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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Flotek Industries Inc | NYSE:FTK | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3.48 | 3.5185 | 3.4001 | 3.48 | 22,122 | 21:00:06 |
FORM 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
FLOTEK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
90-0023731
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
10603 W. Sam Houston Parkway N., Suite 300
Houston, TX
|
|
77064
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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|
Smaller reporting company
|
|
¨
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March 31,
2014 |
|
December 31,
2013 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,664
|
|
|
$
|
2,730
|
|
Accounts receivable, net of allowance for doubtful accounts of $916 and $872 at March 31, 2014 and December 31, 2013, respectively
|
65,882
|
|
|
65,016
|
|
||
Inventories, net
|
72,009
|
|
|
63,132
|
|
||
Deferred tax assets, net
|
2,500
|
|
|
2,522
|
|
||
Other current assets
|
3,679
|
|
|
4,261
|
|
||
Total current assets
|
145,734
|
|
|
137,661
|
|
||
Property and equipment, net
|
81,677
|
|
|
79,114
|
|
||
Goodwill
|
71,583
|
|
|
66,271
|
|
||
Deferred tax assets, net
|
15,100
|
|
|
15,012
|
|
||
Other intangible assets, net
|
76,422
|
|
|
77,523
|
|
||
TOTAL ASSETS
|
$
|
390,516
|
|
|
$
|
375,581
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
26,356
|
|
|
$
|
19,899
|
|
Accrued liabilities
|
9,574
|
|
|
12,778
|
|
||
Income taxes payable
|
6,384
|
|
|
3,361
|
|
||
Interest payable
|
99
|
|
|
111
|
|
||
Current portion of long-term debt
|
24,068
|
|
|
26,415
|
|
||
Total current liabilities
|
66,481
|
|
|
62,564
|
|
||
Long-term debt, less current portion
|
30,905
|
|
|
35,690
|
|
||
Deferred tax liabilities, net
|
27,351
|
|
|
27,575
|
|
||
Total liabilities
|
124,737
|
|
|
125,829
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ 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; 60,230,719 shares issued and 53,719,558 shares outstanding at March 31, 2014; 58,265,911 shares issued and 51,804,078 shares outstanding at December 31, 2013
|
6
|
|
|
6
|
|
||
Additional paid-in capital
|
275,330
|
|
|
266,122
|
|
||
Accumulated other comprehensive income (loss)
|
(508
|
)
|
|
(359
|
)
|
||
Retained earnings (accumulated deficit)
|
11,177
|
|
|
(841
|
)
|
||
Treasury stock, at cost; 5,589,167 and 5,394,178 shares at March 31, 2014 and December 31, 2013, respectively
|
(20,226
|
)
|
|
(15,176
|
)
|
||
Total stockholders’ equity
|
265,779
|
|
|
249,752
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
390,516
|
|
|
$
|
375,581
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Revenue
|
$
|
102,575
|
|
|
$
|
78,243
|
|
Cost of revenue
|
58,894
|
|
|
45,613
|
|
||
Gross margin
|
43,681
|
|
|
32,630
|
|
||
Expenses:
|
|
|
|
||||
Selling, general and administrative
|
21,572
|
|
|
18,017
|
|
||
Depreciation and amortization
|
2,285
|
|
|
1,190
|
|
||
Research and development
|
1,026
|
|
|
875
|
|
||
Total expenses
|
24,883
|
|
|
20,082
|
|
||
Income from operations
|
18,798
|
|
|
12,548
|
|
||
Other income (expense):
|
|
|
|
||||
Interest expense
|
(454
|
)
|
|
(434
|
)
|
||
Other income (expense), net
|
54
|
|
|
(112
|
)
|
||
Total other income (expense)
|
(400
|
)
|
|
(546
|
)
|
||
Income before income taxes
|
18,398
|
|
|
12,002
|
|
||
Income tax expense
|
(6,380
|
)
|
|
(4,237
|
)
|
||
Net income
|
$
|
12,018
|
|
|
$
|
7,765
|
|
|
|
|
|
||||
Earnings per common share:
|
