Replies to post #4133 on Value Microcaps Junior Energy

[arnie70]

This stock has been battered by the crazy market,
was trading in the teens about a month ago.

Flotek Industries, Inc. Announces Third Quarter 2008 Results
Thursday October 30, 7:00 am ET


HOUSTON, Oct. 30 /PRNewswire-FirstCall/ -- Flotek Industries, Inc. (NYSE: FTK - News), a technology driven growth company serving the oil, gas, and mining industries, today reported results for the third quarter of 2008.

3Q 2008 Highlights vs. 3Q 2007 Highlights
-- 50.5% growth in Revenue
-- 48.9% increase in Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA")
-- 42.2% growth in Income from Operations
-- 15.9% increase in Net Income
-- 15.4% increase in Diluted Earnings per Share to $0.30


Jerry D. Dumas, Sr., Chairman of the Board, CEO and President, stated, "I am very pleased with the strong third quarter performance of both our employees and our Company. Flotek's operating performance year over year was significant as revenue grew in all segments and field operating income continued its growth, particularly in Drilling Products and Artificial Lift, while the Chemical and Logistics segment maintained a steady pace. Diluted Earnings per Share increased 15.4% year over year, even though Hurricanes Gustav and Ike curtailed activity in the Gulf of Mexico, and torrential rains affected Drilling Products and Chemical and Logistics in the Haynesville Shale play which reduced our Diluted Earnings per Share by an estimated $0.02 per share."

Mr. Dumas continues, "We expect the growth of our international revenue to continue its upward trend. Our technological posture in all segments remains our strength. The introduction of new tools in Drilling Products coupled with the friction reducer and biocide products by the Chemical and Logistics segments are very positive developments for our Company globally. Given our capital structure, I am also very comfortable with our liquidity position, enabling our ability to comfortably meet our debt service, working capital needs and capital expenditure requirements."

Total revenue for the third quarter of 2008 was $62.8 million, an increase of $21.1 million or 50.5%, compared to $41.7 million for the third quarter of 2007. Revenue increased in all three segments due to increased drilling activity, price increases in the Chemical and Logistics and Artificial Lift segments, and the increased acceptance of our downhole tool products and our proprietary suite of specialty chemicals. Revenue from our downhole motors and the acquisition of Teledrift accounted for approximately $9.7 million of the increase.

Gross margins increased to 45.4% in third quarter 2008 from 43.1% in third quarter 2007. Selling, general and administrative ("SG&A") costs and depreciation and amortization decreased as a percentage of revenue during the third quarter of 2008. SG&A increased 61.0% from $7.7 million in third quarter 2007 to $12.4 million during the third quarter of 2008. This was primarily due to increased indirect personnel costs in Chemicals and Logistics, Drilling Products and Corporate, increased professional fees, and costs associated with our increased international efforts. Depreciation and amortization was up 114.4% from $1.6 million in third quarter of 2007 to $3.5 million in the third quarter of 2008. This increase was attributable to higher depreciation associated with acquired assets and increased capital expenditures. In addition, amortization expense increased due to the amortization of intangible assets acquired in 2007 and 2008. This resulted in income from operations for the third quarter of 2008 totaling $12.1 million, an increase of 42.2% compared to $8.5 million for the third quarter of 2007. Income from operations as a percentage of revenue decreased from 20.4% for the third quarter of 2007 to 19.3% for the third quarter of 2008.

Interest expense increased to $2.7 million in the third quarter of 2008 from $0.8 million in 2007. The increase was a result of higher debt levels incurred to finance acquisitions made in the last half of 2007 and Teledrift in the first quarter of 2008, although our blended interest rate has decreased.

Flotek earned net income of $5.9 million, or $0.30 per fully diluted share, for the third quarter of 2008 compared to $5.0 million, or $0.26 per fully diluted share, for the same period in 2007. Net income and fully diluted earnings per share were up 15.9% and 15.4%, respectively, for the quarter compared to the same period in 2007. Sequentially, fully diluted earnings per share increased from $0.26 in second quarter 2008 to $0.30 in third quarter 2008.

