10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM			10-K/A
Amendment No. 2
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended	December 31, 2019
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                      to
	Commission File Number		1-13270

 

FLOTEK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware			90-0023731
(State of other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
8846 N. Sam Houston Parkway W.	Houston,	TX	77064
(Address of principal executive offices)			(Zip Code)

(713) 849-9911

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	FTK	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark:

•      if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

•      if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒

•      whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

•      whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒  No ☐

•      whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐

Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

•      whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

The aggregate market value of voting stock held by non-affiliates of the registrant as of June 28, 2019 (based on the closing market price on the NYSE Composite Tape on June 28, 2019) was approximately $150,815,000. At March 3, 2020, there were 58,951,784 outstanding shares of the registrant’s common stock, $0.0001 par value.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

This Amendment No. 2 on Form 10-K/A (this “Amendment No 2”) amends Flotek Industries, Inc.’s (the “Company”)’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 6, 2020 (the “Original 2019 Form 10-K”), and amended by the Amendment No. 1 to the Original 2019 Form 10-K, filed with the SEC on March 16, 2020 (the”Original 2019 Form 10-K, as amended”). However, this amendment does not change our consolidated financial statements as set forth in the Original 2019 Form 10-K, as amended.

The purpose of this Amendment No. 2 is to (i) revise the “Report of Independent Registered Public Accounting Firm” of Moss Adams LLP appearing in “Part II, Item 8, Financial Statements and Supplementary Data” regarding the effectiveness of our internal control over financial reporting and (ii) revise the disclosure in Part II, Item 9A, Controls and Procedures, to reflect management’s conclusion that our disclosure controls and procedures and our internal control over financial reporting were not effective at December 31, 2019 due to certain material weaknesses in our internal control over financial reporting identified subsequent to the filing of our Original 2019 Form 10-K, as amended. Notwithstanding the material weaknesses mentioned above, we believe that our consolidated financial statements as set forth in the Original 2019 Form 10-K, as amended, present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its subsidiaries in conformity with generally accepted accounting principles in the United States as of the dates and for the periods stated therein. Part IV, Item 15, “Exhibits and Financial Statement Schedules,” has been amended to include a revised auditor consent and currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. The certifications are attached to this Amendment No. 2 as Exhibits 31.1, 31.2, 32.1 and 32.2.

Other than the inclusion within this Amendment No. 2 of new certifications by management and a new consent of our independent registered public accounting firm (and related amendment to the exhibit index that is incorporated by reference into Part IV, Item 15 of the Original 2019 Form 10-K, as amended, to reflect the addition of such certifications and consent and related changes to the footnotes to that exhibit index), this Amendment No. 2 speaks only as of the date of the Original 2019 Form 10-K and does not modify or update any other disclosures contained in our Original 2019 Form 10-K, as amended. This Amendment No. 2 should be read in conjunction with the Original 2019 Form 10-K, as amended, and reports filed with the SEC subsequent to the Original 2019 Form 10-K.

TABLE OF CONTENTS

PART II		3
Item 8.	Financial Statements and Supplementary Data	3
Item 9A.	Controls and Procedures	38
PART IV		40
Item 15.	Exhibits and Financial Statement Schedules	40
SIGNATURES		42

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) contains “forward-looking statements” within the meaning of the safe harbor provisions, 15 U.S.C. § 78u-5, of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent the Company’s current assumptions and beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside the Company’s control. The forward-looking statements contained in this Annual Report are based on information available as of the date of this Annual Report. The forward looking statements relate to future industry trends and economic conditions, forecast performance or results of current and future initiatives and the outcome of contingencies and other uncertainties that may have a significant impact on the Company’s business, future operating results and liquidity. These forward-looking statements generally are identified by

words such as “anticipate,” “believe,” “estimate,” “continue,” “intend,” “expect,” “plan,” “forecast,” “project” and similar expressions, or future-tense or conditional constructions such as “will,” “may,” “should,” “could” and “would,” or the negative thereof or other variations thereon or comparable terminology. The Company cautions that these statements are merely predictions and are not to be considered guarantees of future performance. Forward-looking statements are based upon current expectations and assumptions that are subject to risks and uncertainties that can cause actual results to differ materially from those projected, anticipated or implied.

