HOUSTON, May 3, 2017 /PRNewswire/ -- Flotek
Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today
announced results for the three-months ended March 31, 2017.
Q1 2017 Highlights:
- First quarter revenue from continuing operations was
$80.0 million, up 13.2% sequentially,
and up 25.3% year-over-year.
- GAAP loss from continuing operations for the three months ended
March 31, 2017, was ($0.7 million), compared with a loss from
continuing operations of less than ($0.1
million) in the same period of 2016.
- Earnings Before Interest, Taxes, Depreciation and Amortization,
or EBITDA, was $2.6 million for the
three months ended March 31, 2017,
compared to $2.6 million for the
three months ended March 31, 2016.
For comparable purposes to estimates, non-recurring charges of
$1.1 million related to executive
retirement may be considered, resulting in $3.7 million of adjusted EBITDA. We identified
that we recorded $3.0 million
associated with non-cash compensation which we intend to identify
as non-cash adjustments to EBITDA going forward.
- Domestic Complex nano-Fluid® (CnF®) volumes rose 24.7% and
revenues were up 19.8% sequentially from the 4th quarter
2016. These volumes compare favorably to the U.S. Energy
Information Administration Drilling Productivity Report which
indicates U.S. land completions rose 22.8% from 4Q16 to 1Q17.
- International CnF volumes rose 12.1% and revenues were up 4.2%
sequentially from the 4th quarter 2016, comparing
favorably to broader declines in sequential spending levels.
- Expected capital expenditures for 2017 are reduced from a
previous range of $15 million - $20
million as disclosed in our form 10K to a range of
$10 million - $14 million, depending
on market conditions, of which, approximately 40% are attributed to
growth oriented projects.
Material Subsequent Events Following Q1 Close:
- On May 2, 2017, Flotek announced
the divestiture of its Drilling Technologies segment for proceeds
of $17 million, subject to normal
working capital adjustments.
- Ongoing strategic alternatives remain as substantial progress
is being made towards the divestiture of our Production
Technologies segment, which remains held for sale.
- On April 25, 2017, Flotek
announced a global agreement with IBM to jointly develop greater
capabilities to predict and apply custom chemistry and other
approaches to enhance the performance of wells throughout their
entire life-cycle, highlighting our commitment to lead the effort
of Big Data in the Oilfield and jointly create value for our
customers.
Segment Results from Continuing Operations:
- Flotek reported positive results from Energy Chemistry
Technologies (ECT), which includes our patented suite of CnF
products, but faced challenges with competitive prices in the
commodity chemicals offerings.
- Sequentially, ECT quarterly revenues increased 10.2% to
$60.8 million, and year-over-year
revenues for the first quarter increased 36.0% due to increased
well completion activity by customers and demand for our
products.
- ECT margins in the first quarter rose by 50 basis points from
the fourth quarter to 36.7%, and we expect these margins to expand
through the course of the year, as price increases implemented in
March, combined with process improvements, become more reflected in
our results.
- After a resilient 4th quarter which reflected 23.0%
revenue growth from the 3rd quarter, the non-CnF, ECT
sales revenue declined 6.1% from the 4th quarter due to
timing of customer orders and key customer equipment
mobilizations.
- Consumer & Industrial Chemistry Technologies (CICT)
reported revenue of $19.2 million, up
24.1% sequentially, and up 0.3% year-over-year.
- CICT's positive growth is, in large part, attributed to flavor
and fragrance sales and highlights our focus on managing the supply
chain.
John Chisholm, Flotek's Chairman,
President and Chief Executive Officer commented, "As anticipated,
overall industry completion activity continued to improve during
the quarter, and Flotek is executing on strategic initiatives and
organic growth opportunities. We continue to experience increasing
demand, above the industry recovery, for our patented CnF®
technology.
"Just over a year ago, the price of oil was near its recent low
point and we embarked on Company-wide initiatives to position
Flotek as a high-return, asset light, technology-focused
Company. We maintained our investments in research while the
industry cut back, began a strategic review of our operating
segments, and developed big data relationships like the recently
announced IBM Watson agreement for the benefit of our shareholders
and customers.
"We are excited to emerge from the industry downturn in a
stronger position in our core operations, technology and
relationships with an improved balance sheet and an expanding
platform of growth opportunities."
