Flotek Industries, Inc. Announces Third Quarter 2018 Results
HOUSTON, Nov. 6, 2018 /PRNewswire/ -- Flotek Industries, Inc. ("Flotek" or the "Company") (NYSE: FTK) today announced results for the three and nine months ended September 30, 2018.
"The third quarter showed material improvement over the first half of this year as our full-fluids Prescriptive Chemistry Management(®) ("PCM(®)") business continued to expand, diligent cost cutting measures were furthered and we executed upon the largest single Complex nano-Fluid(®) ("CnF(®)") order in Company history. Additionally, we delivered consolidated incremental adjusted EBITDA margins of 51% sequentially in the third quarter, in sharp contrast to our disappointing start to the year. As we committed to in the last quarter, our leadership team continues to make steady progress toward increasing our profitability," said John Chisholm, Flotek's Chairman, President and Chief Executive Officer.
"During the quarter, domestic shale operators generally reduced activity. At the same time, they increased their focus on understanding mechanical limitations of proppant loading and lateral lengths to optimize completion techniques and reservoir performance, which we believe play into Flotek's reservoir-centric chemistry offering. Further, as operators prioritize capital efficiency to deliver positive free cash flow, Flotek is providing value-added chemistry technology that delivers higher production at a variety of price points. Meanwhile, there has been increased direct operator interaction as we help address significant reservoir challenges by fine-tuning fluid systems through our chemistry applications. Additionally, we are aligning with service companies that have taken an approach to differentiate themselves through chemistry technology and in turn, can benefit from greater horsepower efficiencies in proppant delivery.
"Impacting Florida Chemical, which is our Consumer and Industrial Chemistry Technologies ("CICT") segment, global citrus markets remained in a state of undersupply during the quarter relative to historical averages. However, the potential for greater crop yields points to the prospect of relief from the inflationary cost environment of the last couple of years. There has been a considerable increase in consumer demand for natural flavors and fragrances, leading to growing market opportunities for our high-margin compounds."
Key accomplishments during the quarter include some of the updates below:
-- Cash Selling, General and Administrative ("SG&A") expense in 3Q 2018 is
now reduced by a run-rate of $28.0 million from our 4Q 2016 reference
point, as another $2.8 million annually was removed from the prior
quarter.
-- Identified further structural cost saving opportunities within
logistics, information technology systems and other administrative
processes which will drive greater operational efficiencies going
forward.
-- PCM(®) platform - providing full-service, value-added fluids systems
customized for the unique complexities of our clients' reservoirs - grew
sequentially and now represents a majority of the domestic Energy
Chemistry Technologies ("ECT") business.
-- Our Global Research & Innovation Center is receiving meaningfully
increased inbound client engagements related to reservoir challenges
that have emerged over the past two years, namely frac hits, lower child
well production, cost-effective remediation solutions and managing
recycled water, all against a backdrop of driving capital efficiency
improvements.
-- Domestic ECT revenue held relatively flat, sequentially.
-- Despite lower revenue in our CICT segment, it was able to expand
adjusted EBITDA modestly compared to the second quarter.
-- Demand for tailored, high-margin flavor and fragrance offerings are
beginning to show a steady increase as we expected into year end and
2019.
-- Completed the upgrade to our Enterprise Resource Planning ("ERP")
system.
"Flotek remains focused on expanding our client base, better serving the needs of challenging and evolving industries, and solidifying new and segmented channels to market with technologically superior chemistry solutions. At the same time, we are continuing to reduce our cash and non-cash costs, and we will diligently manage our balance sheet to realize working capital benefits to drive positive operating cash flow," stated Mr. Chisholm.
3Q Financial Snapshot
-- Revenue of $71.0 million for 3Q 2018 increased 20.1% compared to 2Q 2018
and decreased 10.7% compared to 3Q 2017.
-- Cash SG&A of $12.4 million for 3Q 2018 (excluding stock compensation
expense of $2.2 million) decreased 5.3% compared to 2Q 2018 and
decreased 25.2% compared to 3Q 2017.