The Company has no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events, except as required by law.

2

PART II

Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Flotek Industries, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Flotek Industries, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic No. 842.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment in Item 9A:

• The Company did not design and maintain effective internal controls to detect or prevent errors in the elimination

3

of intercompany profits in inventory.

• The Company did not design and maintain effective internal controls to ensure that it has the legal right to the intangible assets included in its financial statements.

We considered the material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the Company’s consolidated financial statements as of and for the year ended December 31, 2019, and our opinion on such consolidated financial statements was not affected.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Moss Adams LLP

Houston, Texas

March 6, 2020, except with respect to our opinion on internal control over financial reporting insofar as it relates to the effects of the matters described in Management’s Report on Internal Control over Financial Reporting, as to which the date is June 10, 2020

We served as the Company’s auditor from 2017 to 2020.

4

FLOTEK INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	100,575		$	3,044
Restricted cash	663			—
Accounts receivable, net of allowance for doubtful accounts of $1,527 and     $1,190 at December 31, 2019 and 2018, respectively	15,638			37,047
Inventories, net	21,697			27,289
Income taxes receivable	631			3,161
Assets held for sale	—			118,470
Other current assets	13,191			5,771
Total current assets	152,395			194,782
Property and equipment, net	39,829			45,485
Operating lease right-of-use assets	16,388			—
Deferred tax assets, net	152			18,663
Other intangible assets, net	23,083			26,827
Other long-term assets	—			126
TOTAL ASSETS	$	231,847		$	285,883
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,231		$	15,011
Accrued liabilities	24,552			10,335
Interest payable	—			8
Liabilities held for sale	—			9,174
Current portion of lease liabilities	541			—
Long-term debt, classified as current	—			49,731
Total current liabilities and total liabilities	41,324			84,259
Long-term operating lease liabilities	16,973
Long-term finance lease liabilities	158			—
Deferred tax liabilities, net	116			—
TOTAL LIABILITIES	58,571			84,259
Commitments and contingencies (Note16)
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; 63,656,897     shares issued and 57,882,396 shares outstanding at December 31, 2019;     62,162,875 shares issued and 57,342,279 shares outstanding at     December 31, 2018	6			6
Additional paid-in capital	347,564			343,536
Accumulated other comprehensive income (loss)	(966		)	(1,116		)
Retained earnings (accumulated deficit)	(139,844		)	(107,565		)
Treasury stock, at cost; 4,145,481 and 3,770,224 shares at December 31, 2019     and 2018, respectively	(33,484		)	(33,237		)
Total stockholders’ equity	173,276			201,624
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	231,847		$	285,883

See accompanying Notes to Consolidated Financial Statements.

5

FLOTEK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data) 

