HOUSTON, May 18, 2020 /PRNewswire/ -- Flotek
Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today
announced results for the three months ended March 31, 2020.
John W. Gibson, Jr., Chairman,
President, and Chief Executive Officer stated: "Today's environment
is unprecedented as we face difficult challenges with COVID-19,
coupled with an oversupply of crude oil resulting in a sharp
reduction in prices. We would like to thank our employees for
their hard work and dedication to our business during this crisis,
and we will continue to focus on the health and safety of our
employees as we manage through this pandemic. Given the
volatile environment, we are focusing on new opportunities to
diversify our business and better serve our customers amidst
accelerating digital transformation in the energy industry. With
today's announcement of the acquisition of JP3, a leading data and
analytics technology company, we believe that we will be
well-positioned for accelerated growth and reduced
cyclicality."
First Quarter Financial Results
- Flotek generated first quarter 2020 revenue of $19.4 million for three months ended March 31, 2020 compared to $43.3 million in the first quarter 2019 and
declined 0.6% from $19.5 million on a
sequential basis.
- Reported a loss from continuing operations for the first
quarter 2020 of $64.0 million, or a
loss of $1.07 per diluted share,
compared to a loss from continuing operations in the first quarter
2019 of $15.2 million, or a loss of
$0.26 per diluted share. The loss of
$64.0 million included a nonrecurring
charge of $57.5 million related to
the impairment of property, plant, and equipment, right-of-use
assets, and intangible assets.
- Operating expenses were $22.8
million in the first quarter 2020 compared to $44.0 million in the same period last year,
primarily reflecting lower fixed and variable costs, partially
offset by a non-recurring charge of $2.3
million during the first quarter of 2020, which is comprised
of $0.8 million related to a loss on
terpene purchase commitments and $1.5
million related to an incremental reserve against terpene
inventory on hand.
- Corporate general and administrative expense for the first
quarter of 2020 was $4.5 million
compared to $7.3 million for the
first quarter of 2019. Included in the first quarter was
$0.5 million of severance versus
$1.6 million in the first quarter of
the prior year.
- Adjusted EBITDA for the first quarter 2020 was a loss of
$6.5 million versus a loss of
$7.6 million for the first quarter of
2019, and improved 15% on a sequential basis driven by headcount
and expense reductions in freight, equipment rentals, and travel
and entertainment.
Balance Sheet and Liquidity
As of March 31, 2020, the Company
had cash and equivalents of $80.3
million, no outstanding debt and $6.6
million in escrowed funds on the balance sheet, reflecting
Flotek's estimate of its claim to the remaining balance of the
indemnity escrow related to the sale of Florida Chemical
Corporation ("FCC") to Archer-Daniels-Midland ("ADM") and
$6.6 million in taxes receivable,
reflecting a $6.1 million tax refund
applied for pursuant to the CARES Act extended net operating loss
carryback provisions. As previously reported, in February 2020, the Company paid $15.8 million to ADM in exchange for reduced
purchase commitments and pricing in the amendment to its terpene
supply agreement. Also previously reported in February 2020, as a result of the post-closing
working capital dispute resolution determined by a third party,
Flotek paid $1.5 million to ADM, in
addition to releasing Flotek's remaining claim to funds in
post-closing working capital adjustment escrow.
On April 16, 2020, the Company was
funded on a $4.8 million promissory
note pursuant to the Paycheck Protection Program administered by
the United States Small Business Administration as part of the
Coronavirus Aid, Relief, and Economic Security Act (the "CARES
Act").
Flotek's Response to COVID-19 and Current Energy Market
Conditions
In response to COVID-19 and volatile energy market conditions,
the Company has taken numerous actions to improve its financial
flexibility which include the following:
- Lowered base salary in exchange for restricted stock for each
of the other executive officers by 10% and for Gibson by 20%
- Decreased compensation to the Board of Directors by 20%
- Reduced the workforce by 35%
- Cut back discretionary spending across all business operations
of $4 million on an annualized
basis
- Expanded our products and services to meet the current market
environment including well shut-in activities
- Implemented new protocols related to shifts for
manufacturing
- Mandated full-facility cleaning procedures
- Instituted work from home procedures for a majority of the
workforce
- Applied for a $6.1 million tax
refund pursuant to the CARES Act extended net operating loss
("NOL") carryback provisions
- Finalized plans in Q1 2020 to consolidate office space in Q2
2020, while maintaining presence in key markets, most notably,
relocating Houston corporate
headquarters personnel to its Houston-based Global Research and Innovation
facility. In connection with these plans, in Q2 2020, the Company
was successful in negotiating a termination of its corporate
headquarters lease in exchange for a payment of $1 million, which will eliminate approximately
$2.7 million of future lease costs
that would have otherwise been incurred between mid-2020 and
mid-2023.