-- Net income (loss) of ($3.9) million for 3Q 2018, compared to ($75.0)
million for 2Q 2018 and net loss from continuing operations of ($3.4)
million for 3Q 2017.
-- GAAP earnings (loss) per share ("EPS") of ($0.07) for 3Q 2018, compared
to ($1.30) for 2Q 2018 and EPS from continuing operations of ($0.06) for
3Q 2017.
-- Adjusted EPS of ($0.06) for 3Q 2018, compared to ($0.34) for 2Q 2018 and
adjusted EPS from continuing operations of ($0.06) for 3Q 2017.
-- Adjusted EPS for 3Q 2018 excludes an after tax charge of $0.4 million,
or $0.01 per share, related to a loss on sale of business and deferred
tax asset valuation allowance. (See our Reconciliation of Non-GAAP Items
and Non-Cash Items Impacting Earnings at the conclusion of this
release.)
-- Adjusted EBITDA, a non-GAAP measure, of $2.0 million for 3Q 2018,
compared to ($4.0) million in 2Q 2018 and $3.3 million in 3Q 2017, a
$6.0 million sequential improvement.
-- Free cash flow (operating cash flow less capital expenditures) of ($6.2)
million for 3Q 2018, compared to ($8.7) million for 2Q 2018 and $6.8
million for 3Q 2017. This was primarily due to working capital
investments of $6.5 million as our Days Sales Outstanding ("DSOs")
increased, due to the growth of our foreign revenues which carry longer
payment terms compared to our domestic revenue.
-- Net debt position of $51.6 million at end of 3Q 2018 increased from
$46.0 million at end of 2Q 2018, principally due to an increase in DSOs.
We are striving to reduce net debt by year end.
(Please refer to GAAP reconciliation tables in this release)
Third Quarter 2018 Results
For the three months ended September 30, 2018, Flotek reported revenue of $71.0 million, an increase of $11.9 million, or 20.1%, compared to the second quarter 2018. Revenue decreased of $8.5 million, or 10.7%, compared to the same period of 2017.
On a GAAP basis, Flotek reported net loss for the three months ended September 30, 2018 of $3.9 million, an increase of $0.5 million compared to net loss from continuing operations of $3.4 million in the same period of 2017. Net loss decreased $71.1 million compared to net loss of $75.0 million in the second quarter 2018. Flotek reported net loss per share (fully diluted) for the three months ended September 30, 2018 of $0.07 compared to net loss per share from continuing operations of $0.06 in the same period 2017.
Excluding select items totaling $0.4 million, net of tax, or $0.01 per share, adjusted EPS was ($0.06) for the three months ended September 30, 2018, compared to adjusted EPS from continuing operations of ($0.06) for the three months ended September 30, 2017. (See our Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings at the conclusion of this release.)
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") for the three months ended September 30, 2018, was ($0.6) million, compared to $0.2 million for the three months ended September 30, 2017. Adjusted EBITDA for the three months ended September 30, 2018, which excludes select items, was $2.0 million compared to adjusted EBITDA of $3.3 million and ($4.0) million for the three months ended September 30, 2017 and June 30, 2018, respectively. Management believes that adjusted EBITDA provides useful information to investors to assess and understand operating performance and cash flows. (See our Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings at the conclusion of this release.)
A summary income statement reflecting third quarter results can be found at the conclusion of this release, as well as GAAP reconciliation tables.
Third Quarter 2018 - Segment Highlights
3Q 2018
2Q 2018
% Change
3Q 2017
% Change
---
Energy Chemistry Technologies ("ECT")
---
Revenue
$53.7 million
$39.5 million 35.8%
$61.2 million (12.2%)
--- ---
Income From
Operations
$3.9 million
($0.7) million 622.8%
$6.9 million (42.9%)
---
Adj. EBITDA
$8.2 million
$4.2 million 95.5%
$11.7 million (30.0%)
--- ---
Adj. EBITDA
Margin 15.3% 10.6%
467 bps 19.2%
(390) bps
---
Consumer and Industrial Chemistry Technologies ("CICT")
---
Revenue
$17.3 million
$19.5 million (11.6%)
$18.3 million (5.5%)
--- ---
Income From
Operations
$0.9 million
$0.6 million 34.0%
$1.0 million (12.9%)
--- ---
Adj. EBITDA
$1.6 million
$1.5 million 3.4%
$1.9 million (14.5%)
--- ---
Adj. EBITDA
Margin 9.2% 7.9%
133 bps 10.2%
(97) bps
---
* Percentages may be different when
calculated due to rounding.