	Year ended December 31,
	2019			2018			2017
Revenue	$	119,353		$	177,773		$	243,106
Costs and expenses:
Operating expenses (excluding depreciation and amortization)	149,225			159,808			188,744
Corporate general and administrative	27,975			31,467			41,492
Depreciation and amortization	8,465			9,216			9,768
Research and development	8,863			10,356			13,130
(Gain) loss on disposal of long-lived assets	1,450			(443		)	292
Impairment of goodwill	—			37,180			—
Total costs and expenses	195,978			247,584			253,426
Loss from operations	(76,625		)	(69,811		)	(10,320		)
Other (expense) income:
Interest expense	(2,019		)	(2,866		)	(2,168		)
Loss on sale of business	—			(360		)	—
Loss on write-down of assets held for sale	—			(2,580		)	—
Other (expense) income, net	1,708			(5,040		)	1,096
Total other expense	(311		)	(10,846		)	(1,072		)
Loss before income taxes	(76,936		)	(80,657		)	(11,392		)
Income tax benefit (expense)	201			7,216			(6,112		)
Loss from continuing operations	(76,735		)	(73,441		)	(17,504		)
Income (loss) from discontinued operations, net of tax	44,456			2,743			(9,891		)
Net loss	(32,279		)	(70,698		)	(27,395		)
Net loss attributable to noncontrolling interests	—			358			—
Net loss attributable to Flotek Industries, Inc. (Flotek)	$	(32,279	)	$	(70,340	)	$	(27,395	)
Amounts attributable to Flotek shareholders:
Loss from continuing operations	$	(76,735	)	$	(73,083	)	$	(17,504	)
Income (loss) from discontinued operations, net of tax	44,456			2,743			(9,891		)
Net loss attributable to Flotek	$	(32,279	)	$	(70,340	)	$	(27,395	)
Basic earnings (loss) per common share:
Continuing operations	$	(1.31	)	$	(1.26	)	$	(0.30	)
Discontinued operations, net of tax	0.76			0.05			(0.17		)
Basic earnings (loss) per common share	$	(0.55	)	$	(1.21	)	$	(0.47	)
Diluted earnings (loss) per common share:
Continuing operations	$	(1.31	)	$	(1.26	)	$	(0.30	)
Discontinued operations, net of tax	0.76			0.05			(0.17		)
Diluted earnings (loss) per common share	$	(0.55	)	$	(1.21	)	$	(0.47	)
Weighted average common shares:
Weighted average common shares used in computing basic earnings (loss) per common share	58,750			57,995			57,580
Weighted average common shares used in computing diluted earnings (loss) per common share	58,750			57,995			57,580

See accompanying Notes to Consolidated Financial Statements.

6

FLOTEK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Years ended December 31,
	2019			2018			2017
Loss from continuing operations	$	(76,735	)	$	(73,441	)	$	(17,504	)
Income (loss) from discontinued operations, net of tax	44,456			2,743			(9,891		)
Net loss	(32,279		)	(70,698		)	(27,395		)
Other comprehensive income (loss):
Foreign currency translation adjustment	150			(232		)	72
Comprehensive loss	(32,129		)	(70,930		)	(27,323		)
Net loss attributable to noncontrolling interests	—			358			—
Comprehensive loss attributable to Flotek	$	(32,129	)	$	(70,572	)	$	(27,323	)

See accompanying Notes to Consolidated Financial Statements.

7

FLOTEK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED

DECEMBER 31, 2019, 2018 AND 2017

(in thousands)

