppant and processes for making ceramic proppant. A request for continued examination of one of these patent applications will be filed with the

U.S. Patent Office in 2005. The Company also owns two U.S. patent applications (together with a number of counterparts to one of the applications in foreign jurisdictions) that cover scouring and grinding media, and processes for their preparation. The applications are in the early 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.

      The Company believes that its patents have been and will continue to be important in enabling the Company to compete in the market to supply proppant to the natural gas and oil industry. The Company intends to enforce, and has in the past vigorously enforced, its patents. The Company is currently, as described below under “Item 3. Legal Proceedings,” and may from time to time in the future be, involved in litigation to determine the enforceability, scope and validity of its patent rights. Past disputes with the Company’s main competitor have been resolved in settlements that permit the Company to continue to benefit fully from its patent rights. The Company and this competitor have cross-licensed certain of their respective patents relating to intermediate and low density proppant on both a royalty-free and royalty-bearing basis. Royalties under these licenses are not material to the Company’s financial results. As a result of these cross licensing arrangements, the Company is able to produce a broad range of ceramic proppant while third parties are unlikely to be able to produce certain of these ceramic proppants without infringing on the patent and/or licensing rights held by the Company, the above-referenced competitor or both. In addition to patent rights, the Company uses a significant amount of trade secrets, or “Know-how”, and other proprietary information and technology in the conduct of its business. None of this “Know-how” and technology is licensed to or from third parties.

      Pinnacle owns two U.S. patent applications (together with a number of counterparts to one of the applications in numerous foreign jurisdictions) that cover certain of its proprietary systems. The patent applications are in the early 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. Pinnacle also licenses several patents from third parties for use in its business. In addition to patent rights, Pinnacle uses a significant amount of “Know-how” and other proprietary technology in the conduct of its business, and a substantial portion of this “Know-how” and technology is licensed by Pinnacle from third parties.

Production Capacity

      The Company believes that constructing adequate capacity ahead of demand while incorporating new technology to reduce manufacturing costs are important competitive strategies to increase its overall share of the market for proppant. Prior to 1993, the Company’s production capacity was in excess of its sales requirements. Since that time, the Company has been expanding its capacity in order to meet the generally increasing demand for its products. In 1993, the Company increased the capacity of the Eufaula facility from 90 million pounds per year to 170 million pounds per year, in response to the increasing demand for the Company’s CARBOLITE® and CARBOECONOPROP® products. In 1995, the Company completed a 40 million-pound per year capacity expansion at the New Iberia facility, intended to meet increasing demand for CARBOHSP^tm and CARBOPROP®. In 1996, the Company commenced operation of its second 80 million-pound per year expansion of the Eufaula plant bringing total capacity at the facility to 250 million pounds per year. Subsequent modifications to the Eufaula plant and revisions to certain permits increased its capacity to 260 million pounds per year in late 2004. In 2003, the Company completed installation of additional equipment in its New Iberia facility to increase production capacity to 120 million pounds per year.

      In June 1999, the Company substantially completed construction of a new manufacturing facility in McIntyre, Georgia. Design capacity of the plant was 200 million pounds per year and the total initial cost of the plant was approximately $60 million. During 2002 and 2003, the Company spent approximately $17.2 million to expand the capacity of the McIntyre facility to 275 million pounds per year. This expansion was completed in early 2003.

      In late 2002, the Company completed construction of a new manufacturing facility in Luoyang, China, at a cost of approximately $10 million. The plant began operation on schedule in the fourth quarter of 2002 and the first commercial shipments were made from the plant in January 2003. In 2004, the Company added a

second production line to the Luoyang, China facility at a cost of approximately $6 million. The second production line increased annual capacity at the Luoyang, China facility to 100 million pounds.

      In 2004, the Company began construction of a new manufacturing facility in Wilkinson County, Georgia. This facility is expected to cost $62 million, have annual capacity of 250 million pounds, and be completed at the end of 2005.

      The following table sets forth the current capacity of each of the Company’s existing manufacturing facilities:

      The Company generally supplies its customers with products on a just-in-time basis and operates without any material backlog.

Long-lived assets by geographic area

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

      Risks associated with the Company’s international operations are described under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Trends, Risks and Uncertainties — Our international operations subject us to risks inherent in doing business on an international level that could adversely impact our results of operations.”