** Segment adj. EBITDA excludes stock
based compensation, loss on sale of
assets, R&I allocations and select
items.
*** 2Q 2018 ECT Income From
Operations adjusted for impairment
of goodwill.
Energy Chemistry Technologies Highlights ("ECT"):
-- Third quarter revenue increased 35.8% sequentially to $53.7 million, and
decreased 12.2% year-over-year.
-- Revenue increased sequentially due to international CnF(®) sales and
PCM(®) activity.
-- Third quarter adjusted EBITDA margins increased 4.7 percentage points
sequentially to 15.3% and decreased 3.9 percentage points
year-over-year.
-- The sequential increase in adjusted EBITDA was driven by higher
international revenue and continued increase in PCM(®) activity.
-- Third quarter incremental operating income margins increased 33.0%
sequentially.
-- Four new patents were granted during the third quarter 2018.
Consumer and Industrial Chemistry Technologies Highlights ("CICT"):
-- Third quarter revenue decreased 11.6% sequentially to $17.3 million, and
decreased 5.5% year-over-year.
-- Revenue decreased sequentially due to lower terpene sales, partially
offset by an increase in flavor and fragrance and Japan.
-- Third quarter adjusted EBITDA margins increased by 1.3 percentage points
sequentially to 9.2% and decreased 1.0 percentage points year-over year.
-- Third quarter adjusted EBITDA margins increased sequentially despite
lower revenues due to higher mix of flavor and fragrance sales, and
increased internal terpene consumption.
-- Current focus on expanding varietal offerings through investment in
non-thermal extraction capabilities.
-- During the fourth quarter, realized the largest weekly sales order
bookings year-to-date, providing visibility into 2019.
Balance Sheet and Liquidity
Net Debt increased $5.6 million from $46.0 million at second quarter end to $51.6 million at third quarter end, and increased $16.0 million year-over-year from $35.6 million at third quarter end 2017. Working capital requirements were $6.5 million for the third quarter 2018, as DSOs expanded primarily due to international revenue growth. Total liquidity, including cash balances, at quarter end was $17.0 million. The balance on our credit facility as of September 30, 2018 was $53.4 million, compared to $49.1 million at second quarter end 2018. We expect a positive cash benefit from working capital in the fourth quarter.
Flotek Outlook
In commenting about Flotek's outlook, Mr. Chisholm added, "As many of our peers and clients have already reported, fourth quarter domestic completion activity will contract for the energy industry. However, based on what we have seen to date this quarter, we expect that our fourth quarter domestic ECT revenue will be up sequentially from the third quarter, while our international ECT revenue will decline due to the timing and lumpiness of large orders. As a result, we believe that our total ECT revenue will decline in the high-single digit percentage range, sequentially, in the fourth quarter.
"Within CICT, there are a number of high-margin flavor orders that we expect to occur through year end and into 2019. As such, we anticipate revenues to be up mid-to-high single digits sequentially with adjusted EBITDA margins expanding by a few percentage points in the segment.
"While we have exceeded our initial expectations on cost reductions, we continue to reduce our cash and non-cash costs across the board. We have put into place further initiatives to drive lower fixed costs and greater operational efficiencies across the organization which should begin to reflect as early as the end of this year as we continue to focus on improved cash flow."