|
|
|
||||
Basic earnings per common share
|
$
|
0.22
|
|
|
$
|
0.16
|
|
Diluted earnings per common share
|
$
|
0.22
|
|
|
$
|
0.15
|
|
Weighted average common shares:
|
|
|
|
||||
Weighted average common shares used in computing basic earnings per common share
|
53,948
|
|
|
48,582
|
|
||
Weighted average common shares used in computing diluted earnings per common share
|
55,398
|
|
|
51,222
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net income
|
$
|
12,018
|
|
|
$
|
7,765
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation adjustment
|
(149
|
)
|
|
(20
|
)
|
||
Comprehensive income
|
$
|
11,869
|
|
|
$
|
7,745
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
12,018
|
|
|
$
|
7,765
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
4,219
|
|
|
3,033
|
|
||
Amortization of deferred financing costs
|
106
|
|
|
12
|
|
||
Accretion of debt discount
|
—
|
|
|
55
|
|
||
Gain on sale of assets
|
(558
|
)
|
|
(1,132
|
)
|
||
Stock compensation expense
|
2,334
|
|
|
2,241
|
|
||
Deferred income tax (benefit) provision
|
(290
|
)
|
|
301
|
|
||
Excess tax benefit related to share-based awards
|
(1,300
|
)
|
|
(602
|
)
|
||
Changes in current assets and liabilities:
|
|
|
|
||||
Restricted cash
|
—
|
|
|
150
|
|
||
Accounts receivable, net
|
(525
|
)
|
|
(3,908
|
)
|
||
Inventories
|
(9,863
|
)
|
|
341
|
|
||
Other current assets
|
885
|
|
|
1,814
|
|
||
Accounts payable
|
6,700
|
|
|
(2,369
|
)
|
||
Accrued liabilities
|
(2,531
|
)
|
|
161
|
|
||
Income taxes payable
|
4,322
|
|
|
161
|
|
||
Interest payable
|
(12
|
)
|
|
(14
|
)
|
||
Net cash provided by operating activities
|
15,505
|
|
|
8,009
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(4,115
|
)
|
|
(4,383
|
)
|
||
Proceeds from sale of assets
|
832
|
|
|
1,388
|
|
||
Payments for acquisition, net of cash acquired
|
(5,286
|
)
|
|
—
|
|
||
Purchase of patents and other intangible assets
|
(135
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(8,704
|
)
|
|
(2,995
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayments of indebtedness
|
(4,786
|
)
|
|
(6,103
|
)
|
||
Borrowings on revolving credit facility
|
96,750
|
|
|
10,000
|
|
||
Repayments on revolving credit facility
|
(99,097
|
)
|
|
(9,244
|
)
|
||
Debt issuance costs
|
(59
|
)
|
|
—
|
|
||
Issuance costs of preferred stock and detachable warrants
|
—
|
|
|
(200
|
)
|
||
Excess tax benefit related to share-based awards
|
1,300
|
|
|
602
|
|
||
Acquisition of treasury stock related to share-based awards
|
(4,045
|
)
|
|
(2,658
|
)
|
||
Proceeds from sale of common stock
|
231
|
|
|
150
|
|
||
Proceeds from exercise of stock options
|
443
|
|
|
7
|
|
||
Proceeds from exercise of stock warrants
|
1,545
|
|
|
—
|
|
||
Net cash used in financing activities
|
(7,718
|
)
|
|
(7,446
|
)
|
||
Effect of changes in exchange rates on cash and cash equivalents
|
(149
|
)
|
|
(20
|
)
|
||
Net decrease in cash and cash equivalents
|
(1,066
|
)
|
|
(2,452
|
)
|
||
Cash and cash equivalents at the beginning of period
|
2,730
|
|
|
2,700
|
|
||
Cash and cash equivalents at the end of period
|
$
|
1,664
|
|
|
$
|
248
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Retained Earnings(Accumulated
Deficit)
|
|
Total
|
||||||||||||||||||
|
Shares
Issued
|
|
Par
Value
|
|
Shares
|
|
Cost
|
|
|||||||||||||||||||||
Balance, December 31, 2013
|
58,266
|
|
|
$
|
6
|
|
|
5,394
|
|
|
$
|
(15,176
|
)
|
|
$
|
266,122
|
|
|
$
|
(359
|
)
|
|
$
|
(841
|
)
|
|
$
|
249,752
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,018
|
|
|
12,018
