Flotek Industries, Inc. Announces First Quarter, 2014 Financial And Operating Results And Conference Call Information

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[IN] OIL UTI CHM FIN

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TO BUSINESS EDITORS:

Flotek Industries, Inc. Announces First Quarter, 2014 Financial And

Operating Results And Conference Call Information

HOUSTON, April 28, 2014 /PRNewswire/ -- Flotek Industries, Inc. (NYSE:

FTK) ("Flotek" or the "Company") today announced results for the three

months ended March 31, 2014.

As reported on Form 10-Q filed with the U.S. Securities and Exchange

Commission, Flotek reported that revenue for the three months ended

March 31, 2014 was $102.6 million compared to $78.2 million for the

three months ended March 31, 2013. Consolidated revenue for the three

months ended March 31, 2014 increased $24.4 million, or 31.1%,

relative to the comparable period of 2013. The increase in revenue was

primarily due to the acquisition of Florida Chemical and EOGA,

contributing incremental revenue of $16.8 million during the quarter.

Excluding the impact of acquisitions, revenue for the quarter ended

March 31, 2014, increased by $7.5 million, or 9.6%.

For the three months ended March 31, 2014, the Company reported net

income of $12.0 million, or $0.22 per common share (fully diluted),

compared to a net income of $7.8 million, or $0.15 per common share

(fully diluted) for the same period in 2013.

"Flotek's performance in the first quarter, including record quarterly

revenue, creates a strong base from which to continue our

industry-leading growth initiatives for the balance of 2014," said

John Chisholm, Flotek's Chairman, President and Chief Executive

Officer. "While we are pleased with our results - especially given a

slow start in January - we believe we are positioned to post solid

growth through the balance of the year, especially in our key energy

chemistry business. While the second quarter spring break-up has

begun in Canada, which will impact chemistry revenue in the quarter,

our continued growth in the U.S. as well as incremental international

growth provide solid opportunities in the months ahead."

The Company recorded stock-based compensation expense during the

quarter of $2.3 million ($1.5 million, net of tax). That compares to

stock-based compensation expense in the first quarter of 2013 of $2.2

million ($1.5 million, net of tax).

Earnings Before Interest, Taxes, Depreciation and Amortization, or

EBITDA (a non-GAAP measure of financial performance), for the three

months ended March 31, 2014 was $23.1 million, an increase of $7.6

million or 49%, compared to $15.5 million for the three months ended

March 31, 2013.

A presentation of stock-based compensation and a reconciliation of

GAAP net income to EBITDA can be found at the conclusion of this

release.

A complete review and discussion of the Company's quarter-end

financial performance and position can be found in the Company's

quarterly report on Form 10-Q filed with the U.S. Securities and

Exchange Commission today.

Financial Update

Flotek's resilient operational performance continues to support a

strong balance sheet and financial position. During the quarter,

Flotek reduced its outstanding debt by $7.1 million, or 11.5%,

compared to year-end levels. In addition, the Company used $5.3

million in cash for the acquisition of Eclipse IOR Services, LLC

("EOGA") and posted capital expenditures of $4.1 million.

Inventories in the quarter rose by $8.9 million, primarily a result of

a traditional seasonal increase in citrus product inventory held at

Florida Chemical.

Outstanding receivables as of March 31, 2014 were $65.9 million,

compared to $65.0 million as of December 31, 2013. The Company's

allowance for doubtful accounts was at 1.4% of net receivables.

Depreciation and amortization expense for the three months ended

March 31, 2014 increased by $1.1 million, or 92.0%, relative to the

comparable period of 2013, primarily due to incremental depreciation

and amortization of $0.7 million for assets recognized as part of the

acquisition of Florida Chemical in 2013.

Interest and other expense for the three months ended March 31, 2014

was essentially flat relative to the comparable period of 2013.

The Company recorded an income tax provision of $6.4 million, yielding

an effective tax rate of 34.7% for the three months ended March 31,

2014, compared to an income tax provision of $4.2 million reflecting

an effective tax rate of 35.3% for the comparable period in 2013.

"Flotek's ability to generate cash remains a core strength of Flotek,"

added Chisholm. "We are confident of our ability to fund current

operations with internally generated cash flow which provides

meaningful flexibility to consider other strategic growth

opportunities that add value for Flotek shareholders."

Operational Update

As noted earlier, while January oilfield activity was lethargic, each

month in the quarter showed accelerated activity and revenue, a trend

- excepting Canadian activity with the beginning of seasonal break-up

- that continues into April. Revenue in the first quarter of 2014 was

$102.6 million, a Flotek record and the second consecutive quarter

with revenues in excess of $100 million.

