Flotek Industries Inc (FTK, Financial) filed Quarterly Report for the period ended 2009-03-31.
Flotek manufactures and markets innovative specialty chemicals downhole drilling and production equipment and management of 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 has a market cap of $67.9 million; its shares were traded at around $2.93 with a P/E ratio of 3.4 and P/S ratio of 3.7.
Interest expense was $3.7 million for the three months ended March 31, 2009 versus $2.0 million in 2008. The increase was a result of higher debt levels incurred to finance the Teledrift acquisition, the accretion of the debt discount associated with our Convertible Notes and increased working capital needs. To finance the Teledrift acquisition, we issued $115.0 million Convertible Notes bearing an interest rate of 5.25% that are due in 2028.
Chemicals and Logistics revenue decreased $6.4 million, or 27.1%, for the three months ended March 31, 2009 compared to the same period in 2008. The decrease in revenue is a result of decreased activity related to well fracturing activities and increased pricing pressure due to the recent decline in oil and gas exploration activities. Sales of our proprietary, biodegradable, green chemicals declined 21.6% to $12.3 million in the first quarter of 2009 from $15.7 million in the first quarter of 2008.
In the three months ended March 31, 2009, we generated $2.8 million in cash from operating activities. Net loss for the three months ended March 31, 2009 was $2.0 million. Non-cash additions to net income during the three months ended March 31, 2009 consisted primarily of $3.5 million of depreciation and amortization, $0.5 million of compensation expense related to options and restricted stock awards as required under FAS No. 123R and $1.2 million related to the accretion of the debt discount related to our Convertible Notes.
In applying FSP 14-1, $27.8 million of the carrying value of our Convertible Notes was reclassified to equity as of the February 2008 issuance date. This amount represents the equity component of the proceeds from the Convertible Notes, calculated assuming an 11.5% non-convertible borrowing rate. The discount will be accreted to interest expense over the expected term of five-years, which is based on the call/put option on the debt at February 2013. Accordingly, $1.2 million and $0.3 million of additional non-cash interest expense was recorded in the Consolidated Condensed Statement of Income (Loss) and Comprehensive Income (Loss) for the first quarter of 2009 and 2008, respectively.
Our common stock is currently listed on the New York Stock Exchange (NYSE). Under the NYSEs continued listing standards, a company will be considered to be below compliance standards if, among other things, (i) both its average market capitalization is less than $75 million over a 30 trading-day period and its stockholders equity is less than $75 million; (ii) its average market capitalization is less than $15 million over a 30 trading-day period, which will result in immediate initiation of suspension procedures; or (iii) the average closing price of a listed security is less than $1.00 over a consecutive 30 trading-day period. On March 24, 2009, we received notification from the NYSE that we are not in compliance with the NYSEs continued listing requirements because both our 30 trading-day average market capitalization and our last reported stockholders equity were below the respective $75 million requirements. When a listed companys stock falls below the market capitalization and stockholders equity standard, a company is considered below criteria, and the company is permitted to submit a business plan demonstrating its ability to return to compliance with these continued listing standards within 18 months of receipt of the NYSE notification. We have notified the NYSE that we intend to submit a business plan that will advise the NYSE of definitive action we have taken, or are taking, that will bring us into conformity with the NYSE continued listing standards within the required period. However, if our plan is not approved or if we are unable to regain compliance with the NYSE listing requirements, our stock could be delisted from trading on the NYSE. A delisting of our common stock could negatively impact us by: (i) reducing the liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; and (iii) decreasing the amount of news and analyst coverage for us. In addition, we may experience other adverse effects, including, without limitation, the loss of confidence in us by current and prospective suppliers, customers, employees and others with whom we have or may seek to initiate business relationships, and our ability to attract and retain personnel by means of equity compensation could be impaired.
Read the The complete ReportFTK is in the portfolios of John Keeley of Keeley Fund Management.
Flotek manufactures and markets innovative specialty chemicals downhole drilling and production equipment and management of 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 has a market cap of $67.9 million; its shares were traded at around $2.93 with a P/E ratio of 3.4 and P/S ratio of 3.7.
