HOUSTON, April 28, 2014 /PRNewswire/ -- Flotek
Industries, Inc. (NYSE: FTK) ("Flotek" or the "Company")
today announced results for the three months ended March 31, 2014.
As reported on Form 10-Q filed with the U.S. Securities and
Exchange Commission, Flotek reported that revenue for the three
months ended March 31, 2014 was
$102.6 million compared to
$78.2 million for the three months
ended March 31, 2013.
Consolidated revenue for the three months ended March 31, 2014
increased $24.4 million, or 31.1%,
relative to the comparable period of 2013. The increase in revenue
was primarily due to the acquisition of Florida Chemical and EOGA,
contributing incremental revenue of $16.8
million during the quarter. Excluding the impact of
acquisitions, revenue for the quarter ended March 31, 2014,
increased by $7.5 million, or
9.6%.
For the three months ended March 31,
2014, the Company reported net income of $12.0 million, or $0.22 per common share (fully diluted), compared
to a net income of $7.8 million, or
$0.15 per common share (fully
diluted) for the same period in 2013.
"Flotek's performance in the first quarter, including record
quarterly revenue, creates a strong base from which to continue our
industry-leading growth initiatives for the balance of 2014," said
John Chisholm, Flotek's Chairman,
President and Chief Executive Officer. "While we are pleased with
our results – especially given a slow start in January – we believe
we are positioned to post solid growth through the balance of the
year, especially in our key energy chemistry business. While
the second quarter spring break-up has begun in Canada, which will impact chemistry revenue in
the quarter, our continued growth in the U.S. as well as
incremental international growth provide solid opportunities in the
months ahead."
The Company recorded stock-based compensation expense during the
quarter of $2.3 million ($1.5 million, net of tax). That compares to
stock-based compensation expense in the first quarter of 2013 of
$2.2 million ($1.5 million, net of tax).
Earnings Before Interest, Taxes, Depreciation and Amortization,
or EBITDA (a non-GAAP measure of financial performance), for the
three months ended March 31, 2014 was
$23.1 million, an increase of
$7.6 million or 49%, compared to
$15.5 million for the three months
ended March 31, 2013.
A presentation of stock-based compensation and a reconciliation
of GAAP net income to EBITDA can be found at the conclusion of this
release.
A complete review and discussion of the Company's quarter-end
financial performance and position can be found in the Company's
quarterly report on Form 10-Q filed with the U.S. Securities and
Exchange Commission today.
Financial Update
Flotek's resilient operational performance continues to support
a strong balance sheet and financial position. During the quarter,
Flotek reduced its outstanding debt by $7.1
million, or 11.5%, compared to year-end levels. In addition,
the Company used $5.3 million in cash
for the acquisition of Eclipse IOR Services, LLC ("EOGA") and
posted capital expenditures of $4.1
million.
Inventories in the quarter rose by $8.9
million, primarily a result of a traditional seasonal
increase in citrus product inventory held at Florida Chemical.
Outstanding receivables as of March 31,
2014 were $65.9 million,
compared to $65.0 million as of
December 31, 2013. The Company's
allowance for doubtful accounts was at 1.4% of net receivables.
Depreciation and amortization expense for the three months ended
March 31, 2014 increased by $1.1
million, or 92.0%, relative to the comparable period of
2013, primarily due to incremental depreciation and amortization of
$0.7 million for assets recognized as
part of the acquisition of Florida Chemical in 2013.
Interest and other expense for the three months ended
March 31, 2014 was essentially flat relative to the comparable
period of 2013.
The Company recorded an income tax provision of $6.4 million, yielding an effective tax rate of
34.7% for the three months ended March 31, 2014, compared to
an income tax provision of $4.2
million reflecting an effective tax rate of 35.3% for the
comparable period in 2013.
"Flotek's ability to generate cash remains a core strength of
Flotek," added Chisholm. "We are confident of our ability to fund
current operations with internally generated cash flow which
provides meaningful flexibility to consider other strategic growth
opportunities that add value for Flotek shareholders."