During this challenging period, Flotek utilized excess
manufacturing capacity to produce 12,000 gallons of alcohol-based
hand sanitizers to donate to first responders, hospitals, schools,
homeless shelters, and senior residential
communities.
Acquisition of JP3
On May 18, 2020, the Company
separately announced its acquisition of 100% ownership of JP3
Measurement, LLC ("JP3"), a privately held, leading data and
analytics technology company, in exchange for cash-and-stock valued
at approximately $34.4 million and
the assumption of approximately $1.3
million of debt.
Conference Call Details
Flotek will host a conference call on Tuesday, May 19, 2020, at 9:00 AM CT (10:00 AM
ET) to discuss its operating results for the three months
ended March 31, 2020. To participate
in the call, participants should dial 844-835-9986 approximately
five minutes prior to the start of the call. The call can also be
accessed from Flotek's website at www.flotekind.com. An archived
edition of the earnings webcast will also be posted on the
Company's website later that day and will remain available to
interested parties via the same link.
The conference call may contain forward-looking statements in
addition to statements of historical fact. The actual achievement
of any forecasted results or the unfolding of future economic or
business developments in a way anticipated or projected by the
Company involves numerous risks and uncertainties that may cause
the Company's actual performance to be materially different from
that stated or implied in the forward-looking statements. Such
risks and uncertainties include, among other things, risks
discussed within the "Risk Factors" section of the Company's most
recent Forms 10-Q and 10-K and subsequent 8-Ks.
Non-GAAP Financial Measures
The Company's accounting and reporting policies conform to
United States generally accepted
accounting principles, or GAAP. The Company's management also
evaluates performance based on certain additional non-GAAP
financial measures. The Company classifies a financial measure as
being a non-GAAP financial measure if that financial measure
excludes or includes amounts, or is subject to adjustments that
have the effect of excluding or including amounts, that are not
included or excluded in the most directly comparable measure
calculated and presented in accordance with GAAP as in effect from
time to time in the United States
in our statements of income, balance sheets or statements of cash
flows.
This earnings release, our investor conference calls and other
filings with the Securities and Exchange Commission contain certain
non-GAAP financial measures such as "EBITDA" and "adjusted EBITDA"
which are supplemental measures that are not required by, or are
not presented in accordance with, GAAP. Non-GAAP financial measures
do not include operating, other statistical measures or ratios
calculated using exclusively financial measures calculated in
accordance with GAAP. Non-GAAP financial measures should not be
considered in isolation or as a substitute for the most directly
comparable or other financial measures calculated in accordance
with GAAP. Moreover, the way we calculate the non-GAAP financial
measures may differ from that of other companies reporting measures
with similar names, which may limit these measures' usefulness as a
comparative measure.
Please refer to the table titled "Unaudited Reconciliation of
Non-GAAP Items and Non-Cash Items Impacting Earnings" at the end of
this earnings release for a reconciliation of these non-GAAP
financial measures.
About Flotek Industries, Inc.
Flotek empowers the energy industry to maximize the value of
their hydrocarbon streams and improve return on invested capital
through data-driven platforms and chemistry technologies. Flotek
serves downstream, midstream and upstream customers, both domestic
and international. Flotek 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 will, well-positioned, strong position, guidance, looking
forward, continue, 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. Forward-looking statements in this
press release are not historical facts, but reflect the good faith
judgment of management and current assumptions and beliefs
regarding future events, many of which, by their nature, are
inherently uncertain and outside the Company's control. Such
statements include estimates, projections, and statements related
to the Company's business plan, objectives, expected operating
results, and assumptions upon which those statements are based.
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. Further information about the
risks and uncertainties that may impact the Company are set forth
in the Company's most recent filing with the Securities and
Exchange Commission on Form 10-K (including, without limitation, in
the "Risk Factors" section thereof), 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.