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
(149
|
)
|
||||||
Common stock issued under employee stock purchase plan
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
231
|
|
|
—
|
|
|
—
|
|
|
231
|
|
||||||
Common stock issued in payment of accrued liability
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
600
|
|
|
—
|
|
|
—
|
|
|
600
|
|
||||||
Stock warrants exercised
|
1,277
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,545
|
|
|
—
|
|
|
—
|
|
|
1,545
|
|
||||||
Stock options exercised
|
283
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,448
|
|
|
—
|
|
|
—
|
|
|
1,448
|
|
||||||
Stock surrendered for exercise of stock
options
|
—
|
|
|
—
|
|
|
39
|
|
|
(1,005
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,005
|
)
|
||||||
Restricted stock granted
|
284
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Restricted stock forfeited
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Treasury stock acquired related to tax
withholding for share-based awards
|
—
|
|
|
—
|
|
|
162
|
|
|
(4,045
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,045
|
)
|
||||||
Excess tax benefit related to share-based
awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,300
|
|
|
—
|
|
|
—
|
|
|
1,300
|
|
||||||
Stock compensation expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,334
|
|
|
—
|
|
|
—
|
|
|
2,334
|
|
||||||
Stock issued in EOGA acquisition
|
94
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,750
|
|
|
—
|
|
|
—
|
|
|
1,750
|
|
||||||
Balance, March 31, 2014
|
60,231
|
|
|
$
|
6
|
|
|
5,589
|
|
|
$
|
(20,226
|
)
|
|
$
|
275,330
|
|
|
$
|
(508
|
)
|
|
$
|
11,177
|
|
|
$
|
265,779
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Supplemental non-cash investing and financing activities:
|
|
|
|
||||
Value of common stock issued in acquisition of EOGA
|
$
|
1,750
|
|
|
$
|
—
|
|
Value of common stock issued in payment of accrued liability
|
600
|
|
|
—
|
|
||
Equipment acquired through capital leases
|
—
|
|
|
480
|
|
||
Exercise of stock options by common stock surrender
|
1,005
|
|
|
2,357
|
|
||
Supplemental cash payment information:
|
|
|
|
||||
Interest paid
|
$
|
360
|
|
|
$
|
381
|
|
Income taxes paid
|
2,039
|
|
|
3,537
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Revenue:
|
|
|
|
||||
Products
|
$
|
82,406
|
|
|
$
|
56,330
|
|
Rentals
|
13,923
|
|
|
15,740
|
|
||
Services
|
6,246
|
|
|
6,173
|
|
||
|
$
|
102,575
|
|
|
$
|
78,243
|
|
Cost of revenue:
|
|
|
|
||||
Products
|
$
|
47,732
|
|
|
$
|
34,516
|
|
Rentals
|
6,513
|
|
|
6,517
|
|
||
Services
|
2,715
|
|
|
2,737
|
|
||
Depreciation
|
1,934
|
|
|
1,843
|
|
||
|
$
|
58,894
|
|
|
$
|
45,613
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Raw materials
|
$
|
28,816
|
|
|
$
|
13,953
|
|
Work-in-process
|
2,576
|
|
|
1,904
|
|
||
Finished goods
|
43,214
|
|
|
50,019
|
|
||
Inventories
|
74,606
|
|
|
65,876
|
|
||
Less reserve for excess and obsolete inventory
|
(2,597
|
)
|
|
(2,744
|
)
|
||
Inventories, net
|
$
|
72,009
|
|
|
$
|
63,132
|
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Land
|
|
$
|
5,175
|
|
|
$
|
5,088
|
|
Buildings and leasehold improvements
|
|
32,711
|
|
|
32,269
|
|
||
Machinery, equipment and rental tools
|
|
75,470
|
|
|
71,073
|
|
||
Equipment in progress
|
|
4,592
|
|
|
4,601
|
|
||
Furniture and fixtures
|
|
2,350
|
|
|
2,400
|
|
||
Transportation equipment
|
|
6,441
|
|
|
6,340
|
|
||
Computer equipment and software
|
|
8,005
|
|
|
7,617
|
|
||
Property and equipment
|
|
134,744
|
|
|
129,388
|
|
||
Less accumulated depreciation
|
|