Conference Call and Presentation Details
Flotek will host a conference call on Wednesday, November 7, at 9:00 AM CT (10:00 AM ET) to discuss its operating results for the three and nine months ended September 30, 2018. To participate in the call, participants should dial 800-771-7943 approximately 5 minutes prior to the start of the call. In conjunction with this release, Flotek has also released a supplemental earnings presentation. Both the call and the supplemental earnings presentation can 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.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2018
December 31, 2017
---
ASSETS
Current assets:
Cash and cash equivalents $1,829 $4,584
Accounts receivable, net of
allowance for doubtful accounts
of $841 and $733
at
September 30, 2018 and December
31, 2017, respectively 55,473 46,018
Inventories, net 93,161 75,759
Income taxes receivable 2,441 2,826
Other current assets 7,797 8,737
Total current assets 160,701 137,924
Property and equipment, net 65,094 68,835
Goodwill 19,480 56,660
Deferred tax assets, net - 12,713
Other intangible assets, net 47,538 48,231
Other long-term assets 489 527
Assets held for sale - 4,998
---
TOTAL ASSETS $293,302 $329,888
===
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $30,428 $22,048
Accrued liabilities 14,004 14,589
Interest payable 6 43
Current portion of long-term
debt 53,402 27,950
Total current liabilities 97,840 64,630
Deferred tax liabilities, net 2,646 -
Total liabilities 100,486 64,630
Commitments and contingencies
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;
62,102,875
shares
issued and 57,026,176 shares
outstanding at September 30,
2018; 60,622,986
shares issued and 56,755,293
shares outstanding at December
31, 2017 6 6
Additional paid-in capital 343,048 336,067
Accumulated other comprehensive
income (loss) (960) (884)
Retained earnings (accumulated
deficit) (116,124) (37,225)
Treasury stock, at cost;
3,584,300 and 3,621,435 shares
at September 30, 2018 and
December 31, 2017,
respectively (33,155) (33,064)
Flotek Industries, Inc.
stockholders' equity 192,815 264,900
Noncontrolling interests 1 358
Total equity 192,816 265,258
TOTAL LIABILITIES AND EQUITY $293,302 $329,888
===
Flotek Industries, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
9/30/2018
9/30/2017
9/30/2018
9/30/2017
---
(in thousands, except per share (in thousands, except per share
data) data)
Revenue $70,989 $79,458 $190,591 $244,589
Costs and expenses:
Cost of revenue (excluding
depreciation and
amortization) 54,083 57,191 146,522 167,389
Corporate general and
administrative 7,476 10,346 24,634 33,773
Segment selling and
administrative 7,126 9,277 21,123 28,972
Depreciation and amortization 2,957 3,067 8,984 9,091
Research and development 2,511 2,691 8,537 9,940
Loss (gain) on disposal of
long-lived assets 58 (11) 119 401
Impairment of goodwill - 37,180
Total costs and expenses 74,211 82,561 247,099 249,566
Loss from operations (3,222) (3,103) (56,508) (4,977)
Other (expense) income:
Interest expense (746) (574) (1,902) (1,718)
Loss on sale of business (360) (360) -
Loss on write-down of assets
held for sale - (2,580)
Other income (expense), net 69 273 (2,348) 664
Total other expense (1,037) (301) (7,190) (1,054)
Loss before income taxes (4,259) (3,404) (63,698) (6,031)
Income tax benefit (expense) 327 (17) (15,558) 746
Loss from continuing
operations (3,932) (3,421) (79,256) (5,285)
Income (loss) from
discontinued operations, net
of tax - 319 (13,621)
Net loss (3,932) (3,102) (79,256) (18,906)
Net loss attributable to
noncontrolling interests - 357
Net loss attributable to
Flotek Industries, Inc.