Energy Chemical Technologies revenue for the three months ended March

31, 2014 totaled $62.4 million, compared to $44.7 million in the

year-ago period. Energy Chemical Technologies revenue for the three

months ended March 31, 2014 increased $17.7 million, or 39.7%,

relative to the comparable period of 2013. Increased sales of

stimulation chemical additives accounted for the majority of the

revenue increase for the quarter ended March 31, 2014 relative to the

comparable period of 2013.

Energy Chemical Technologies gross margins for the quarter were 46.8%,

an increase from 42.8% in the first quarter of 2013.The increase in

gross margin percentage for the three months ended March 31, 2014 was

primarily attributable to product portfolio mix resulting from

proportionately higher sales of patented and proprietary products and

the supply chain benefits of the Florida Chemical acquisition.

Sequentially, Energy Chemical Technologies revenue for the three

months ended March 31, 2014 increased $5.5 million, or 9.6%. Energy

Chemical Technologies gross profit for the three months ended March

31, 2014 totaled $29.2 million, an increase of $2.2 million or 8.3%

sequentially.

Growth in chemistry revenue was driven by acceleration in both North

America and international activity. In the U.S., the Company continues

to see solid growth in South Texas with new customers adopting

Flotek's CnF@ completion chemistries as well as new opportunities in

both West Texas and the Mid-Continent. In addition, use in the Rockies

remains robust and has recovered from disruptions from flooding in the

second-half of last year.

In Canada, the first quarter saw a significant increase in the number

of customers adopting CnF@ completion chemistries, a trend the Company

believes will continue, resulting in volume growth at the conclusion

of the spring break-up season. The Canadian thaw, as is typically the

case, will have an impact on April and early May revenues in Canada.

Internationally, Flotek continues to make progress on several fronts.

CnF@ completion chemistry sales into Argentina increased consistently

in the quarter. Our Middle Eastern initiatives continue to yield

steady results with opportunities in Oman, the United Arab Emirates

and Saudi Arabia continuing to grow. Of special note, through our

major service company partners, we have seen meaningful growth in

multiple chemistry sales, including CnF@ completion chemistries, into

Saudi Aramco.

Other international markets continue to contribute to overall chemical

sales including Mexico, the Netherlands and Turkey with additional

opportunities in those nations as well as Guatemala, Ecuador and

elsewhere in Latin and South America, the Middle East and Europe.

Flotek continues to make progress on the Gulf Energy joint venture to

develop oilfield chemistry and production facilities in the Sultanate

of Oman to serve the rapidly growing hydrocarbon markets in the Middle

East and North Africa. The companies have completed the definitive

joint venture agreements and are working through various regulatory

processes in Oman. In addition, Flotek has begun the process of

vetting global engineering firms to complete the construction of the

chemical manufacturing facility near Sohar. The Company expects to

complete the facility by the end of 2014.

Even before completion of the blending infrastructure, the Company is

already seeing benefits from the Omani venture. During the first

quarter, Flotek held a three-day comprehensive chemistry seminar -

with a focus on Enhanced Oil Recovery - with Petroleum Development

Oman ("PDO"). PDO, a joint venture between the Sultanate and Royal

Dutch Shell, is the largest producer of hydrocarbons in Oman,

responsible for nearly 70% of Omani crude oil production. Flotek is

encouraged by the opportunity and acceptance of the Company's

chemistry technology and commercial relationship opportunities in the

Sultanate.

In addition, Flotek Gulf, the new name of the joint venture, was a

sponsor, through Gulf Energy, and exhibitor at the recent OGWA

conference and exhibition in Muscat. The conference was attended by

over 10,000 oil and gas professionals from the Middle East and Africa

and provided a host of solid commercial leads for Flotek Gulf.

"Our commitment to being a leading innovator in oilfield chemistry is

beginning to yield results as we continue our solid growth in energy

chemistry," added Chisholm. "While we have plenty of work ahead of us,

we are pleased with our success in reaching new clients and basins in

North America. Moreover, our plate remains full of additional

opportunities that, if successful in converting to commercial

business, should accelerate our growth in the coming months."

"In addition, while still relatively small compared to our North

American business, our international prospects continue to develop and

become better defined," Chisholm added. "We continue to be deliberate,

focused and conservative in our approach to business in distant lands

yet believe that - over the course of the next several quarters - our

international portfolio has the potential to be transformational for

Flotek and its growth profile."