(53,067
|
)
|
|
(50,274
|
)
|
||
Property and equipment, net
|
|
$
|
81,677
|
|
|
$
|
79,114
|
|
|
|
Energy Chemical Technologies
|
|
Consumer and Industrial Chemical Technologies
|
|
Teledrift
TM
|
|
Total
|
||||||||
Balance at December 31, 2013
|
|
$
|
30,296
|
|
|
$
|
20,642
|
|
|
$
|
15,333
|
|
|
$
|
66,271
|
|
Addition upon acquisition of EOGA
|
|
5,312
|
|
|
—
|
|
|
—
|
|
|
5,312
|
|
||||
Balance at March 31, 2014
|
|
$
|
35,608
|
|
|
$
|
20,642
|
|
|
$
|
15,333
|
|
|
$
|
71,583
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Long-term debt:
|
|
|
|
||||
Term loan
|
$
|
41,048
|
|
|
$
|
45,833
|
|
Borrowings under revolving credit facility
|
13,925
|
|
|
16,272
|
|
||
Total long-term debt
|
54,973
|
|
|
62,105
|
|
||
Less current portion of long-term debt
|
(24,068
|
)
|
|
(26,415
|
)
|
||
Long-term debt, less current portion
|
$
|
30,905
|
|
|
$
|
35,690
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net income - Basic and Diluted
|
$
|
12,018
|
|
|
$
|
7,765
|
|
|
|
|
|
||||
Weighted average common shares outstanding - Basic
|
53,948
|
|
|
48,582
|
|
||
Assumed conversions:
|
|
|
|
||||
Incremental common shares from warrants
|
486
|
|
|
1,411
|
|
||
Incremental common shares from stock options
|
949
|
|
|
1,142
|
|
||
Incremental common shares from restricted stock units
|
15
|
|
|
87
|
|
||
Weighted average common shares outstanding - Diluted
|
55,398
|
|
|
51,222
|
|
||
|
|
|
|
||||
Basic earnings per common share
|
$
|
0.22
|
|
|
$
|
0.16
|
|
Diluted earnings per common share
|
$
|
0.22
|
|
|
$
|
0.15
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
|
•
|
Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs.
|
|
March 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Term loan
|
$
|
41,048
|
|
|
$
|
41,048
|
|
|
$
|
45,833
|
|
|
$
|
45,833
|
|
Borrowings under revolving credit facility
|
13,925
|
|
|
13,925
|
|
|
16,272
|
|
|
16,272
|
|
|
Three months ended March 31,
|
||||
|
2014
|
|
2013
|
||
Federal statutory tax rate
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
2.3
|
|
|
2.6
|
|
Change in valuation allowance
|
—
|
|
|
(0.1
|
)
|
Domestic production activities deduction
|
(2.7
|
)
|
|
(2.4
|
)
|
Other
|
0.1
|
|
|
0.2
|
|
Effective income tax rate
|
34.7
|
%
|
|
35.3
|
%
|
|
|
March 31, 2014
|
|
December 31, 2013
|
||||
Current deferred tax assets
|
|
$
|
2,500
|
|
|
$
|
2,522
|
|
Non-current deferred tax assets
|
|
15,100
|
|
|
15,012
|
|
||
Non-current deferred tax liabilities
|
|
(27,351
|
)
|
|
(27,575
|
)
|
||
Net deferred tax assets (liabilities)
|
|
$
|
(9,751
|
)
|
|
$
|
(10,041
|
)
|
•
|
Energy Chemical Technologies designs, develops, manufactures, packages and markets specialty chemicals, some of which hold patent protection, used in oil and gas well cementing, stimulation, acidizing, drilling and production. Activities in this segment also include construction and management of automated material handling facilities and management of loading facilities and blending operations for oilfield services companies.
|
•
|
Consumer and Industrial Chemical Technologies designs, develops and manufactures products that are sold to companies in the flavor and fragrance industry and the specialty chemical industry. These technologies are used by beverage and food companies, fragrance companies, and companies providing household and industrial cleaning products.
|
•
|
Drilling Technologies rents, sells, inspects, manufactures and markets down-hole drilling equipment used in energy, mining, water well and industrial drilling activities.