(Flotek) $(3,932) $(3,102) $(78,899) $(18,906)
===
Amounts attributable to Flotek shareholders:
Loss from continuing
operations $(3,932) $(3,421) $(78,899) $(5,285)
Income (loss) from
discontinued operations, net
of tax - 319 (13,621)
Net loss attributable to
Flotek $(3,932) $(3,102) $(78,899) $(18,906)
===
Basic earnings (loss) per common share:
Continuing operations $(0.07) $(0.06) $(1.36) $(0.09)
Discontinued operations, net
of tax - 0.01 (0.24)
Basic earnings (loss) per
common share $(0.07) $(0.05) $(1.36) $(0.33)
===
Diluted earnings (loss) per common share:
Continuing operations $(0.07) $(0.06) $(1.36) $(0.09)
Discontinued operations, net
of tax - 0.01 (0.24)
Diluted earnings (loss) per
common share $(0.07) $(0.05) $(1.36) $(0.33)
===
Weighted average common shares:
Weighted average common
shares used in computing
basic earnings (loss) per
common share 58,319 57,602 57,820 57,709
Weighted average common
shares used in computing
diluted earnings (loss) per
common share 58,319 57,602 57,820 57,709
Flotek Industries, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
9/30/2018 9/30/2017
---
Cash flows from operating activities:
Net loss attributable to Flotek
Industries, Inc. (Flotek) $(78,899) $(18,906)
Loss from discontinued operations,
net of tax - (13,621)
---
Loss from continuing operations (78,899) (5,285)
Adjustments to reconcile loss from continuing operations to net
cash (used in) provided by operating activities:
Depreciation and amortization 8,984 9,091
Amortization of deferred financing
costs 294 376
Provision for excess and obsolete
inventory 1,817 390
Impairment of goodwill 37,180 -
Loss on sale of business 360 -
Loss on write-down of assets held
for sale 2,580 -
Loss on sale of assets 119 401
Stock compensation expense 6,570 9,679
Deferred income tax provision
(benefit) 15,359 (8,290)
Reduction in tax benefit related
to share-based awards 312 915
Changes in current assets and liabilities:
Accounts receivable, net (9,512) (8,704)
Inventories, net (19,276) (12,603)
Income taxes receivable 58 9,254
Other current assets 1,779 12,649
Accounts payable 8,493 (8,262)
Accrued liabilities (82) 1,561
Interest payable (37) 6
Net cash (used in) provided by
operating activities (23,901) 1,178
Cash flows from investing activities:
Capital expenditures (4,561) (6,155)
Proceeds from sales of businesses 1,665 18,490
Proceeds from sale of assets 361 321
Purchase of patents and other
intangible assets (1,500) (817)
Net cash (used in) provided by
investing activities (4,035) 11,839
Cash flows from financing activities:
Repayments of indebtedness - (9,833)
Borrowings on revolving credit
facility 213,612 310,021
Repayments on revolving credit
facility (188,160) (307,998)
Debt issuance costs (98) (106)
Purchase of treasury stock related
to share-based awards (91) (1,500)
Proceeds from sale of common stock 341 530
Repurchase of common stock - (4,174)
Proceeds from exercise of stock
options - 21
Loss from noncontrolling interest (357) -
Net cash provided by (used in)
financing activities 25,247 (13,039)
Discontinued operations:
Net cash used in operating
activities - (695)
Net cash provided by investing
activities - 708
Net cash flows provided by
discontinued operations - 13
---
Effect of changes in exchange
rates on cash and cash
equivalents (66) 128
Net (decrease) increase in cash
and cash equivalents (2,755) 119
Cash and cash equivalents at the
beginning of period 4,584 4,823
Cash and cash equivalents at the
end of period $1,829 $4,942
===
Flotek Industries, Inc.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands, except per share data)
GAAP Income (Loss) from Continuing Operations and Reconciliation to Adjusted Net Income (Loss) (Non-GAAP)
---
Three Months Ended Nine Months Ended
9/30/2018
9/30/2017
9/30/2018
9/30/2017
(in thousands, except per share data)
Income (Loss) from Continuing
Operations (GAAP) $(3,932) $(3,421) $(78,899) $(5,285)
Deferred Tax Asset Valuation Allowance 158 21,779
Select Items Impacting Earnings, net of tax 284 33,793 1,194
Adjusted Net Income (Loss) (Non-GAAP) $(3,490) $(3,421) $(23,327) $(4,091)
Weighted Average Shares Outstanding
(Fully Diluted) 58,319 57,602 57,820 57,709
Adjusted Earnings (Loss) Per Share
(Fully Diluted) $(0.06) $(0.06) $(0.40) $(0.07)
Select Items Impacting Earnings
---
Executive Retirement:
Stock Compensation Expense 887
Cash Payments 950
Loss on Sale of Business 360 360
Inventory Write-down 1,000 -
Impairment of Goodwill 37,180 -
Loss on Write-down of Assets Held For Sale 2,580 -
Discontinuation of Corporate Projects 1,220 -
Expenses Relating to Closing of Business
Venture 436 -
Total Select Items $360
$ - $42,776 $1,837
Less income tax effect at 21% for 2018 and
35% for 2017 (76) (8,983) (643)
Select Items Impacting Earnings, net of tax $284
$ - $33,793 $1,194
* Management believes that
adjusted Net Income for the
three and nine months ended
September 30, 2018, and
September 30, 2017, 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.