Operational Update
As noted earlier, while January oilfield activity was lethargic,
each month in the quarter showed accelerated activity and revenue,
a trend – excepting Canadian activity with the beginning of
seasonal break-up – that continues into April. Revenue in the first
quarter of 2014 was $102.6 million, a
Flotek record and the second consecutive quarter with revenues in
excess of $100 million.
Energy Chemical Technologies revenue for the three months ended
March 31, 2014 totaled $62.4 million, compared to $44.7 million in the year-ago period. Energy
Chemical Technologies revenue for the three months ended
March 31, 2014 increased $17.7
million, or 39.7%, relative to the comparable period of
2013. Increased sales of stimulation chemical additives
accounted for the majority of the revenue increase for the quarter
ended March 31, 2014 relative to the comparable period of
2013.
Energy Chemical Technologies gross margins for the quarter were
46.8%, an increase from 42.8% in the first quarter of 2013.The
increase in gross margin percentage for the three months ended
March 31, 2014 was primarily
attributable to product portfolio mix resulting from
proportionately higher sales of patented and proprietary products
and the supply chain benefits of the Florida Chemical
acquisition.
Sequentially, Energy Chemical Technologies revenue for the three
months ended March 31, 2014 increased $5.5 million, or 9.6%. Energy Chemical
Technologies gross profit for the three months ended March 31, 2014 totaled $29.2 million, an increase of $2.2 million or 8.3% sequentially.
Growth in chemistry revenue was driven by acceleration in both
North America and international
activity. In the U.S., the Company continues to see solid growth in
South Texas with new customers
adopting Flotek's CnF® completion chemistries as well as new
opportunities in both West Texas
and the Mid-Continent. In addition, use in the Rockies remains
robust and has recovered from disruptions from flooding in the
second-half of last year.
In Canada, the first quarter
saw a significant increase in the number of customers adopting CnF®
completion chemistries, a trend the Company believes will continue,
resulting in volume growth at the conclusion of the spring break-up
season. The Canadian thaw, as is typically the case, will have an
impact on April and early May revenues in Canada.
Internationally, Flotek continues to make progress on several
fronts. CnF® completion chemistry sales into Argentina increased consistently in the
quarter. Our Middle Eastern initiatives continue to yield steady
results with opportunities in Oman, the United
Arab Emirates and Saudi
Arabia continuing to grow. Of special note, through our
major service company partners, we have seen meaningful growth in
multiple chemistry sales, including CnF® completion chemistries,
into Saudi Aramco.
Other international markets continue to contribute to overall
chemical sales including Mexico,
the Netherlands and Turkey with additional opportunities in those
nations as well as Guatemala,
Ecuador and elsewhere in Latin and
South America, the Middle East and Europe. Flotek continues to make progress on
the Gulf Energy joint venture to develop oilfield chemistry and
production facilities in the Sultanate of Oman to serve the rapidly growing hydrocarbon
markets in the Middle East and
North Africa. The companies have
completed the definitive joint venture agreements and are working
through various regulatory processes in Oman. In addition, Flotek has begun the
process of vetting global engineering firms to complete the
construction of the chemical manufacturing facility near Sohar. The
Company expects to complete the facility by the end of 2014.
Even before completion of the blending infrastructure, the
Company is already seeing benefits from the Omani venture. During
the first quarter, Flotek held a three-day comprehensive chemistry
seminar – with a focus on Enhanced Oil Recovery – with Petroleum
Development Oman ("PDO"). PDO, a joint venture between the
Sultanate and Royal Dutch Shell, is
the largest producer of hydrocarbons in Oman, responsible for nearly 70% of Omani
crude oil production. Flotek is encouraged by the opportunity and
acceptance of the Company's chemistry technology and commercial
relationship opportunities in the Sultanate.