|
•
|
Production Technologies assembles and markets production-related equipment, including the Petrovalve™ product line of rod pump components, electric submersible pumps, gas separators, valves and services that support natural gas, oil and coal bed methane production activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the three months ended March 31,
|
|
Energy Chemical Technologies
|
|
Consumer and Industrial Chemical Technologies
|
|
Drilling Technologies
|
|
Production Technologies
|
|
Corporate and
Other
|
|
Total
|
||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue from external customers
|
|
$
|
62,377
|
|
|
$
|
13,030
|
|
|
$
|
24,901
|
|
|
$
|
2,267
|
|
|
$
|
—
|
|
|
$
|
102,575
|
|
Gross margin
|
|
29,220
|
|
|
4,033
|
|
|
9,788
|
|
|
640
|
|
|
—
|
|
|
43,681
|
|
||||||
Income (loss) from operations
|
|
21,623
|
|
|
2,335
|
|
|
3,317
|
|
|
(79
|
)
|
|
(8,398
|
)
|
|
18,798
|
|
||||||
Depreciation and amortization
|
|
1,067
|
|
|
433
|
|
|
2,437
|
|
|
70
|
|
|
212
|
|
|
4,219
|
|
||||||
Total assets
|
|
137,638
|
|
|
93,217
|
|
|
136,141
|
|
|
14,864
|
|
|
8,656
|
|
|
390,516
|
|
||||||
Capital expenditures
|
|
1,386
|
|
|
14
|
|
|
3,296
|
|
|
61
|
|
|
233
|
|
|
4,990
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net revenue from external customers
|
|
$
|
44,650
|
|
|
$
|
—
|
|
|
$
|
28,914
|
|
|
$
|
4,679
|
|
|
$
|
—
|
|
|
$
|
78,243
|
|
Gross margin
|
|
19,113
|
|
|
—
|
|
|
11,346
|
|
|
2,171
|
|
|
—
|
|
|
32,630
|
|
||||||
Income (loss) from operations
|
|
14,324
|
|
|
—
|
|
|
5,419
|
|
|
1,613
|
|
|
(8,808
|
)
|
|
12,548
|
|
||||||
Depreciation and amortization
|
|
460
|
|
|
—
|
|
|
2,362
|
|
|
61
|
|
|
150
|
|
|
3,033
|
|
||||||
Total assets
|
|
59,301
|
|
|
—
|
|
|
120,015
|
|
|
12,280
|
|
|
26,887
|
|
|
218,483
|
|
||||||
Capital expenditures
|
|
1,025
|
|
|
—
|
|
|
861
|
|
|
997
|
|
|
1,500
|
|
|
4,383
|
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
U.S.
|
$
|
87,331
|
|
|
$
|
66,023
|
|
Other countries
|
15,244
|
|
|
12,220
|
|
||
Total
|
$
|
102,575
|
|
|
$
|
78,243
|
|
•
|
Energy Chemical Technologies designs, develops, manufactures, packages and markets specialty chemicals used in O&G well drilling, cementing, completion, stimulation and production. Activities in this segment also include construction and management of automated material handling facilities and management of loading facilities and blending operations for oilfield services companies.
|
•
|
Consumer and Industrial Chemical Technologies designs, develops and manufactures products that are sold to companies in the flavor and fragrance industries and specialty chemical industry. These technologies are used by beverage and food companies, fragrance companies, and companies providing household and industrial cleaning products.
|
•
|
Drilling Technologies rents, sells, inspects, manufactures and markets down-hole drilling equipment used in energy, mining, water well and industrial drilling activities.
|
•
|
Production Technologies assembles and markets production-related equipment, including the Petrovalve product line of rod pump components, electric submersible pumps, gas separators, valves and services that support natural gas, oil and coal bed methane production activities.
|
•
|
Historical, current, and anticipated future O&G prices,
|
•
|
Federal, State and local governmental actions that may encourage or discourage drilling activity,
|
•
|
Customers’ strategies relative to capital funds allocations,
|
•
|
Weather conditions, and
|
•
|
Technological changes to drilling methods and economics.
|
•
|
Chemistries that improve the economics of their O&G operations,
|
•
|
Drilling products that improve drilling operations and efficiencies, and
|
•
|
Chemistries that are economically viable, socially responsible and ecologically sound.