|
Unaudited
Condensed Consolidated Statements of Operations
|
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
3/31/2020
|
|
3/31/2019
|
|
12/31/2019
|
|
|
|
|
|
|
Revenue
|
$
19,416
|
|
$
43,256
|
|
$
19,526
|
Costs and
expenses:
|
|
|
|
|
|
Operating expenses
(excluding depreciation and amortization)
|
22,841
|
|
43,968
|
|
42,390
|
Corporate general and
administrative
|
4,493
|
|
7,281
|
|
8,955
|
Depreciation and
amortization
|
2,191
|
|
2,260
|
|
2,028
|
Research and
development
|
2,555
|
|
2,285
|
|
2,205
|
(Gain) loss on
disposal of long-lived assets
|
(33)
|
|
1,097
|
|
354
|
Impairment of fixed
and long-lived assets
|
57,454
|
|
—
|
|
—
|
Total costs and
expenses
|
89,501
|
|
56,891
|
|
55,932
|
Loss from
operations
|
(70,085)
|
|
(13,635)
|
|
(36,406)
|
Other (expense)
income:
|
|
|
|
|
|
Interest
expense
|
(4)
|
|
(1,998)
|
|
(4)
|
Other (expense)
income, net
|
(47)
|
|
110
|
|
469
|
Total other (expense)
income
|
(51)
|
|
(1,888)
|
|
465
|
Loss before income
taxes
|
(70,136)
|
|
(15,523)
|
|
(35,941)
|
Income tax benefit
(expense)
|
6,169
|
|
311
|
|
(956)
|
Loss from
continuing operations
|
(63,967)
|
|
(15,212)
|
|
(36,897)
|
Income (loss) from
discontinued operations, net of tax
|
—
|
|
46,074
|
|
(2,425)
|
Net (loss)
income
|
(63,967)
|
|
30,862
|
|
(39,322)
|
|
|
|
|
|
|
Amounts
attributable to Flotek shareholders:
|
|
|
|
|
|
Loss from continuing
operations
|
$
(63,967)
|
|
$
(15,212)
|
|
$
(36,897)
|
Income (loss) from
discontinued operations, net of tax
|
—
|
|
46,074
|
|
(2,425)
|
Net (loss) income
attributable to Flotek
|
$
(63,967)
|
|
$
30,862
|
|
$
(39,322)
|
Basic earnings
(loss) per common share:
|
|
|
|
|
|
Continuing
operations
|
$
(1.07)
|
|
$
(0.26)
|
|
$
(0.64)
|
Discontinued operations, net of
tax
|
—
|
|
$
0.79
|
|
$
(0.04)
|
Basic earnings (loss)
per common share
|
$
(1.07)
|
|
$
0.53
|
|
$
(0.68)
|
Diluted earnings
(loss) per common share:
|
|
|
|
|
|
Continuing
operations
|
$
(1.07)
|
|
$
(0.26)
|
|
$
(0.64)
|
Discontinued
operations, net of tax
|
—
|
|
$
0.79
|
|
(0.04)
|
Diluted earnings
(loss) per common share
|
$
(1.07)
|
|
$
0.53
|
|
$
(0.68)
|
Weighted average
common shares:
|
|
|
|
|
|
Weighted average
common shares used in computing basic earnings (loss) per common
share
|
59,836
|
|
58,373
|
|
58,403
|
Weighted average
common shares used in computing diluted earnings (loss) per common
share
|
59,836
|
|
58,373
|
|
58,403
|
|
(1) Results of the
Company's Consumer and Industrial Chemistry Technologies ("CICT")
segment are presented as discontinued operations for all
periods.
(2) Prior periods presented for 2019 have been adjusted to
reflect revisions to results determined not to be material to those
prior periods. The adjustments include a pretax $2.8M reduction of
gain on the sale of Florida Chemical, Inc. related to the transfer
of trademarks and brand names not previously reflected for
discontinued operations and pretax expense reductions to previously
reported cost of sales of $0.6M in Q1 2019 and $0.2M in Q4 2019 for
continuing operations.
|
Flotek Industries,
Inc.