First Quarter 2017 Results
For the three months ended
March 31, 2017, Flotek posted
revenue of $80.0 million, an
increase of $16.1 million, or 25.3%,
compared to $63.8 million in the same
period of 2016. Revenue increased $9.3
million, or 13.2%, compared to the fourth quarter of
2016.
Flotek reported Loss from Operations for the three months
ended March 31, 2017 of $0.6 million, an increase of $1.0 million compared to Income from
Operations of $0.4 million in the
same period of 2016. Loss from Operations decreased $5.0 million compared to fourth quarter 2016.
On a GAAP basis, Flotek reported loss per share (fully
diluted) for the three months ended March
31, 2017 of ($0.01) from
continuing operations compared to earnings per share (fully
diluted) of $0.00 for the three
months ended March 31, 2016.
Earnings Before Interest, Taxes, Depreciation and Amortization,
or EBITDA, for the three months ended March 31, 2017, was $2.6
million, compared to $2.6
million for the three months ended March 31, 2016.
Consolidated gross margin for the three months ended
March 31, 2017, was 34.7% compared to
37.3% in the same period of 2016 and relatively flat with the
fourth quarter 2016 margin of 34.5%.
A summary income statement reflecting first quarter results can
be found at the conclusion of this release.
First Quarter 2017 – Segment Highlights
|
1Q
2017
|
4Q
2016
|
%
Change
|
1Q
2016
|
%
Change
|
|
Energy Chemistry
Technology
|
Revenue
|
$60.8
million
|
$55.1
million
|
10.2%
|
$44.7
million
|
36.0%
|
Gross
Margin
|
36.7%
|
36.2%
|
|
42.0%
|
|
Operating
Income
|
$8.5
million
|
$7.2
million
|
18.4%
|
$8.0
million
|
6.7%
|
|
Consumer and
Industrial Chemistry Technologies ("CICT")
|
Revenue
|
$19.2
million
|
$15.5
million
|
24.1%
|
$19.1
million
|
0.3%
|
Gross
Margin
|
28.3%
|
18.3%
|
|
26.3%
|
|
Operating
Income
|
$3.7
million
|
$1.2
million
|
220.5%
|
$3.4
million
|
9.3%
|
* Percentage
change may be different when calculated due to rounding.
|
Flotek Outlook
In commenting about Flotek's outlook,
Mr. Chisholm added, "For the second quarter 2017, we are
anticipating steady completion activity with opportunities for
growth, continued demand in energy chemistry with expanding margins
as the result of strategic price increases, and steady growth in
our consumer and industrial chemistry technology sectors."
Conference Call Details
Flotek will host a conference
call on Thursday, May 4, at
7:30 AM CDT (8:30 AM EDT) to discuss its operating results for
the three months ended March 31,
2017. To participate in the call, participants should dial
800-672-8961 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 develops and
delivers prescriptive chemistry-based technology, including
specialty chemicals, to clients in the energy, consumer industrials
and food & beverage industries. Flotek's inspired chemists draw
from the power of bio-derived solvents to deliver solutions that
enhance energy production, cleaning products, foods & beverages
and fragrances. In the oil and gas sector, Flotek serves major and
independent energy producers and oilfield service companies, both
domestic and international. 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
filings 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.
Flotek Industries,
Inc.
|
Reconciliation of
Non-GAAP Items and Non-Cash Items Impacting Earnings
|
(in thousands,
except per share data)
|
|
|
|
Three Months
Ended
|
|
|
|
3/31/2017
|
|
3/31/2016
|
|
|
|
|
GAAP Net Loss and
Reconciliation to EBITDA (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
Net Loss
(GAAP)
|
$
(743)
|
|
$
(29)
|
|
|
|
|
|
|
|
|
Interest
Expense
|
594
|
|
408
|
|
|
|
|
|
|
|
|
Income Tax
Benefit
|
(320)
|
|
(17)
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
3,032
|
|
2,250
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
$
2,563
|
|
$
2,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select Non-Cash
Items Impacting Earnings
|
|
|
|
|
|
|
|
|
|
|
Stock Compensation
Expense
|
$
3,011
|
|
$
2,058
|
|
|
|
|
|
|
|
|
Less income tax
effect at 35%
|
(1,054)
|
|
(720)
|
|
|
|
|
|
|
|
|
Stock Compensation
Expense, net of tax
|
$
1,957
|
|
$
1,338
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding (Fully Diluted)
|
57,673
|
|
54,744
|
|
|
|
|
|
|
|
Stock Compensation
Expense Per Share (Fully Diluted)
|
$
0.03
|
|
$
0.02
|
|
Flotek Industries,
Inc.