Flotek Industries, Inc.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands)
GAAP Income (Loss) from Continuing Operations and Reconciliation to Adjusted EBITDA (Non-GAAP)
---
Three Months Ended Nine Months Ended
9/30/2018
9/30/2017
9/30/2018
9/30/2017
(in thousands)
Income (Loss) from Continuing Operations
(GAAP) $(3,932) $(3,421) $(78,899) $(5,285)
Interest Expense 746 574 1,902 1,718
Income Tax (Benefit) Expense (327) 17 15,558 (746)
Depreciation and Amortization 2,957 3,067 8,984 9,091
EBITDA (Non-GAAP) $(556) $237 $(52,455) $4,778
Stock Compensation Expense 2,185 3,026 6,570 9,679
Loss (Gain) on Sale of Assets 58 (11) 119 401
Loss on Sale of Business 360 360 -
Inventory Write-down 1,000 -
Impairment of Goodwill 37,180 -
Loss on Write-down of Assets Held
For Sale 2,580 -
Discontinuation of Corporate Projects 1,220 -
Expenses Relating to Closing of
Business Venture 436 -
Cash Executive Retirement Expense 950
Adjusted EBITDA (Non-GAAP) $2,047 $3,252 $(2,990) $15,808
* Management believes that
adjusted EBITDA for the three
and nine months ended September
30, 2018, and September 30,
2017, 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.
Flotek Industries, Inc.
Unaudited Reconciliation of Non-GAAP Items and Non-Cash Items Impacting Earnings
(in thousands)
GAAP Segment Net Income and Reconciliation to Segment Adjusted EBITDA (Non-GAAP)
---
Energy Chemistry Technologies Consumer and Industrial Chemistry Technologies
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
9/30/2018
9/30/2017
9/30/2018
9/30/2017
9/30/2018
9/30/2017
9/30/2018
9/30/2017
(in thousands)
(in thousands)
Segment Net Income (GAAP) $3,920 $6,867 $(34,175) $24,715 $858 $985 $3,937 $5,906
Interest Expense (a)
Income Tax Expense (a)
Depreciation and Amortization 1,734 1,863 5,300 5,507 699 590 2,049 1,752
Segment EBITDA (Non-GAAP) $5,654 $8,730 $(28,875) $30,222 $1,557 $1,575 $5,986 $7,658
Stock Compensation Expense 153 441 559 1,510 (128) 171 462
R&I Allocation 2,350 2,575 8,054 9,594 161 116 483 346
Loss on Sale of Assets 57 (5) 119 407
Inventory Write-down 1,000
Impairment of Goodwill 37,180
Segment Adjusted EBITDA (Non-GAAP) $8,214 $11,741 $18,037 $41,733 $1,590 $1,862 $6,469 $8,466
(a) Interest Expense and Tax Expense are recorded at the Corporate level and not allocated to segments.
* Management believes that adjusted EBITDA for the three and nine months ended September 30, 2018, and
September 30, 2017, is useful to investors to assess and understand operating performance, especially
when comparing those results with previous and subsequent periods. 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.
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SOURCE Flotek Industries, Inc.