EBITDA increased 48.9% from $10.5 million in third quarter of 2007 to $15.7 million in the third quarter of 2008.


We report our results under three segments:
-- The Chemicals and Logistics segment develops, manufactures and markets
specialty chemicals used in oil and gas well stimulation, acidizing,
drilling, and production treatment. The segment provides bulk
blending and transload services for products used in well cementing.
-- The Drilling Products segment rents, inspects, manufactures and
markets downhole drilling equipment for the energy, mining, water well
and industrial drilling sectors.
-- The Artificial Lift segment manufactures and markets artificial lift
equipment which includes the Petrovalve line of beam pump components,
electric submersible pumps, gas separators, valves and services to
support coal bed methane production.


Chemicals and Logistics Segment

Chemicals and Logistics revenue for third quarter 2008 was $30.4 million, an increase of $7.1 million, or 30.4%, compared to $23.3 million for the same period in 2007. The growth in revenue is primarily the result of an increase in sales volume of our proprietary suite of products, particularly our biodegradable chemicals (Microemulsions). Sales of these products grew 37.0% from $16.0 million in the third quarter 2007 to $21.9 million in the third quarter 2008. Microemulsion sales grew as a percentage of total Chemicals and Logistics revenue from 68.7% to 72.0% in the third quarter of 2008. Sooner, our production chemicals business acquired in September 2007, accounted for approximately $1.1 million of the increase in revenue. Hurricane activity adversely impacted our facility in Raceland, Louisiana resulting in 26 days of non-activity during the third quarter of 2008.

Income from operations was $10.5 million for the third quarter 2008, an increase of $1.6 million or 18.3%, compared to $8.9 million for the same period in 2007. Income from operations as a percentage of revenue decreased to 34.6%, compared to 38.1% in the third quarter of 2007, due to higher raw material costs of surfactants and other petroleum based products, higher international sales costs and the expansion of R&D activities in the quarter.

Drilling Products Segment

Drilling Products revenue for third quarter 2008 increased $12.5 million to $26.6 million, an increase of 88.3%, compared to $14.1 million for the third quarter in 2007. Acquisitions accounted for approximately $8.6 million of this increase. Growth drivers were rentals and services associated with the expansion of our CAVO mud motor fleet and Teledrift MWD tools. Revenue growth was inhibited by delays in activity due to heavy rains from Hurricanes Gustav and Ike in the Haynesville Shale play and Eastern Oklahoma areas.

Income from operations was $5.5 million for the third quarter 2008, an increase of $3.7 million or 211.7%, compared to $1.8 million for the same period in 2007. Income from operations as a percentage of revenue increased to 20.6% of revenue in the third quarter 2008 compared to 12.4% for the same quarter 2007. This increased field operating profits to 18% year-to-date. Contributions from the Teledrift and CAVO acquisitions plus expansion of our rental tool operations, including the introduction of our line of shock subs replacing sub-rentals, favorably impacted these results.

Artificial Lift Segment

Artificial Lift revenue increased $1.5 million for the third quarter of 2008 to $5.8 million as compared to $4.3 million in the third quarter of 2007. This growth can be attributed to market share growth and an increase in rod pump sales along with an 8% price increase implemented in August. An expansion into the Farmington, New Mexico market occurred in September.

Income from operations was $0.9 million, an increase of $0.4 million or 95.9%, for the third quarter 2008 compared to $0.5 million in the same period in 2007 due to increased volumes. Income from operations as a percentage of revenue increased to 15.8% in third quarter 2008 from 10.9% in third quarter 2007.

Corporate and Other

General and administrative expenses were $4.8 million for the third quarter of 2008 compared to $2.6 million for the third quarter 2007. Personnel costs during the third quarter of 2008 included $0.6 million of stock-based compensation expense, equal to the same period in 2007, and a $250,000 non-recurring item.