	Common Stock			Treasury Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Accumulated Deficit)			Non-controlling Interests			Total Stockholders’ Equity
	Shares Issued	Par Value		Shares		Cost
Balance, December 31, 2016	59,685	$	6	2,029		$	(20,269	)	$	318,392	$	(956	)	$	(9,830	)	$	358		$	287,701
Net loss	—	—		—		—			—		—			(27,395		)	—			(27,395		)
Foreign currency translation adjustment	—	—		—		—			—		72			—			—			72
Stock issued under employee stock purchase plan	—	—		(113	)	—			654		—			—			—			654
Common stock issued in payment of accrued liability	—	—		—		—			188		—			—			—			188
Stock options exercised	663	—		—		—			5,884		—			—			—			5,884
Restricted stock awards granted	275	—		—		—			—		—			—			—			—
Restricted stock forfeited	—	—		122		—			—		—			—			—			—
Treasury stock purchased	—	—		200		(1,729		)	—		—			—			—			(1,729		)
Stock surrendered for exercise of stock options	—	—		478		(5,863		)	—		—			—			—			(5,863		)
Stock compensation expense	—	—		—		—			10,949		—			—			—			10,949
Repurchase of common stock	—	—		905		(5,203		)	—		—			—			—			(5,203		)
Balance, December 31, 2017	60,623	$	6	3,621		$	(33,064	)	$	336,067	$	(884	)	$	(37,225	)	$	358		$	265,258
Net loss	—	—		—		—			—		—			(70,340		)	(358		)	(70,698		)
Foreign currency translation adjustment	—	—		—		—			—		(232		)	—			—			(232		)
Stock issued under employee stock purchase plan	—	—		(111	)	—			341		—			—			—			341
Restricted stock awards granted	1,540	—		—		—			—		—			—			—			—
Restricted stock forfeited	—	—		158		—			—		—			—			—			—
Treasury stock purchased	—	—		102		(173		)	—		—			—			—			(173		)
Stock compensation expense	—	—		—		—			7,128		—			—			—			7,128
Balance, December 31, 2018	62,163	$	6	3,770		$	(33,237	)	$	343,536	$	(1,116	)	$	(107,565	)	$	—		$	201,624
Net loss	—	—		—		—			—		—			(32,279		)				(32,279		)
Foreign currency translation adjustment	—	—		—		—			—		150			—			—			150
Stock issued under employee stock purchase plan	—	—		(18	)	—			35		—			—			—			35
Restricted stock awards granted	924	—		—		—			—		—			—			—			—
Restricted stock forfeited	—	—		299		—			—		—			—			—			—
Restricted stock units granted	570	—		—		—			—		—			—			—			—
Treasury stock purchased	—	—		94		(247		)	—		—			—			—			(247		)
Stock compensation expense	—	—		—		—			3,993		—			—			—			3,993
Balance, December 31, 2019	63,657	$	6	4,145		$	(33,484	)	$	347,564	$	(966	)	$	(139,844	)	$	—		$	173,276

See accompanying Notes to Consolidated Financial Statements.

8

FLOTEK INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2019			2018			2017
Cash flows from operating activities:
Net loss attributable to Flotek Industries, Inc. (Flotek)	$	(32,279	)	$	(70,340	)	$	(27,395	)
Income (loss) from discontinued operations, net of tax	44,456			2,743			(9,891		)
Loss from continuing operations	(76,735		)	(73,083		)	(17,504		)
Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization	8,465			9,216			9,768
Amortization of deferred financing costs	1,428			400			472
Provision for doubtful accounts	512			839			157
Provision for excess and obsolete inventory	5,659			2,418			388
Loss on sale of business	—			360			—
Loss on write-down of assets held for sale	—			2,580			—
(Gain) loss on sale of assets	1,450			(443		)	292
Impairment of goodwill	—			37,180			—
Stock compensation expense	4,235			7,050			10,643
Deferred income tax (benefit) provision	18,307			(5,950		)	181
Reduction in tax benefit related to share-based awards	24			709			1,989
Non-cash lease expense	740			—			—
Changes in current assets and liabilities:
Accounts receivable, net	20,993			(2,606		)	4,076
Inventories	(65		)	2,597			(3,442		)
Income taxes receivable	2,546			(1,116		)	8,008
Other current assets	(8,359		)	3,177			12,001
Accounts payable	1,131			4,631			(8,528		)
Accrued liabilities	908			(8,740		)	(6,175		)
Interest payable	(8		)	(35		)	19
Net cash (used in) provided by operating activities	(18,769		)	(20,816		)	12,345
Cash flows from investing activities:
Capital expenditures	(2,411		)	(3,559		)	(4,197		)
Proceeds from sale of businesses	169,722			1,665			18,490
Proceeds from sale of assets	240			1,387			689
Purchase of patents and other intangible assets	(614		)	(1,602		)	(456		)
Net cash provided (used in) by investing activities	166,937			(2,109		)	14,526
Cash flows from financing activities:
Repayments of indebtedness	—			—			(9,833		)
Borrowings on revolving credit facility	42,984			277,599			383,160
Repayments on revolving credit facility	(92,715		)	(255,818		)	(393,776		)
Debt issuance costs	—			(111		)	(579		)
Payments for finance leases	(51		)	—			—
Purchase of treasury stock	(247		)	(173		)	(1,729		)
Proceeds from sale of common stock	35			341			654
Repurchase of common stock	—			—			(5,203		)
Proceeds from exercise of stock options	—			—			21
Loss from noncontrolling interest	—			(358		)	—
Net cash (used in) provided financing activities	(49,994		)	21,480			(27,285		)
Discontinued operations:
Net cash provided by (used in) operating activities	(322		)	1,296			4,102
Net cash provided by (used in) investing activities	337			(1,303		)	(4,078		)
Net cash flows provided by (used in) provided by discontinued operations	15			(7		)	24
Effect of changes in exchange rates on cash and cash equivalents	5			(88		)	151
Net change in cash, cash equivalents and restricted cash	98,194			(1,540		)	(239		)
Cash, cash equivalents and restricted cash at beginning of year	3,044			4,584			4,823
Cash, cash equivalents and restricted cash at end of year	$	101,238		$	3,044		$	4,584

