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

Recent Developments

Reorganization, Chapter 11 Proceedings, and Going Concern

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

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

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

COVID-19 Update

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



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

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

Executive Level Overview

CARBO Ceramics Inc. is a global technology company that provides products and services to the oil and gas, industrial, and environmental markets to enhance value for its clients.

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

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

Oilfield ceramic technology products and base ceramic proppant are manufactured and sold to pressure pumping companies and oil and gas operators for use in the hydraulic fracturing of natural gas and oil wells. Hydraulic fracturing is the most widely used method of increasing production from oil and natural gas wells. The hydraulic fracturing process consists of pumping fluids down a natural gas or oil well at pressures sufficient to create fractures in the hydrocarbon-bearing rock formation. A granular material, called proppant, is suspended and transported in the fluid and fills the fracture, "propping" it open once high-pressure pumping stops. The proppant filled fracture creates a conductive channel through which the hydrocarbons can flow more freely from the formation to the well and then to the surface.

There are three primary types of proppant that can be utilized in the hydraulic fracturing process: sand, resin coated sand and ceramic. Sand is the least expensive proppant, resin-coated sand is more expensive and ceramic proppant is typically the most expensive. We believe the higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions typically results in an increase in the production rate of oil and natural gas, an increase in the total oil or natural gas that can be recovered from the well and, consequently, an increase in cash flow for the operators of the well. The increased production rates are primarily attributable to the higher strength and more uniform size and shape of ceramic proppant versus alternative materials. During the fourth quarter of 2019, we idled all of our sand operations, and we are currently evaluating alternatives for the sand business.

Through our wholly-owned subsidiary StrataGen, Inc., we promote increased production and EUR of oil and natural gas by selling a widely used fracture stimulation software under the brand FracPro, and providing fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

FracPro provides a suite of stimulation software solutions used for designing fracture treatments and for on-site real-time analysis. Use of FracPro enables our clients to optimize stimulation jobs to enhance oil and gas production. FracPro has been integrated with third-party reservoir simulation software, furthering its reach and utility.

The StrataGen consulting team works with operators around the world to help optimize well placement, fracture treatment design and production enhancement. The broad range of expertise of the StrataGen consultants includes: fracture treatment design; completion support; on-site treatment supervision; quality control; post-treatment evaluation and optimization; reservoir and fracture studies; rock mechanics and software application and training.

Our industrial ceramic technology products are manufactured and sold to industrial companies. These products are designed for use in various industrial technology applications, including but not limited to casting and milling.

We also produce industrial products at our manufacturing facilities for third parties under tolling arrangements. These products so far have been primarily used in industrial, or agricultural applications. We continue to develop additional opportunities within the industrial, agricultural and oil and gas industries to grow revenue, and reduce our plant's slowing and idling costs.

Our Environmental Technologies and Services segment is intended to protect operators' assets, minimize environmental risks, and lower lease operating expense ("LOE"). AGPI, the only subsidiary of ours to operate in this segment, provides spill prevention, containment and countermeasure systems for the oil and gas industry. AGPI uses proprietary technology to make products designed



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to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials.

International revenues represented 27% and 19% of total revenues in 2019 and 2018, respectively.

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

Critical Accounting Policies

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

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

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

We value inventory using the weighted average cost method. Assessing the ultimate realization of inventories requires judgments about future demand and market conditions. We regularly review inventories to determine if the carrying value of the inventory exceeds net realizable value and we record an adjustment to reduce the carrying value to net realizable value, as necessary. Future changes in demand and market conditions could cause us to be exposed to additional obsolescence or slow moving inventory. If actual market conditions are less favorable than those projected by management, lower of cost or net realizable value adjustments may be required. During the year ended December 31, 2019, the Company recognized a $4.3 million lower of cost or net realizable value adjustment in cost of sales. There were no lower of cost or net realizable value inventory adjustments for the year ended December 31, 2018.

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



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Accounting Standards Codification ("ASC") Topic 740, Income Taxes, provides the carrying value of DTAs should be reduced by the amount not expected to be realized. A company should reduce deferred tax assets by a valuation allowance if, based on the weight of all available evidence, it is no longer more likely than not that some portion or all of the deferred tax assets will be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. ASC 740 requires all available evidence, both positive and negative, be considered to determine whether a valuation allowance for deferred tax assets is needed in the financial statements. Additionally there can be statutory limitations and losses also assessed on the deferred tax assets should certain conditions arise.