Significant Events and Technology Updates

-- Flotek's chemical research facility developed StimLube and StimLube
CAT, next generation, patent pending friction reducers with an
ultra-high molecular weight, salt tolerant polymer engineered to
provide premium friction reduction. The unique polymer is more
effective pound for pound than competitive products, providing better
or equivalent drag reduction and reduces formation damage potential.
Both products were designed for higher salt and/or return frac fluid
systems, providing a more cost effective performance. StimLube
exhibits enhanced performance when used with our Microemulsion
products.

-- The first of two independent studies on Microemulsion to determine
technical and economic benefits to the end user has been completed.
The results are being finalized and will be published in an SPE paper
for distribution and presentation to the industry. The second
independent study is still ongoing with completion and finalization
expected in the fourth quarter.

-- Flotek's chemical research facility developed AMB-100, a
broad-spectrum microbiocide that is effective in the control of
bacteria, fungi, and algae for use in production enhancement.
AMB-100 provides a longer term kill than conventional oilfield
biocides and is extremely effective against acid producing bacteria.
The product has no compatibility issues with oxygen scavengers, and
does not interact with separation aids or friction reducers.

-- Flotek's Teledrift completed the engineering and surface package
software for the new TelePulse MWD tool. The TelePulse provides entry
into the directional drilling market and can be used in concert with
the Flotek's CAVO motors. Field testing and patent applications are
currently underway.

-- Flotek's Teledrift released the new TeleShot MWD for use in all
drilling applications. This technology is currently being rented to
customers in Wyoming and Northern Louisiana and looking to expand into
West Texas. Markets using air drilling, such as the Marcellus Shale
and Fayetteville Shale plays, are ideal conditions for the TeleShot
technology.

-- Flotek's Technology and Engineering Group designed and developed the
first Flotek shock subs and drilling jars. The shock sub addition to
Flotek's downhole tool portfolio is designed to provide maximum
protection against bottom-hole assembly vibration damage. The
drilling jars are used downhole to deliver an impact load to another
downhole component, especially when that component is stuck.



Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2007 2008 2007
Revenue
Product $41,978 $32,148 $109,494 $86,539
Rental 14,892 6,016 41,287 17,836
Service 5,917 3,564 15,286 10,234
62,787 41,728 166,067 114,609

Cost of revenue
Cost of product 23,601 19,174 64,116 51,406
Cost of rental 7,282 2,716 18,048 7,775
Cost of service 3,377 1,845 8,521 5,562
34,260 23,735 90,685 64,743

Gross profit 28,527 17,993 75,382 49,866

Expenses:
Selling, general and
administrative 12,382 7,690 34,297 21,455
Depreciation and amortization 3,534 1,648 9,429 4,553
Research and development 494 132 1,331 440
Total expenses 16,410 9,470 45,057 26,448
Income from operations 12,117 8,523 30,325 23,418

Other income (expense):
Interest expense (2,653) (834) (7,149) (2,544)
Investment income and other (19) 325 (33) 709
Total other income (expense) (2,672) (509) (7,182) (1,835)

Income before income taxes 9,445 8,014 23,143 21,583
Provision for income taxes (3,595) (2,965) (8,790) (7,975)
Net income $5,850 $5,049 $14,353 $13,608

Basic and diluted earnings
per common share:
Basic earnings per common share $0.31 $0.27 $0.76 $0.75
Diluted earnings per common share $0.30 $0.26 $0.74 $0.71
Weighted average common shares
used in computing basic
earnings per common share 18,972 18,542 18,832 18,215
Incremental common shares from
stock options, warrants and
restricted stock 429 1,174 514 1,072
Weighted average common shares
used in computing diluted
earnings per common share 19,401 19,716 19,346 19,287



Third Quarter Conference Call

Date & Time: Thursday, October 30, 2008 at 10:00 a.m. CDT/ 11:00 EDT.
Dial-In Number: 800-860-2442 (U.S. & Canada)
412-858-4600 (International)
Passcode: Flotek
Call will be broadcast live at http://www.flotekind.com

[DrLink]

Kozuh, I apologize for the language. It's just that the timeing of this move by IB could not be worse. Most of my companies with below 100 million market cap were way above 100 million just 4 weeks ago and probably will be above 100 million market cap in 4 weeks (cross my fingers)