See accompanying Notes to Consolidated Financial Statements.

9

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Organization and Nature of Operations

Flotek Industries, Inc. (“Flotek” or the “Company”) is a global, diversified, technology-driven company that develops and supplies chemistries and services to the oil and gas industries. Flotek also supplied high value compounds to companies that make food and beverages, cleaning products, cosmetics, and other products that are sold in consumer and industrial markets, classified as discontinued operations at December 31, 2018.

The Company’s oilfield business designs, develops, manufactures, packages, distributes, delivers, and markets reservoir-centric fluid systems, including specialty and conventional chemistries, for use in oil and gas well drilling, cementing, completion, remediation, and stimulation activities designed to maximize recovery in both new and mature fields. Activities in this segment also include construction and management of automated material handling facilities as well as management of loading facilities and blending operations for oilfield services companies. In the segment reported as discontinued operations at December 31, 2018, the Company processed citrus oil to produce (1) high

value compounds used as additives by companies in the flavors and fragrances markets and (2) environmentally friendly chemistries for use in numerous industries around the world, including the oil and gas industry.

Flotek operates in seven domestic and international markets. Customers include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, pressure-pumping service companies, national and state-owned oil companies, and international supply chain management companies. The Company also served customers who purchase non-energy-related citrus oil and related products, including household and commercial cleaning product companies, fragrance and cosmetic companies, and food manufacturing companies, in the segment reported as discontinued operations at December 31, 2018.

Flotek was initially incorporated under the laws of the Province of British Columbia on May 17, 1985. On October 23, 2001, Flotek changed its corporate domicile to the state of Delaware.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The consolidated financial statements include the accounts of Flotek Industries, Inc. and all wholly-owned subsidiary corporations. Where Flotek owns less than 100% of the share capital of its subsidiaries, but is still considered to have sufficient ownership to control the business, results of the business operations are consolidated within the Company’s financial statements. The ownership interests held by other parties are shown as noncontrolling interests.

During the fourth quarter of 2018, the Company classified the Consumer and Industrial Chemistry Technologies segment as held for sale based on management’s intention to sell this business, which occurred in January 2019. The Company’s historical financial statements have been revised to present the operating results of the Consumer and Industrial Chemistry Technologies segment as discontinued operations. The results of operations of this segment are presented as “Income (loss) from discontinued operations” in the statement of operations and the related cash flows of this segment have been reclassified to discontinued operations for all periods presented. The assets and liabilities of the Consumer and Industrial Chemistry Technologies segment have been reclassified to “Assets held for sale” and “Liabilities held for

sale”, respectively, in the consolidated balance sheet for all periods presented.

During 2017, the Company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of each of the Drilling Technologies and Production Technologies segments.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase.

Cash Management

The Company uses a controlled disbursement account for its main cash account. Under this system, outstanding checks can be in excess of the cash balances at the bank before the disbursement account is funded, creating a book overdraft. Book overdrafts on this account are presented as a current liability in accounts payable in the consolidated balance sheets.