Flotek's recent acquisition of EOGA is an important addition to our

energy chemistry and Enhanced Oil Recovery ("EOR") offerings. Flotek

is already experiencing the benefits of expanding EOR services and the

expertise that Jay Portwood and his team bring to Flotek's chemistry

offerings. The recent closing of the acquisition of SiteLark, LLC adds

reservoir and project modeling and evaluation capabilities to the

stable which should further enhance our reputation as a leader in

global Enhanced Oil Recovery services.

Energy Chemical Technology margins remained strong in the first

quarter as a result of favorable product mix and continued benefits

from efficiency improvements at our Marlow, Oklahoma chemistry

manufacturing and blending facility. In addition, better control of

raw material costs - largely a result of our acquisition of Florida

Chemical in 2013 - continues to support strong margins.

In research and product development, Flotek continues to focus on

next-generation chemistry solutions for key oil and gas challenges.

The company continues to enhance its core CnF@ chemistry products as

well as work on customized solutions presented to the Company by

clients, both domestic and international.

"We remain both proud of and committed to our reputation of being a

leading innovator in oilfield chemistry, and our first quarter

activity is a strong testament to that commitment," added Chisholm.

"We will continue to work tirelessly to convince our clients and

prospects that the use of Flotek chemistries is an investment that

yields results, both in terms of production and economics. Over the

course of the next several weeks we believe those benefits will become

even more clear and compelling."

The Consumer and Industrial Chemical Technologies ("CICT") segment was

formed in the second quarter of 2013 with the acquisition of Florida

Chemical. For the three months ended March 31, 2014 the segment

contributed revenue of $13.0 million. CICT revenue is primarily driven

by demand for d-Limonene and other bio-based chemistries as well as

from citrus isolates produced for the flavor and fragrance industry.

Revenue for CICT is subject to market seasonality and availability of

raw materials. CICT gross margin for the three months ended March 31,

2014 contributed $4.0 million. Gross margin for the quarter was

favorably impacted by proportionally higher sales of high margin

flavor and fragrance isolates.

Sequentially, CICT revenue for the three months ended March 31, 2014

decreased $1.9 million, or 12.9%. CICT gross profit for the three

months ended March 31, 2014 totaled $4.0 million, an increase of $0.7

million or 19.4% sequentially. Gross margin percentage for the three

months ended March 31, 2014 increased to 31.0%, up from 22.6% for the

three months ended December 31, 2013.

Drilling Technologies revenue for the three months ended March 31,

2014 totaled $24.9 million, compared to $28.9 million for the three

months ended March 31, 2013. Revenue declines can be primarily

attributed to a decline in oilfield and mining product sales along

with rental revenue declines for actuated tool rentals and TeledriftT

tools.

Drilling Technologies gross margin for the three months ended March

31, 2014 decreased by $1.6 million, or 13.7%, over the comparable

period of 2013, but remained relatively flat as a percentage of

revenue. Gross margin declined due to decreased revenue, partially

offset by an increase in gross margin percentage due to direct cost

control including lower employee, supplies, and travel expenses in the

first quarter of 2014.

Drilling Technologies revenue for the three months ended March 31,

2014 decreased $1.2 million, or 4.7%, sequentially. Drilling

Technologies gross profit for the three months ended March 31, 2014

totaled $9.8 million, an increase of $1.3 million or 14.7%

sequentially. Gross margin percentage for the three months ended

March 31, 2014 increased to 39.3%, up from 32.6% for the three months

ended December 31, 2013.

The decline in revenue is primarily the result of a decline in

TeledriftT rentals in the Mid Continent and Southern regions due to

seasonal weather patterns and transient employment and logistics

issues. Both regions regained momentum in the later part of the

quarter and are continuing to re-accelerate. In addition, although the

StemulatorT agitation tool experienced a slower-than-expected start in

January, rentals ended the quarter strong, with March providing the

strongest monthly rental revenue to date, a trend Flotek expects to

continue in the second quarter.

Internationally, TeledriftT continues to win accolades and gain

traction with key clients. Revenues from Saudi Aramco continue at

record levels with additional growth expected throughout the year.

While seasonal weakness in Argentina had an impact, we continue to

experience new opportunities in Kazakhstan. In the Middle East, a

number of new opportunities are developing, including new tools headed

to Iraq which should be working in the coming months. Flotek expects

TeledriftT to continue to post international growth throughout the

balance of the year.