|
Unaudited
Condensed Consolidated Balance Sheets
|
(in thousands,
except share data)
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
80,263
|
|
$
100,575
|
Restricted
cash
|
664
|
|
663
|
Accounts receivable,
net of allowance for doubtful accounts of $1,642 and
$1,527
|
|
|
|
at March 31, 2020 and
December 31, 2019, respectively
|
13,297
|
|
15,638
|
Inventories,
net
|
16,322
|
|
23,210
|
Income taxes
receivable
|
6,635
|
|
631
|
Other current
assets
|
9,005
|
|
13,191
|
Total current
assets
|
126,186
|
|
153,908
|
Property and
equipment, net
|
7,946
|
|
39,829
|
Operating lease
right-of-use assets
|
2,473
|
|
16,388
|
Deferred tax assets,
net
|
169
|
|
152
|
Other intangible
assets, net
|
—
|
|
20,323
|
TOTAL
ASSETS
|
$
136,774
|
|
$
230,600
|
LIABILITIES AND
STOCKHOLDERS' & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
8,556
|
|
$
16,231
|
Accrued
liabilities
|
8,320
|
|
24,552
|
Income taxes
payable
|
72
|
|
—
|
Current portion of
lease liabilities
|
1,223
|
|
541
|
Total current
liabilities
|
18,171
|
|
41,324
|
Long-term operating
lease liabilities
|
9,754
|
|
16,973
|
Long-term finance
lease liabilities
|
144
|
|
158
|
Deferred tax
liabilities, net
|
—
|
|
116
|
Total
liabilities
|
28,069
|
|
58,571
|
Commitments and
contingencies
|
|
|
|
Stockholders'
Equity:
|
|
|
|
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; 64,338,087
|
|
|
|
shares issued and
59,942,270 shares outstanding at March 31, 2020;
|
|
|
|
63,656,897
shares issued and 59,511,416 shares outstanding at
December 31, 2019
|
6
|
|
6
|
Additional paid-in
capital
|
348,375
|
|
347,564
|
Accumulated other
comprehensive loss
|
(1,089)
|
|
(966)
|
Retained earnings
(accumulated deficit)
|
(205,058)
|
|
(141,091)
|
Treasury stock, at
cost 4,395,817and 4,145,481 shares at March 31, 2020 and
|
|
|
|
December 31,
2019 respectively
|
(33,529)
|
|
(33,484)
|
Total stockholders'
equity
|
108,705
|
|
172,029
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
136,774
|
|
$
230,600
|
|
(1) Results of the
Company's Consumer and Industrial Chemistry Technologies ("CICT")
segment are presented as discontinued operations for all
periods.
(2) Prior periods presented for 2019 have been adjusted to reflect
revisions to results determined not to be material to those prior
periods. The adjustments to December 31, 2019 include a $1.5M
increase in inventory related to intercompany eliminations, a
$2.8M reduction in intangible assets related to the transfer of
trademarks and brand names not previously reflected on the sale to
Florida Chemical Inc, and the net increase of $1.2M in retained
accumulated deficit.
|
Flotek Industries,
Inc.
|
Unaudited
Reconciliation of Non-GAAP Items and Non-Cash Items Impacting
Earnings
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
GAAP Loss from
Continuing Operations and Reconciliation to Adjusted EBITDA
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
3/31/2020
|
|
3/31/2019
|
|
12/31/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Continuing Operations (GAAP)
|
|
|
$
(63,967)
|
|
$
(15,212)
|
|
$
(36,897)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
|
4
|
|
1,998
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
|
(269)
|
|
(226)
|
|
(405)
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax (Benefit)
Expense
|
|
|
(6,169)
|
|
(311)
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization
|
|
|
2,191
|
|
2,260
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Fixed
and Long Lived Assets
|
|
57,454
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
|
|
|
$
(10,756)
|
|
$
(11,491)
|
|
$
(34,314)
|
|
|
|
|
|
|
|
|
|
|
|
Stock Compensation
Expense
|
|
|
462
|
|
456
|
|
1,409
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Retirement
|
|
|
1,538
|
|
1,721
|
|
3,753
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder-Related
Activities
|
|
|
-
|
|
581
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on
Disposal of Assets
|
|
|
(33)
|
|
1,097
|
|
355
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
Write-Down
|
|
|
1,468
|
|
-
|
|
4,438
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain Contract
Commitment
|
|
825
|
|
-
|
|
15,750
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(Non-GAAP)
|
|
|
|
$
(6,496)
|
|
$
(7,636)
|
|
$
(8,609)
|
|
(1) Management
believes that adjusted EBITDA for the three months ended March 31,
2020, December 31, 2019 and March 31, 2019, is useful to investors
to assess and understand operating performance, especially when
comparing those results with previous and subsequent periods.
Management views the expenses noted above to be outside of the
Company's normal operating results. Management analyzes operating
results without the impact of the above items as an indicator of
performance, to identify underlying trends in the business and cash
flow from continuing operations, and to establish operational
goals.
(2) Results of the Company's Consumer and Industrial Chemistry
Technologies ("CICT") segment are presented as discontinued
operations for all periods.
(3) Prior periods presented for 2019 have been adjusted to reflect
revisions to results determined not to be material to those prior
periods. The adjustments include a pretax $2.8M reduction of gain
on the sale of Florida Chemical, Inc. related to the transfer of
trademarks and brand names not previously reflected for
discontinued operations and pretax expense reductions to previously
reported cost of sales in Q1 2019 of $0.6M and in Q4 2019 of $0.2M
for continuing operations.
|
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SOURCE Flotek Industries, Inc.