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Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable arise from product sales and services and are stated at estimated net realizable value. This value incorporates an allowance for doubtful accounts to reflect any loss anticipated on accounts receivable balances. The Company regularly evaluates its accounts receivable to estimate amounts that will not be collected and records the appropriate provision for doubtful accounts as a charge to operating expenses. The allowance for doubtful accounts is based on a combination of the age of the receivables, individual customer circumstances, credit conditions, and historical

write-offs and collections. The Company writes off specific accounts receivable when they are determined to be uncollectible.

The majority of the Company’s customers are engaged in the energy industry. The cyclical nature of the energy industry may affect customers’ operating performance and cash flows, which directly impact the Company’s ability to collect on outstanding obligations. Additionally, certain customers are located in international areas that are inherently subject to risks of economic, political, and civil instability, which can impact the collectability of receivables.

Changes in the allowance for doubtful accounts for continuing operations are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Balance, beginning of year	$	1,190		$	673		$	579
Charged to provision for doubtful accounts, net of recoveries	512			839			157
Write-offs	(175		)	(322		)	(63		)
Balance, end of year	$	1,527		$	1,190		$	673

Inventories

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost, determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor, and production overhead. The Company quarterly reviews inventories on hand and current market conditions to determine if the cost of finished goods inventories exceeds current market prices and impairs the cost basis of the inventory accordingly. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if those amounts are determined to be less than cost.

Property and Equipment

Property and equipment are stated at cost. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. Depreciation or amortization of property and equipment, including assets held under capital leases, is calculated using the straight-line method over the asset’s estimated useful life as follows:

Buildings and leasehold improvements	2-30 years
Machinery and equipment	7-10 years
Furniture and fixtures	3 years
Transportation equipment	2-5 years
Computer equipment and software	3-7 years

Property and equipment are reviewed for impairment on an quarterly basis or whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Indicative events or circumstances include, but are not limited to, matters such as a significant decline in market value or a significant change in business climate. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows from the use of the asset and its eventual disposition. The amount of impairment loss recognized is the excess of the asset’s carrying amount over its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less cost to sell. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received.

Internal Use Computer Software Costs

Direct costs incurred to purchase and develop computer software for internal use are capitalized during the application development and implementation stages. These software costs have been primarily for enterprise-level business and finance software that is customized to meet the Company’s specific operational needs. Capitalized costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life of the software beginning when the software project is substantially complete and placed in service. Costs incurred during the preliminary project stage and costs for training, data conversion, and maintenance are expensed as incurred.

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The Company amortizes software costs using the straight-line method over the expected life of the software, generally three to seven years. The unamortized amount of capitalized software was $1.0 million at December 31, 2019.

Goodwill

Goodwill is the excess of cost of an acquired entity over the amounts assigned to identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not subject to amortization, but is tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include an adverse change in the business climate or a change in the assessment of future operations of a reporting unit.

The Company assesses whether a goodwill impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative impairment test is performed to determine whether goodwill impairment exists at the reporting unit.

The quantitative impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the estimated fair value of each reporting unit with goodwill to its carrying amount, including goodwill. To determine fair value estimates, the Company uses the income approach based on discounted cash flow analyses, combined, when appropriate, with a market-based approach. The market-based approach considers valuation comparisons of recent public sale transactions of similar businesses and earnings multiples of publicly traded businesses operating in industries consistent with the reporting unit. If the carrying amount of a reporting unit, including goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit.

Other Intangible Assets

The Company’s other intangible assets have finite and indefinite lives and consist of customer relationships, trademarks, brand names, and purchased patents.

The cost of intangible assets with finite lives is amortized using the straight-line method over the estimated period of economic

benefit, ranging from two to 95 years. Asset lives are adjusted whenever there is a change in the estimated period of economic benefit. No residual value has been assigned to these intangible assets.

Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models.

Intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include, but are not limited to, a significant adverse change in the business climate, unanticipated competition, or a change in projected operations or results of a reporting unit.

The Company assesses whether an indefinite lived intangible impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the indefinite-lived intangible asset is impaired or if the Company elects to not perform a qualitative assessment, the Company then performs the quantitative impairment test. The quantitative impairment test for an indefinite-lived intangible asset consists of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flows.

Business Combinations

The Company includes the results of operations of its acquisitions in its consolidated results, prospectively from the date of acquisition. Acquisitions are accounted for by applying the acquisition method. The Company allocates the fair value of purchase consideration to the assets acquired, liabilities

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assumed, and any noncontrolling interests in the acquired entity generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity is recorded as goodwill. The primary items that generate goodwill include the value of the synergies between the acquired company and Flotek and the value of the acquired assembled workforce. Acquisition-related expenses are recognized separately from the business acquisition and are recognized as expenses as incurred.

Fair Value Measurements

The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value. Inputs refer broadly to assumptions market participants would use to value an asset or liability and may be observable or unobservable. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). “Level 1” measurements are measurements using quoted prices in active markets for identical assets and liabilities. “Level 2” measurements are measurements using quoted prices in markets that are not active or that are based on quoted prices for similar assets or liabilities. “Level 3” measurements are measurements that use significant unobservable inputs which require a company to develop its own assumptions. When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available.

Revenue Recognition

The Company recognizes revenues to depict the transfer of control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Refer to Note 4 – “Revenue from Contracts with Customers” for further discussion on Revenue.

The Company recognizes revenue based on the Accounting Standards Codification (“ASC”) 606 five-step model when all of the following criteria have been met: (i) a contract with a customer exists, (ii) performance obligations have been identified, (iii) the price to the customer has been determined, (iv) the price to the customer has been allocated to the performance obligations, and (v) performance obligations are satisfied.

Products and services are sold with fixed or determinable prices. Certain sales include right of return provisions, which are considered when recognizing revenue and deferred accordingly. Deposits and other funds received in advance of delivery are deferred until the transfer of control is complete.

For certain contracts, the Company recognizes revenue under the percentage-of-completion method of accounting, measured by the percentage of “costs incurred to date” to the

“total estimated costs of completion.” This percentage is applied to the “total estimated revenue at completion” to calculate proportionate revenue earned to date. For the years ended December 31, 2019, 2018, and 2017, the percentage-of-completion revenue accounted for less than 0.1% of total revenue during the respective time periods.

As an accounting policy election, the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues.

Foreign Currency Translation

Financial statements of foreign subsidiaries are prepared using the currency of the primary economic environment of the foreign subsidiaries as the functional currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect as of the end of identified reporting periods. Revenue and expense transactions are translated using the average monthly exchange rate for the reporting period. Resultant translation adjustments are recognized as other comprehensive income (loss) within stockholders’ equity.

Comprehensive Income (Loss)

Comprehensive income (loss) encompasses all changes in stockholders’ equity, except those arising from investments from and distributions to stockholders. The Company’s comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments.

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged to expense as incurred.

Income Taxes

The Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets and liabilities are recognized related to the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company’s assets and liabilities using statutory tax rates at the applicable year end. Deferred tax assets are also recognized for operating loss and tax credit carry forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations

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in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization.

A valuation allowance is recorded to reduce previously recorded tax assets when it becomes more likely than not that such assets will not be realized. The Company evaluates, at least annually, net operating loss carry forwards and other net deferred tax assets and considers all available evidence, both positive and negative, to determine whether a valuation allowance is necessary relative to net operating loss carry forwards and other net deferred tax assets. In making this determination, the Company considers cumulative losses in recent years as significant negative evidence. The Company considers recent years to mean the current year plus the two preceding years. The Company considers the recent cumulative income or loss position as objectively verifiable evidence for the projection of future income, which consists primarily of determining the average of the pre-tax income of the current and prior two years after adjusting for certain items not indicative of future performance. Based on this analysis, the Company determines whether a valuation allowance is necessary.