We believe it is more likely than not that a portion of our deferred tax assets will not be realized in the future. Accordingly, we have a $143.4 million valuation allowance against our deferred tax assets. Our assessment of the realizability of our deferred tax assets is based on the weight of all available evidence, both positive and negative, including future reversals of deferred tax liabilities. Income tax benefit was $2.2 million, or 0.7% of pretax loss, for the year ending December 31, 2019 compared to income tax expense of $0.9 million, or 1.2% of pretax loss, for the same period in 2018.

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

Due to worsening market conditions and outlook and the loss of a key customer during the fourth quarter of 2019, we evaluated essentially all of our long-lived assets for possible impairment and in doing so recognized an impairment charge totaling $169.9 million primarily related to (1) our Toomsboro, Georgia manufacturing plant, (2) our technology assets, including our Eufaula, Alabama and New Iberia, Louisiana manufacturing plants, (3) our sand assets, including our Marshfield, Wisconsin facility and (4) various general corporate assets primarily related to distribution centers we no longer intend to utilize in our business. In addition, as a result of the change in the outlook of our business and the idling of our Marshfield sand facility, we have an excess number of railcars that we no longer expect to utilize in our business and efforts to locate sublessees have not been successful. In addition, we previously utilized a leased distribution center in our sand business, and as a result of the idling of our sand business, we no longer expect to utilize this leased distribution center, and efforts to locate a sublessee have not been successful. As a result, the Company concluded to abandon the assets and has recorded an impairment of the excess railcar operating lease right of use assets, as well as the distribution center operating lease right of use asset. In addition, the Company made the decision that it will vacate certain leased office space during 2020, and as a result has recorded an additional impairment to operating lease right of use assets. The total amount of right of use asset impairments recorded during the fourth quarter of 2019 was approximately $35.2 million.

In addition, the Company identified indicators of impairment relating to our PicOnyx investment, and as a result recorded an impairment of $4.1 million during the fourth quarter of 2019.

The Company evaluated goodwill during the fourth quarter of 2019. The Company has been marketing for sale all or a portion of the Company to various parties. As a result of this marketing effort and various indications of interest, the Company estimated that the fair value of StrataGen, Inc. was less than the carrying value of identifiable assets, and as a result a $3.5 million impairment was recorded to goodwill.

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



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

During the fourth quarter of 2019, we evaluated the carrying value of inventories and concluded that for certain inventory, the net realizable value had fallen below its carrying value, and as a result, we recorded a $4.3 million inventory adjustment within cost of sales on the consolidated statements of operations.

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

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

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

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

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



Results of Operations

Net Loss



                                                   Percent
                ($ in thousands)      2019         Change          2018
                Net Loss           $ (304,201 )        (303 )%   $ (75,433 )

For the year ended December 31, 2019, we reported net loss of $304.2 million, which was 303% worse compared to the $75.4 million net loss reported in the previous year. This increase in net loss was primarily due to decreases in sales of technology products and services, base ceramic and sand proppants, and environmental technologies and services. In addition, during the year ended December 31, 2019, we recorded impairments of various long-lived assets totaling approximately $225 million, as well as lower of cost or net realizable value inventory adjustments of $4.3 million.

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



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Revenues



                                                                      Percent
($ in thousands)                                        2019          Change            2018
Consolidated revenues                                $  161,707             (23 )%   $  210,745

Revenues by operating segment:


 Oilfield and Industrial Technologies and Services   $  135,555             (24 )%   $  178,609
 Environmental Technologies and Services             $   26,152             (19 )%   $   32,136

Oilfield and Industrial Technologies and Services segment revenues of $135.6 million for the year ended December 31, 2019 decreased 24% compared to $178.6 million in 2018. The decrease was mainly attributable to a 38% decrease in technology products and services sales, and a 25% decrease in base ceramic and sand proppants. These decreases were partially offset by a 3% increase in industrial products and services and $4.2 million of sublease and rental income. As a result of the adoption of ASC 842 as of January 1, 2019, sublease and rental income was classified within revenues during the year ended December 31, 2019. These amounts were classified as a reduction of costs for the same period in 2018. Despite the overall decrease in base ceramic revenue, our international base ceramic revenue increased to 60% of total base ceramic revenue for the year ended December 31, 2019 compared to 39% for the same period in 2018.