|
•
|
Historical, current, and anticipated future production levels of the global citrus (primarily orange) crop,
|
•
|
Weather related risks, and
|
•
|
Health and condition of citrus trees (e.g., disease and pests).
|
•
|
O&G drilling and completion operations,
|
•
|
O&G production operations, and
|
•
|
Non-O&G industrial solvents.
|
TABLE A
|
|
|
|
|
|
|||
|
Three months ended March 31,
|
|||||||
|
2014
|
|
2013
|
|
% Change
|
|||
North American Average Active Drilling Rigs
|
|
|
|
|
|
|||
U.S.
|
1,779
|
|
|
1,758
|
|
|
1.2
|
%
|
Canada
|
525
|
|
|
531
|
|
|
(1.1
|
)%
|
Total Average North American Drilling Rigs
|
2,304
|
|
|
2,289
|
|
|
0.7
|
%
|
U.S. Average Active Drilling Rigs by Type
|
|
|
|
|
|
|||
Vertical
|
387
|
|
|
440
|
|
|
(12.0
|
)%
|
Horizontal
|
1,182
|
|
|
1,127
|
|
|
4.9
|
%
|
Directional
|
210
|
|
|
191
|
|
|
9.9
|
%
|
Total Average U.S. Drilling Rigs by Type
|
1,779
|
|
|
1,758
|
|
|
1.2
|
%
|
Oil vs. Natural Gas Average North American Drilling Rigs
|
|
|
|
|
|
|||
Oil
|
1,766
|
|
|
1,724
|
|
|
2.4
|
%
|
Natural Gas
|
538
|
|
|
565
|
|
|
(4.8
|
)%
|
Total North America
|
2,304
|
|
|
2,289
|
|
|
0.7
|
%
|
U.S. Average Wells Drilled per Quarter per Rig
|
5.14
|
|
|
5.00
|
|
|
2.8
|
%
|
•
|
In November 2013, the Company signed a shareholder agreement with Tasneea Oil and Gas Technologies, LLC (“Tasneea”) an Omani Limited Liability Company, to form Omani based Flotek Gulf, LLC (“Flotek Gulf”) and Flotek Gulf Research, LLC (“Flotek Gulf Research”). Upon official approval by the Omani government, Flotek and Tasneea will begin the transfer of assets into Flotek Gulf and Flotek Gulf Research. Flotek Gulf and Flotek Gulf Research will develop and market specialty chemistries for the oil and gas industry throughout the Middle East and North Africa. During 2014 Flotek Gulf expects to construct a manufacturing facility designed to produce Flotek's patented and proprietary products for distribution throughout the region.
|
•
|
Effective January 1, 2014, the Company acquired Eclipse IOR Services, LLC (“EOGA”), a leading enhanced oil recovery (EOR) design and injection firm. EOGA’s expertise in enhanced oil recovery processes and the use of polymers to improve the performance of EOR projects will be combined with the Company’s existing EOR products and services. The combined product and service offerings will be well positioned to serve the growing market for EOR products and services.
|
•
|
Effective
April 1, 2014
, the Company acquired
100%
of the membership interests in SiteLark for
$0.4 million
and
5327
shares of the Company's common stock. SiteLark provides reservoir engineering and modeling services for a variety of hydrocarbon applications. Its services include proprietary software which assists engineers with reservoir simulation, reservoir engineering and waterflood optimization.
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Revenue
|
$
|
102,575
|
|
|
$
|
78,243
|
|
Cost of revenue
|
58,894
|
|
|
45,613
|
|
||
Gross margin
|
43,681
|
|
|
32,630
|
|
||
Gross margin %
|
42.6
|
%
|
|
41.7
|
%
|
||
Selling, general and administrative costs
|
21,572
|
|
|
18,017
|
|
||
Selling, general and administrative costs %
|
21.0
|
%
|
|
23.0
|
%
|
||
Depreciation and amortization
|
2,285
|
|
|
1,190
|
|
||
Research and development
|
1,026
|
|
|
875
|
|
||
Income from operations
|
18,798
|
|
|
12,548
|
|
||
Income from operations %
|
18.3
|
%
|
|
16.0
|
%
|
||
Interest and other expense, net
|
(400
|
)
|
|
(546
|
)
|
||
Income before income taxes
|
18,398
|
|
|
12,002
|
|
||
Income tax expense
|
(6,380
|
)
|
|
(4,237
|
)
|
||
Net income
|
$
|
12,018
|
|
|
$
|
7,765
|
|
Net income %
|
11.7
|
%
|
|
9.9
|
%
|
•
|
Product revenue for the
first quarter
of
2014
compared to the same quarter of
2013
decreased by $2.2 million, or 22.4%, due to decreased sales of centralizers and float equipment in the oilfield services market and drill pipe in the mining industry.