In addition, Flotek Gulf, the new name of the joint venture, was
a sponsor, through Gulf Energy, and exhibitor at the recent OGWA
conference and exhibition in Muscat. The conference was attended by
over 10,000 oil and gas professionals from the Middle East and Africa and provided a host of solid commercial
leads for Flotek Gulf.
"Our commitment to being a leading innovator in oilfield
chemistry is beginning to yield results as we continue our solid
growth in energy chemistry," added Chisholm. "While we have plenty
of work ahead of us, we are pleased with our success in reaching
new clients and basins in North
America. Moreover, our plate remains full of additional
opportunities that, if successful in converting to commercial
business, should accelerate our growth in the coming months."
"In addition, while still relatively small compared to our North
American business, our international prospects continue to develop
and become better defined," Chisholm added. "We continue to be
deliberate, focused and conservative in our approach to business in
distant lands yet believe that – over the course of the next
several quarters – our international portfolio has the potential to
be transformational for Flotek and its growth profile."
Flotek's recent acquisition of EOGA is an important addition to
our energy chemistry and Enhanced Oil Recovery ("EOR") offerings.
Flotek is already experiencing the benefits of expanding EOR
services and the expertise that Jay
Portwood and his team bring to Flotek's chemistry offerings.
The recent closing of the acquisition of SiteLark, LLC adds
reservoir and project modeling and evaluation capabilities to the
stable which should further enhance our reputation as a leader in
global Enhanced Oil Recovery services.
Energy Chemical Technology margins remained strong in the first
quarter as a result of favorable product mix and continued benefits
from efficiency improvements at our Marlow, Oklahoma chemistry manufacturing and
blending facility. In addition, better control of raw material
costs – largely a result of our acquisition of Florida Chemical in
2013 – continues to support strong margins.
In research and product development, Flotek continues to focus
on next-generation chemistry solutions for key oil and gas
challenges. The company continues to enhance its core CnF®
chemistry products as well as work on customized solutions
presented to the Company by clients, both domestic and
international.
"We remain both proud of and committed to our reputation of
being a leading innovator in oilfield chemistry, and our first
quarter activity is a strong testament to that commitment," added
Chisholm. "We will continue to work tirelessly to convince our
clients and prospects that the use of Flotek chemistries is an
investment that yields results, both in terms of production and
economics. Over the course of the next several weeks we believe
those benefits will become even more clear and compelling."
The Consumer and Industrial Chemical Technologies ("CICT")
segment was formed in the second quarter of 2013 with the
acquisition of Florida Chemical. For the three months ended
March 31, 2014 the segment contributed revenue of $13.0 million. CICT revenue is primarily driven
by demand for d-Limonene and other bio-based chemistries as well as
from citrus isolates produced for the flavor and fragrance
industry. Revenue for CICT is subject to market seasonality
and availability of raw materials. CICT gross margin for the three
months ended March 31, 2014
contributed $4.0 million. Gross
margin for the quarter was favorably impacted by proportionally
higher sales of high margin flavor and fragrance isolates.
Sequentially, CICT revenue for the three months ended
March 31, 2014 decreased $1.9
million, or 12.9%. CICT gross profit for the three
months ended March 31, 2014 totaled
$4.0 million, an increase of
$0.7 million or 19.4%
sequentially. Gross margin percentage for the three months
ended March 31, 2014 increased to
31.0%, up from 22.6% for the three months ended December 31, 2013.
Drilling Technologies revenue for the three months ended
March 31, 2014 totaled $24.9 million, compared to $28.9 million for the three months ended
March 31, 2013. Revenue declines can
be primarily attributed to a decline in oilfield and mining product
sales along with rental revenue declines for actuated tool rentals
and Teledrift™ tools.
Drilling Technologies gross margin for the three months ended
March 31, 2014 decreased by
$1.6 million, or 13.7%, over the
comparable period of 2013, but remained relatively flat as a
percentage of revenue. Gross margin declined due to decreased
revenue, partially offset by an increase in gross margin percentage
due to direct cost control including lower employee, supplies, and
travel expenses in the first quarter of 2014.