Environmental Technologies and Services segment revenues of $26.2 million for the year ended December 31, 2019 decreased 19% compared to $32.1 million in 2018. These decreases were mainly attributable to a decrease in oil and natural gas industry activity and increased competition.



Gross (Loss) Profit



                                                                  Percent
($ in thousands)                                   2019           Change            2018
Consolidated gross loss                         $  (33,437 )            (47 )%   $  (22,689 )
Consolidated as a % of revenues                        (21 )%                           (11 )%

Gross (loss) profit by operating segment:


 Oilfield and Industrial Technologies and
Services                                        $  (36,483 )            (28 )%   $  (28,439 )
 Oilfield and Industrial Technologies and
Services %                                             (27 )%                           (16 )%
 Environmental Technologies and Services        $    3,046              (47 )%   $    5,750
 Environmental Technologies and Services %              12 %                             18 %

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

Oilfield and Industrial Technologies and Services segment gross loss for the year ended December 31, 2019 was $36.5 million, or (27)% of revenues, compared to gross loss of $28.4 million, or (16)% of revenues, for 2018. The worsening of gross loss in 2019 was primarily attributable to a reduction in more profitable technology products within our sales mix. We expect to incur slowing and idling production costs in the future until our production levels return to normal capacity. In addition, during the fourth quarter of 2019, the Company recorded a $4.3 million lower of cost or net realizable value inventory adjustment as a result of certain inventories in which net realizable value fell below book value.

Environmental Technologies and Services segment gross profit for the year ended December 31, 2019 was $3.0 million, or 12% of revenues, compared to gross profit of $5.8 million, or 18% of revenues, for 2018. This decrease in gross profit was primarily the result of the decrease in sales.

Depreciation and amortization was $29.2 million for the year ended December 31, 2019 compared to $32.3 million for the same period in 2018. This decrease was largely due to the sale of the Millen facility in December 2018.



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





                                                                 Percent
($ in thousands)                                   2019          Change            2018
Selling, general and administrative expenses
(SG&A) (exclusive of depreciation and
amortization)                                   $   39,181              (0 )%   $   39,227
SG&A as a % of revenues                                 24 %                            19 %
Depreciation and amortization                   $    1,516             (35 )%   $    2,336
Loss on sale of Millen plant                    $        -            (100 )%   $    2,305
Loss on sale of Russian proppant business       $        -            (100 )%   $      350
Other operating expense (income)                $  224,896             n/m      $     (332 )

SG&A by operating segments:


 Oilfield and Industrial Technologies and
Services                                        $   36,743               1 %    $   36,491
 Oilfield and Industrial Technologies and
Services %                                              27 %                            20 %
 Environmental Technologies and Services        $    2,438             (11 )%   $    2,736
 Environmental Technologies and Services %               9 %                             9 %

n/m - not meaningful

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

Depreciation and amortization was $1.5 million for the year ended December 31, 2019 compared to $2.3 million for 2018. This decrease was the result of certain assets becoming fully depreciated and fully amortized. Other operating expense in 2019 was related to various asset impairments. See Critical Accounting Policies section. Other operating income in 2018 was primarily related to gain on asset sales partially offset by other operating expenses. As a percentage of revenues, Oilfield and Industrial Technologies and Services segment SG&A expenses for 2019 increased to 27% compared to 20% in 2018, primarily due to the decrease in revenues.



Income Tax Expense (Benefit)



                  ($ in thousands)                 2019        2018
                  Income Tax (Benefit) Expense   $ (2,214 )    $ 892
                  Effective Income Tax Rate          (0.7 )%     1.2 %

Income taxes are not allocated between our operating segments. Consolidated income tax benefit was $2.2 million, or (0.7)% of pretax loss, for the year ended December 31, 2019 compared to income tax expense of $0.9 million, or 1.2% of pretax loss for 2018. Net operating losses generated are carried forward, the substantial majority of which are reserved by a valuation allowance.

Liquidity and Capital Resources

Overview

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

We estimate our total capital expenditures in 2020 will be less than $2.0 million and may be limited by the Chapter 11 Cases.

Chapter 11 Cases

Since the commencement of the Chapter 11 Cases, each of the Debtors has continued to operate its business as a "debtor-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. At the conclusion of the Chapter 11 Cases, we expect the Supporting Lenders to exchange certain



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

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

Principal Sources and Uses of Capital Resources

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

Debtor-in-Possession Financing and Exit Facility

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

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

Going Concern and Financial Reporting in Reorganization

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

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2019.

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