The StemulatorT, Flotek's new horizontal drilling acceleration tool,

finished the quarter with record revenue in March, after a slow start

in January. The Company continues to tweak the design to ensure

optimal performance, largely a result of customer feedback. For

example, Flotek recently adjusted the pulsing frequency of the tool to

minimize interference with signals from directional drilling

technologies. Additionally, in the Mid-Continent, the Company is

currently running its largest single-customer job with the StemulatorT

and, if successful, expects significant growth in the region beginning

late in the second quarter or early in the second-half of the year.

While increased competition presents challenges in many basins, Flotek

continues to experience growth in the Permian Basin and is seeing new

opportunities in the Eagle Ford and Mid-Continent regions with Rockies

activity remaining stable. More important, Drilling Technologies

margins were resilient in the quarter, a metric on which the Company

remains focused.

The Company's Galleon mining tools group experienced a decline in

backlog and orders, largely due to a decline in overall mining

activity in North and South America. While Galleon's near-term

visibility is challenged, the Company believes activity and backlog

should begin to redevelop in the later part of 2014 and into 2015.

Flotek is completing its move into a new state-of-the-art facility in

Moore, Oklahoma which will house the Company's TeledriftT, StemulatorT

and Motors operations as well as its Mid-Continent Drilling

Technologies division. The new facility is more efficient and allows

better coordination and collaboration in the Company's key drilling

technologies.

Revenue for the Production Technologies segment for the quarter ended

March 31, 2014 was $2.3 million, a decrease of $2.4 million compared

to the same period in 2013. The segment is shifting focus to the

unconventional oil markets and the related equipment sales and

service. International valve sales decreased year over year due to a

contract fulfilled in the first quarter of 2013. Electrical

submersible pump sales have also decreased as a result of continued

declines in CBM activity. These decreases were partially offset by

increases in revenue with linear lift systems and rod valve sales in

the Powder River and Williston Basins unconventional oil markets.

"As we noted earlier this year as we begin to reengineer our

Production Technologies enterprise, 2014 results are likely to be

variable," added Chisholm. "While we will continue to provide

exceptional service to our legacy clients, our longer-term focus is on

opportunistic products and services where we can make a difference to

clients in providing innovative solutions to niche production

challenges. Hence, as we reimagine the business, we believe Production

Technologies better describes the business prospects ahead. In the

coming months we will consider a wide-range of opportunities - from

intrinsic development to acquisitive ventures - that we believe will

create an industry leading business. Under David McMahon's leadership,

we are already beginning to see meaningful opportunities ahead."

"Overall, while pleased with our first quarter results, we are more

excited about what lies ahead for the balance of the year for Flotek,"

concluded Chisholm. "We believe Flotek can post industry-leading

results through focusing on superior innovation in oilfield

technologies, executing our marketing and sales strategy and having an

ever-more vigilant focus on profitable growth. Moreover, we now firmly

believe we can add to that success through a prudent review of

external growth opportunities which stand in support of our core

strategy: making a positive difference for our clients while at the

same time focusing on making a difference for our other stakeholders:

our employees and their communities, our shareholders and the

environment. If successful in the execution of our vision, we believe

2014 will once again be a transformational year for all Flotek

stakeholders."

Conference Call Details

Flotek will host a conference call on Tuesday, April 29, 2014 at 7:30

a.m. Central Daylight Time to discuss its operating results for the

three months ended March 31, 2014.

To participate in the call, participants should dial 800-679-0308

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 is a global developer and distributor of innovative specialty

chemicals and down-hole drilling and production equipment. Flotek

manages 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.

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 filing 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.

GAAP Accounting Reconciliation

Three Months Ended March 31,

2014 2013

(in thousands, except per share data)

GAAP Net Income and Reconciliation to EBITDA (Non-GAAP)

Net Income (GAAP) $ 12,018 $ 7,765

Interest Expense 454 434

Income Tax Expense 6,380 4,237

Depreciation and Amortization 4,219 3,033

EBITDA (Non-GAAP) $ 23,071 $ 15,469

Select Non-Cash Items Impacting Earnings

Stock Compensation Expense $ 2,334 $ 2,241

Less income tax effect (817) (784)

Stock Compensation Expense, net of tax $ 1,517 $ 1,457

Weighted Average Shares Outstanding (Fully Diluted) 55,398 51,222

Stock Compensation Expense Per Share (Fully Diluted) $ 0.03 $ 0.03

SOURCE Flotek Industries, Inc.

-0- 04/28/2014

/CONTACT: Investor & Media Relations, (713) 726-5376, IR@flotekind.com

/Web Site: http://www.flotekind.com

(NYSE:FTK) /

CO: Flotek Industries, Inc.

ST: Texas

IN: OIL UTI CHM FIN

SU: ERN CCA

PRN

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