Drilling Technologies revenue for the three months ended
March 31, 2014 decreased $1.2
million, or 4.7%, sequentially. Drilling Technologies
gross profit for the three months ended March 31, 2014 totaled $9.8 million, an increase of $1.3 million or 14.7% sequentially. Gross
margin percentage for the three months ended March 31, 2014 increased to 39.3%, up from 32.6%
for the three months ended December 31,
2013.
The decline in revenue is primarily the result of a decline in
Teledrift™ rentals in the Mid Continent and Southern regions due to
seasonal weather patterns and transient employment and logistics
issues. Both regions regained momentum in the later part of the
quarter and are continuing to re-accelerate. In addition, although
the Stemulator™ agitation tool experienced a slower-than-expected
start in January, rentals ended the quarter strong, with March
providing the strongest monthly rental revenue to date, a trend
Flotek expects to continue in the second quarter.
Internationally, Teledrift™ continues to win accolades and gain
traction with key clients. Revenues from Saudi Aramco continue at
record levels with additional growth expected throughout the year.
While seasonal weakness in Argentina had an impact, we continue to
experience new opportunities in Kazakhstan. In the Middle East, a number of new opportunities are
developing, including new tools headed to Iraq which should be working in the coming
months. Flotek expects Teledrift™ to continue to post international
growth throughout the balance of the year.
The Stemulator™, Flotek's new horizontal drilling acceleration
tool, finished the quarter with record revenue in March, after a
slow start in January. The Company continues to tweak the design to
ensure optimal performance, largely a result of customer feedback.
For example, Flotek recently adjusted the pulsing frequency of the
tool to minimize interference with signals from directional
drilling technologies. Additionally, in the Mid-Continent, the
Company is currently running its largest single-customer job with
the Stemulator™ and, if successful, expects significant growth in
the region beginning late in the second quarter or early in the
second-half of the year.
While increased competition presents challenges in many basins,
Flotek continues to experience growth in the Permian Basin and is
seeing new opportunities in the Eagle Ford and Mid-Continent
regions with Rockies activity remaining stable. More important,
Drilling Technologies margins were resilient in the quarter, a
metric on which the Company remains focused.
The Company's Galleon mining tools group experienced a decline
in backlog and orders, largely due to a decline in overall mining
activity in North and South
America. While Galleon's near-term visibility is challenged,
the Company believes activity and backlog should begin to redevelop
in the later part of 2014 and into 2015.
Flotek is completing its move into a new state-of-the-art
facility in Moore, Oklahoma which
will house the Company's Teledrift™, Stemulator™ and Motors
operations as well as its Mid-Continent Drilling Technologies
division. The new facility is more efficient and allows better
coordination and collaboration in the Company's key drilling
technologies.
Revenue for the Production Technologies segment for the quarter
ended March 31, 2014 was $2.3 million, a decrease of $2.4 million compared to the same period in 2013.
The segment is shifting focus to the unconventional oil markets and
the related equipment sales and service. International valve sales
decreased year over year due to a contract fulfilled in the first
quarter of 2013. Electrical submersible pump sales have also
decreased as a result of continued declines in CBM activity.
These decreases were partially offset by increases in revenue with
linear lift systems and rod valve sales in the Powder River and
Williston Basins unconventional oil markets.
"As we noted earlier this year as we begin to reengineer our
Production Technologies enterprise, 2014 results are likely to be
variable," added Chisholm. "While we will continue to provide
exceptional service to our legacy clients, our longer-term focus is
on opportunistic products and services where we can make a
difference to clients in providing innovative solutions to niche
production challenges. Hence, as we reimagine the business, we
believe Production Technologies better describes the business
prospects ahead. In the coming months we will consider a wide-range
of opportunities – from intrinsic development to acquisitive
ventures – that we believe will create an industry leading
business. Under David McMahon's
leadership, we are already beginning to see meaningful
opportunities ahead."