Highlight of Business Operations:
Depreciation and amortization was $1.2 million for the three months ended March 31, 2009, an increase of $0.3 million, compared to $0.9 million during the same period in 2008. The increase is due to higher depreciation associated with acquired assets and increased capital expenditures during 2008. In addition, amortization expense increased due to the amortization of intangible assets acquired in 2007 and 2008.Interest expense was $3.7 million for the three months ended March 31, 2009 versus $2.0 million in 2008. The increase was a result of higher debt levels incurred to finance the Teledrift acquisition, the accretion of the debt discount associated with our Convertible Notes and increased working capital needs. To finance the Teledrift acquisition, we issued $115.0 million Convertible Notes bearing an interest rate of 5.25% that are due in 2028.
Chemicals and Logistics revenue decreased $6.4 million, or 27.1%, for the three months ended March 31, 2009 compared to the same period in 2008. The decrease in revenue is a result of decreased activity related to well fracturing activities and increased pricing pressure due to the recent decline in oil and gas exploration activities. Sales of our proprietary, biodegradable, green chemicals declined 21.6% to $12.3 million in the first quarter of 2009 from $15.7 million in the first quarter of 2008.
In the three months ended March 31, 2009, we generated $2.8 million in cash from operating activities. Net loss for the three months ended March 31, 2009 was $2.0 million. Non-cash additions to net income during the three months ended March 31, 2009 consisted primarily of $3.5 million of depreciation and amortization, $0.5 million of compensation expense related to options and restricted stock awards as required under FAS No. 123R and $1.2 million related to the accretion of the debt discount related to our Convertible Notes.
In applying FSP 14-1, $27.8 million of the carrying value of our Convertible Notes was reclassified to equity as of the February 2008 issuance date. This amount represents the equity component of the proceeds from the Convertible Notes, calculated assuming an 11.5% non-convertible borrowing rate. The discount will be accreted to interest expense over the expected term of five-years, which is based on the call/put option on the debt at February 2013. Accordingly, $1.2 million and $0.3 million of additional non-cash interest expense was recorded in the Consolidated Condensed Statement of Income (Loss) and Comprehensive Income (Loss) for the first quarter of 2009 and 2008, respectively.
Our common stock is currently listed on the New York Stock Exchange (NYSE). Under the NYSEs continued listing standards, a company will be considered to be below compliance standards if, among other things, (i) both its average market capitalization is less than $75 million over a 30 trading-day period and its stockholders equity is less than $75 million; (ii) its average market capitalization is less than $15 million over a 30 trading-day period, which will result in immediate initiation of suspension procedures; or (iii) the average closing price of a listed security is less than $1.00 over a consecutive 30 trading-day period. On March 24, 2009, we received notification from the NYSE that we are not in compliance with the NYSEs continued listing requirements because both our 30 trading-day average market capitalization and our last reported stockholders equity were below the respective $75 million requirements. When a listed companys stock falls below the market capitalization and stockholders equity standard, a company is considered below criteria, and the company is permitted to submit a business plan demonstrating its ability to return to compliance with these continued listing standards within 18 months of receipt of the NYSE notification. We have notified the NYSE that we intend to submit a business plan that will advise the NYSE of definitive action we have taken, or are taking, that will bring us into conformity with the NYSE continued listing standards within the required period. However, if our plan is not approved or if we are unable to regain compliance with the NYSE listing requirements, our stock could be delisted from trading on the NYSE. A delisting of our common stock could negatively impact us by: (i) reducing the liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; and (iii) decreasing the amount of news and analyst coverage for us. In addition, we may experience other adverse effects, including, without limitation, the loss of confidence in us by current and prospective suppliers, customers, employees and others with whom we have or may seek to initiate business relationships, and our ability to attract and retain personnel by means of equity compensation could be impaired.
Read the The complete ReportFTK is in the portfolios of John Keeley of Keeley Fund Management.