Environmental and Other Governmental Regulations

      The Company believes that its operations are in substantial compliance with applicable federal, state and local environmental and safety laws and regulations. The Company does not anticipate any significant expenditure in order to continue to comply with such laws and regulations.

Employees

      At December 31, 2004, the Company had 426 full-time employees. In addition to the services of its employees, the Company employs the services of consultants as required. The Company’s 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. The Company believes its relations with its employees are satisfactory.

Forward-Looking Information

      The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Form 10-K, the Company’s 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” 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Company’s forward-looking statements are based on assumptions that we believe to be reasonable but that may not prove to be accurate. All of the Company’s 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.

      The Company’s results of operations could be adversely affected if its business assumptions do not prove to be accurate or if adverse changes occur in the Company’s business environment, including but not limited to:

      The Company’s results of operations could also be adversely affected as a result of worldwide economic, political and military events, including war, terrorist activity or initiatives by the Organization of the Petroleum Exporting Countries. For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Trends, Risks and Uncertainties.”

Available Information

      The Company’s annual reports on Form 10-K, 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 Exchange Act are made available free of charge on the Company’s 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 the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington DC 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.

      The Company maintains its corporate headquarters (approximately 8,000 square feet of leased office space) in Irving, Texas, owns its manufacturing facilities, land and substantially all of the related production equipment in New Iberia, Louisiana, and Eufaula, Alabama, and leases its McIntyre, Georgia, facility through 2016, at which time title will be conveyed to the Company. The Company owns the buildings and production equipment at its facility in Luoyang, China, and has 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 Company maintains a sales office in Houston, Texas (approximately 2,100 square feet of leased office space).

      The facility in New Iberia, Louisiana, located on 24 acres of land owned by the Company, consists of two production units (approximately 85,000 square feet), a laboratory (approximately 4,000 square feet) and an office building (approximately 3,000 square feet). The Company also owns an 80,000 square foot warehouse on the plant grounds in New Iberia, Louisiana.

      The facility in Eufaula, Alabama, located on 14 acres of land owned by the Company, consists of one production unit (approximately 111,000 square feet), a laboratory (approximately 2,000 square feet) and an office (approximately 1,700 square feet).

      The facility in McIntyre, Georgia, includes real property, consisting of approximately 36 acres, plant and equipment that are leased by the Company from the Development Authority of Wilkinson County. The term of the lease commenced on September 1, 1997 and terminates on December 1, 2016. Under the terms of the lease, as amended in 2003, the Company was responsible for all costs incurred in connection with the premises, including costs of construction of the plant and equipment. As an inducement to locate the facility in Wilkinson County, Georgia, the Company received certain ad-valorem property tax incentives. The lease and a related memorandum of understanding define a negotiated value of the Company’s leasehold interest during the term of the lease. The lease also calls for annual payments of additional rent to the Development Authority of Wilkinson County. The total additional rent payments are immaterial in relation to the cost of the facility borne by the Company. At the termination of the lease, title to all of the real property, plant and equipment will be conveyed to the Company in exchange for nominal consideration. The Company has the right to purchase the property, plant and equipment at any time during the term of the lease for a nominal price plus payment of any additional rent due to the Development Authority of Wilkinson County through the remaining lease term.

      The facility in Luoyang, China, is located on approximately 11 acres and consists of various production and support buildings (approximately 106,000 square feet), a laboratory (approximately 6,000 square feet), and two administrative buildings (each of which is approximately 6,000 square feet).

      The Company’s customer service and distribution operations are located at the New Iberia facility, while its quality control, testing and development functions operate at the New Iberia, Eufaula and McIntyre facilities. The Company owns distribution facilities in San Antonio, Texas; Rock Springs, Wyoming; and Edmonton and Grande Prairie, Alberta, Canada.

      During 2002 and 2003, the Company completed the acquisition of approximately 1,500 acres of land and leasehold interests in Wilkinson County, Georgia, near its plant in McIntyre, Georgia. The land contains approximately 12 million tons of raw material for use in the production of the Company’s lightweight ceramic proppants. The Company has contracted with a third party to mine and haul the reserves and bear the responsibility for subsequent reclamation of the mined areas.

      The Company’s wholly-owned subsidiary, Pinnacle Technologies, Inc., leases its corporate headquarters in San Francisco, California (approximately 6,800 square feet), and maintains leased offices totaling approximately 27,000 square feet in Houston, Texas; Centennial, Colorado; Delft, The Netherlands; and Calgary, Alberta, Canada. Pinnacle also owns its field office (approximately 2,800 square feet) in Bakersfield, California.