|
Unaudited
Condensed Consolidated Balance Sheets
|
(in thousands,
except share data)
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
ASSETS
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
1,826
|
|
$
4,823
|
Accounts receivable, net of allowance for doubtful
accounts of $779 and $664
at March 31, 2017 and December 31, 2016, respectively
|
62,934
|
|
47,152
|
Inventories
|
64,677
|
|
58,283
|
Income taxes
receivable
|
12,271
|
|
12,752
|
Assets held for
sale
|
27,891
|
|
43,900
|
Other current
assets
|
6,694
|
|
21,708
|
Total current
assets
|
176,293
|
|
188,618
|
Property and
equipment, net
|
74,327
|
|
74,691
|
Goodwill
|
56,660
|
|
56,660
|
Deferred tax assets,
net
|
20,044
|
|
12,894
|
Other intangible
assets, net
|
49,726
|
|
50,352
|
TOTAL
ASSETS
|
$
377,050
|
|
$
383,215
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
35,635
|
|
$
29,960
|
Accrued
liabilities
|
7,841
|
|
12,170
|
Interest
payable
|
49
|
|
24
|
Liabilities held for
sale
|
4,638
|
|
4,961
|
Current portion of
long-term debt
|
42,603
|
|
40,566
|
Total current
liabilities
|
90,766
|
|
87,681
|
Long-term debt, less
current portion
|
7,083
|
|
7,833
|
Total
liabilities
|
97,849
|
|
95,514
|
Commitments and
contingencies
|
|
|
|
Equity:
|
|
|
|
Cumulative
convertible preferred stock, $0.0001 par value, 100,000 shares
authorized; no shares issued and outstanding
|
—
|
|
—
|
Common stock, $0.0001
par value, 80,000,000 shares authorized; 59,770,452 shares issued
and 57,035,414 shares outstanding at March 31, 2017; 59,684,669
shares issued and 56,972,580 shares outstanding at December 31,
2016
|
6
|
|
6
|
Additional paid-in
capital
|
321,980
|
|
318,392
|
Accumulated other
comprehensive income (loss)
|
(964)
|
|
(956)
|
Retained earnings
(accumulated deficit)
|
(21,808)
|
|
(9,830)
|
Treasury stock, at
cost; 2,046,168 and 2,028,847 shares at March 31, 2017 and December
31, 2016, respectively
|
(20,371)
|
|
(20,269)
|
Flotek Industries,
Inc. stockholders' equity
|
278,843
|
|
287,343
|
Noncontrolling
interests
|
358
|
|
358
|
Total
equity
|
279,201
|
|
287,701
|
TOTAL LIABILITIES
AND EQUITY
|
$
377,050
|
|
$
383,215
|
Flotek Industries,
Inc.
|
Unaudited
Condensed Consolidated Statements of Operations
|
(in thousands,
except per share data)
|
|
|
|
|
|
Three Months
Ended
|
|
3/31/2017
|
|
3/31/2016
|
Revenue
|
$
79,954
|
|
$
63,812
|
Cost of
revenue
|
52,212
|
|
40,018
|
Gross
profit
|
27,742
|
|
23,794
|
Expenses:
|
|
|
|
Selling, general and
administrative
|
22,581
|
|
19,577
|
Depreciation and
amortization
|
2,445
|
|
1,902
|
Research and
development
|
3,141
|
|
1,947
|
Loss on disposal of
long-lived assets
|
198
|
|
-
|
Total
expenses
|
28,365
|
|
23,426
|
(Loss) income from
operations
|
(623)
|
|
368
|
Other
(expense) income:
|
|
|
|
Interest
expense
|
(594)
|
|
(408)
|
Other (expense)
income, net
|
154
|
|
(6)
|
Total other
expense
|
(440)
|
|
(414)
|
Loss before income
taxes
|
(1,063)
|
|
(46)
|
Income tax
benefit
|
320
|
|
17
|
Loss from
continuing operations
|
(743)
|
|
(29)
|
Loss from
discontinued operations, net of tax
|
(11,235)
|
|
(30,156)
|
Net
loss
|
$ (11,978)
|
|
$ (30,185)
|
|
|
|
|
Basic earnings
(loss) per common share:
|
|
|
|
Continuing
operations
|
$
(0.01)
|
|
$
-
|
Discontinued
operations, net of tax
|
(0.19)
|
|
(0.55)
|
Basic earnings (loss)
per common share
|
$
(0.20)
|
|
$
(0.55)
|
Diluted earnings
(loss) per common share:
|
|
|
|
Continuing
operations
|
$
(0.01)
|
|
$
-
|
Discontinued
operations, net of tax
|
(0.19)
|
|
(0.55)
|
Diluted earnings
(loss) per common share
|
$
(0.20)
|
|
$
(0.55)
|
Weighted average
common shares:
|
|
|
|
Weighted average
common shares used in computing basic earnings (loss) per common
share
|
57,673
|
|
54,744
|
Weighted average
common shares used in computing diluted earnings (loss) per common
share
|
57,673
|
|
54,744
|
Flotek Industries,
Inc.