"Overall, while pleased with our first quarter results, we are
more excited about what lies ahead for the balance of the year for
Flotek," concluded Chisholm. "We believe Flotek can post
industry-leading results through focusing on superior innovation in
oilfield technologies, executing our marketing and sales strategy
and having an ever-more vigilant focus on profitable growth.
Moreover, we now firmly believe we can add to that success through
a prudent review of external growth opportunities which stand in
support of our core strategy: making a positive difference for our
clients while at the same time focusing on making a difference for
our other stakeholders: our employees and their communities, our
shareholders and the environment. If successful in the execution of
our vision, we believe 2014 will once again be a transformational
year for all Flotek stakeholders."
Conference Call Details
Flotek will host a conference call on Tuesday, April 29, 2014 at 7:30 a.m. Central Daylight Time to discuss its
operating results for the three months ended March 31, 2014.
To participate in the call, participants should dial
800-679-0308 approximately 5 minutes prior to the start of the
call. The call can also be accessed from Flotek's website
at www.flotekind.com.
About Flotek Industries, Inc.
Flotek is a global developer and distributor of innovative
specialty chemicals and down-hole drilling and production
equipment. Flotek manages automated bulk material handling, loading
and blending facilities. It serves major and independent companies
in the domestic and international oilfield service industry. Flotek
Industries, Inc. is a publicly traded company headquartered in
Houston, Texas, and its common
shares are traded on the New York Stock Exchange under the ticker
symbol "FTK"
For additional information, please visit Flotek's web site
at www.flotekind.com.
Forward-Looking Statements:
Certain statements set forth in this Press Release constitute
forward-looking statements (within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934) regarding Flotek Industries, Inc.'s business,
financial condition, results of operations and prospects. Words
such as expects, anticipates, intends, plans, believes, seeks,
estimates and similar expressions or variations of such words are
intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this
Press Release.
Although forward-looking statements in this Press Release
reflect the good faith judgment of management, such statements can
only be based on facts and factors currently known to management.
Consequently, forward-looking statements are inherently subject to
risks and uncertainties, and actual results and outcomes may differ
materially from the results and outcomes discussed in the
forward-looking statements. Factors that could cause or contribute
to such differences in results and outcomes include, but are not
limited to, demand for oil and natural gas drilling services in the
areas and markets in which the Company operates, competition,
obsolescence of products and services, the Company's ability to
obtain financing to support its operations, environmental and other
casualty risks, and the impact of government regulation.
Further information about the risks and uncertainties that may
impact the Company are set forth in the Company's most recent
filing on Form 10-K (including without limitation in the "Risk
Factors" Section), and in the Company's other SEC filings and
publicly available documents. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this Press Release. The Company undertakes no
obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the
date of this Press Release.
GAAP Accounting
Reconciliation
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2014
|
|
2013
|
|
|
|
|
(in thousands,
except per share data)
|
GAAP Net Income
and Reconciliation to EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
|
|
$
12,018
|
|
$
7,765
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
454
|
|
434
|
|
|
|
|
|
|
|
|
Income Tax
Expense
|
6,380
|
|
4,237
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
4,219
|
|
3,033
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
|
$
23,071
|
|
$
15,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select Non-Cash
Items Impacting Earnings
|
|
|
|
|
|
|
|
Stock Compensation
Expense
|
|
$
2,334
|
|
$
2,241
|
|
|
|
|
|
|
|
|
Less income tax
effect
|
(817)
|
|
(784)
|
|
|
|
|
|
|
|
|
Stock Compensation
Expense, net of tax
|
$
1,517
|
|
$
1,457
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding (Fully Diluted)
|
55,398
|
|
51,222
|
|
|
|
|
|
|
|
Stock Compensation
Expense Per Share (Fully Diluted)
|
$
0.03
|
|
$
0.03
|
SOURCE Flotek Industries, Inc.