      The Company and Curimbaba are currently involved in litigation in Texas federal district court to determine if Curimbaba’s intermediate strength product infringes a patent owned by the Company. The Company does not believe that this proceeding will have a material adverse effect on its business or its results of operations.

      From time to time, the Company is the subject of legal proceedings arising in the ordinary course of business. The Company does not believe that any of these proceedings will have a material adverse effect on its business or its results of operations.

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2004.

Executive Officers of the Registrant

      Dr. C. Mark Pearson (age 49) has served as President and Chief Executive Officer since April 2001. Prior to assuming these positions, Dr. Pearson served as the Company’s Senior Vice President of Marketing & Technology from March 1997 to 2001. Prior to joining the Company, Dr. Pearson was an Associate Professor of Petroleum Engineering at the Colorado School of Mines from 1995 to March 1997. Dr. Pearson held various positions with Atlantic Richfield Company from 1984 to 1995.

      Paul G. Vitek (age 46) has been the Senior Vice President of Finance and Administration and Chief Financial Officer since January 2000. Prior to serving in his current capacity, Mr. Vitek served as Vice President of Finance from February 1996 and has served as Treasurer and Secretary of the Company since 1988.

      Mark L. Edmunds (age 49) has been the Vice President, Operations since April 2002. From 2000 until joining the Company, Mr. Edmunds served as Business Unit Manager and Plant Manager for FMC Corporation. Prior to 2000, Mr. Edmunds served Union Carbide Corporation and The Dow Chemical Company in a variety of management positions including Director of Operations, Director of Internal Consulting and Manufacturing Operations Manager.

      Christopher A. Wright (age 40) has been a Vice President of the Company since May 2002. Mr. Wright has been President of Pinnacle Technologies, Inc., a provider of fracture diagnostic products and services, and subsidiary of the Company, since its founding in 1992.

      All officers are elected at the Annual Meeting of the Board of Directors 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.

PART II

Common Stock Market Prices and Dividends

      The Company’s Common Stock is traded on the New York Stock Exchange (ticker symbol CRR). The approximate number of holders, including both record holders and individual participants in security position listings, of the Company’s Common Stock at February 15, 2005 was 13,600.

      High and low stock prices and dividends for the last two fiscal years were:

      The Company currently expects to continue its policy of paying quarterly cash dividends, although there can be no assurance as to future dividends because they depend on future earnings, capital requirements and financial condition.

      The following selected financial data are derived from the audited consolidated financial statements of the Company. The data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included elsewhere in this Report.

Executive Level Overview

      CARBO Ceramics Inc. generates revenue through the sale of products and services to the oil and gas industry. The Company’s principal business consists of manufacturing and selling ceramic proppant for use in the hydraulic fracturing of oil and natural gas wells. The Company’s products and services help oil and gas producers increase production and recovery rates from their wells, thereby lowering overall reservoir development costs. As a result, the Company’s business is dependent to a large extent on the level of drilling activity in the oil and gas industry worldwide. However, the Company has increased its revenues and income over an extended period and across various industry business cycles by increasing its share of the worldwide market for all types of proppant. While the Company’s ceramic proppants are more expensive than alternative non-ceramic proppants, the Company has been able to demonstrate the cost-effectiveness of its products to numerous operators of oil and gas wells through increased technical marketing activity. The Company believes its future prospects will benefit from both an expected increase in drilling activity worldwide and the desire of industry participants to lower their overall development costs.

      Recently, the Company has expanded its operations outside the United States. International revenues represented 47%, 36% and 30% of total revenues, respectively, over the past three years. In 2002 the Company constructed a manufacturing plant in China, its first plant located outside the United States, and completed a second production line at the facility in 2004 that doubled that plant’s capacity. In 2004, the Company opened a sales office in Moscow, Russia and established distribution operations in this country. The Company also continues to evaluate the possibility of building a production facility in Russia. The Company believes international operations will continue to represent an important role in its future growth.

      Revenue growth in recent years has been driven primarily by increases in sales volume. Because the Company’s products compete in part against lower-cost alternatives, price increases for the Company’s products have been minimal in recent years and the Company expects future growth will continue to be dependent on increasing sales volume. As a result, the Company initiated construction of significant new manufacturing capacity in 2004 to me