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
(in
thousands)
|
|
|
Three Months
Ended
|
|
3/31/2017
|
|
3/31/2016
|
Cash flows from
operating activities:
|
|
|
|
Net loss
|
$ (11,978)
|
|
$ (30,185)
|
Loss from
discontinued operations, net of tax
|
(11,235)
|
|
(30,156)
|
Loss from continuing
operations
|
(743)
|
|
(29)
|
Adjustments to
reconcile loss from continuing operations to net cash used in
operating activities:
|
|
|
|
Depreciation and
amortization
|
3,032
|
|
2,250
|
Amortization of
deferred financing costs
|
130
|
|
87
|
Loss on sale of
assets
|
198
|
|
0
|
Stock compensation
expense
|
3011
|
|
2058
|
Deferred income tax
benefit
|
(7,403)
|
|
(6,898)
|
Reduction in tax
benefit related to share-based awards
|
66
|
|
365
|
Changes in current
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(15,788)
|
|
252
|
Inventories
|
(6,373)
|
|
(10,479)
|
Income taxes
receivable
|
332
|
|
(10,308)
|
Other current
assets
|
13,923
|
|
31
|
Accounts
payable
|
5,671
|
|
5,801
|
Accrued
liabilities
|
1,265
|
|
12,274
|
Income taxes
payable
|
97
|
|
(1,817)
|
Interest
payable
|
25
|
|
30
|
Net cash used in
operating activities
|
(2,557)
|
|
(6,383)
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(1,877)
|
|
(3,790)
|
Proceeds from sale of
assets
|
158
|
|
-
|
Purchase of patents
and other intangible assets
|
(84)
|
|
(131)
|
Net cash used in
investing activities
|
(1,803)
|
|
(3,921)
|
Cash flows from
financing activities:
|
|
|
|
Repayments of
indebtedness
|
(750)
|
|
(1,785)
|
Borrowings on
revolving credit facility
|
98,863
|
|
96,000
|
Repayments on
revolving credit facility
|
(96,826)
|
|
(83,526)
|
Debt issuance
costs
|
(106)
|
|
-
|
Reduction in tax
benefit related to share-based awards
|
-
|
|
(365)
|
Purchase of treasury
stock related to share-based awards
|
(102)
|
|
(154)
|
Proceeds from sale of
common stock
|
251
|
|
212
|
Proceeds from
exercise of stock options
|
7
|
|
134
|
Net cash provided by
financing activities
|
1,337
|
|
10,516
|
Discontinued
operations:
|
|
|
|
Net cash used in
operating activities
|
(353)
|
|
(169)
|
Net cash provided by
investing activities
|
353
|
|
169
|
Net cash flows used
in discontinued operations
|
-
|
|
-
|
Effect of changes in
exchange rates on cash and cash equivalents
|
26
|
|
60
|
Net (decrease)
increase in cash and cash equivalents
|
(2,997)
|
|
272
|
Cash and cash
equivalents at the beginning of period
|
4,823
|
|
2,208
|
Cash and cash
equivalents at the end of period
|
$
1,826
|
|
$
2,480
|
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SOURCE Flotek Industries, Inc.