|
•
|
Rental revenue for the first quarter of 2014 decreased $1.9 million, or 11.9% in relation to the first quarter of 2013. Actuated tool rental revenue (motors, jars and shocks) declined by $1.2 million or 25.6% in 2014 due to increased competition, competitive pricing pressure, and strategic selection of higher margin rental jobs for these tools. Teledrift® tool rentals decreased by $0.8 million due to declines domestically in the Mid-Continent and Southern regions from seasonal weather, transient employment and logistics issues, and declines internationally in Argentina. The domestic regions regained momentum in the later part of the first quarter of 2014 and are continuing to accelerate. Partially offsetting these decreases was an increase of $0.6 million in Stemulator™ extended reach tool revenue year over year with March of 2014 showing the strongest revenue yet for the product line.
|
•
|
Service revenue for the
three months ended March 31, 2014
was relatively flat as compared to the same period of
2013
. Service revenue remains stable for Drilling Technologies as the segment maintains complimentary oilfield services and continues to add additional services along with increased service pricing.
|
|
Three months ended March 31,
|
||||||
|
2014
|
|
2013
|
||||
Net cash provided by operating activities
|
$
|
15,505
|
|
|
$
|
8,009
|
|
Net cash used in investing activities
|
(8,704
|
)
|
|
(2,995
|
)
|
||
Net cash provided by financing activities
|
(7,718
|
)
|
|
(7,446
|
)
|
||
Effect of changes in exchange rates on cash and cash equivalents
|
(149
|
)
|
|
(20
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(1,066
|
)
|
|
$
|
(2,452
|
)
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
||||||||||
Term loan
|
|
$
|
41,048
|
|
|
$
|
10,143
|
|
|
$
|
20,286
|
|
|
$
|
10,619
|
|
|
$
|
—
|
|
Interest expense on term loan
(1)
|
|
4,781
|
|
|
1,476
|
|
|
2,436
|
|
|
869
|
|
|
—
|
|
|||||
Borrowings under revolving credit facility
(2)
|
|
13,925
|
|
|
13,925
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
|
|
9,124
|
|
|
1,629
|
|
|
2,590
|
|
|
1,654
|
|
|
3,251
|
|
|||||
Total
|
|
$
|
68,878
|
|
|
$
|
27,173
|
|
|
$
|
25,312
|
|
|
$
|
13,142
|
|
|
$
|
3,251
|
|
Period
|
Total
Number of
Shares
Purchased (1)
|
|
Average
Price Paid
per Share
|
|
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
|
|
Maximum
Dollar Value of
Shares that
May Yet be
Purchased
Under the
Plans or
Programs (2)
|
||||||
January 1, 2014 to January 31, 2014
|
698
|
|
|
$
|
19.68
|
|
|
—
|
|
|
$
|
25,000,000
|
|
February 1, 2014 to February 28, 2014
|
79,115
|
|
|
$
|
19.04
|
|
|
—
|
|
|
$
|
25,000,000
|
|
March 1, 2014 to March 31, 2014
|
121,331
|
|
|
$
|
24.95
|
|
|
—
|
|
|
$
|
25,000,000
|
|
Total
|
201,144
|
|
|
$
|
22.61
|
|
|
—
|
|
|
|
|
FLOTEK INDUSTRIES, INC.
|
||
|
|
|
By:
|
|
/s/ JOHN W. CHISHOLM
|
|
|
John W. Chisholm
|
|
|
President, Chief Executive Officer and
Chairman of the Board
|
FLOTEK INDUSTRIES, INC.
|
||
|
|
|
By:
|
|
/s/ H. RICHARD WALTON
|
|
|
H. Richard Walton
|
|
|
Executive Vice President and
Chief Financial Officer
|
1 Year Flotek Industries Chart |
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