Historically, U.S. Federal income taxes are not provided on unremitted earnings of subsidiaries operating outside the U.S. because it is the Company’s intention to permanently reinvest undistributed earnings in the subsidiary. These earnings would become subject to income tax if they were remitted as dividends or loaned to a U.S. affiliate. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded at December 31, 2017, for a one-time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable.

The Company has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense.

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders, adjusted for the effect of assumed conversions of convertible notes and preferred stock, by the weighted average number of common shares outstanding, including potentially dilutive common share equivalents, if the effect is dilutive. Potentially dilutive common shares equivalents consist of incremental shares of common stock issuable upon exercise of stock options and warrants,

settlement of restricted stock units, and conversion of convertible notes and convertible preferred stock.

Debt Issuance Costs

Costs related to debt issuance are capitalized and amortized as interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Upon the repayment of debt, the Company accelerates the recognition of an appropriate amount of the costs as interest expense.

Capitalization of Interest

Interest costs are capitalized for qualifying in-process software development projects. Capitalization of interest commences when activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying assets and amortized over the estimated useful lives of the assets.

Stock-Based Compensation

Stock-based compensation expense for share-based payments, related to stock options, restricted stock awards, and restricted stock units, is recognized based on their grant-date fair values. The Company recognizes compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Estimated forfeitures are based on historical experience.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Significant items subject to estimates and assumptions include application of the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets.

Assets and Liabilities Held for Sale

The Company classifies disposal groups as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the disposal group; (2) the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups; (3) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group have been initiated; (4) the sale of the disposal group is probable, and transfer of the disposal group

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is expected to qualify for recognition as a completed sale, within one year, except if events of circumstances beyond the Company’s control extend the period of time required to sell the disposal group beyond one year; (5) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A disposal group that is classified as held for sale is initially measured at the lower of its carrying amount or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Subsequent changes in the fair value of a disposal group less any costs to sell are reported as an adjustment to the carrying amount of the disposal group, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group for all periods presented in the line items assets held for sale and liabilities held for sale, respectively, in the consolidated balance sheets.

Discontinued Operations

The results of operations of a component of the Company that can be clearly distinguished, operationally and for financial reporting purposes, that either has been disposed of or is classified as held for sale is reported in discontinued operations, if the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not impact net loss.

New Accounting Pronouncements

(a) Application of New Accounting Standards

Effective January 1, 2019, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2016-02, “Leases” This standard (ASC 842) requires the recognition of Right of Use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP (ASC 840). The Company adopted ASC 842 using the optional transition method. Consequently, the Company’s reporting for the comparative periods presented prior to 2019 in the financial statements will continue to be in accordance with ASC 840. Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of

deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Refer to Note 6 - “Leases” for further information surrounding adoption of this new standard.

Effective January 1, 2019, the Company adopted ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting.” This standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” This standard supersedes most of the existing revenue recognition requirements in U.S. GAAP under Accounting Standards Codification (“ASC”) 605 and establishes a new revenue standard, ASC 606. This new standard requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 using the full retrospective method. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. Refer to Note 4 — “Revenue from Contracts with Customers” for further information surrounding adoption of this new standard.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This standard addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively, where applicable, as there were no historical transactions affected by this implementation.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-01, “Clarifying the

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Definition of a Business.” This standard provided additional guidance on whether an integrated set of assets and activities constitutes a business. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods were not adjusted. In addition, the Company had no activity during the year ended December 31, 2019 that was required to be treated differently under this ASU than previously issued guidance.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-09, “Scope of Modification Accounting.” This standard provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods presented were not adjusted. There were no changes to the terms or conditions of current share-based payment awards during the year ended December 31, 2019.

(b) New Accounting Requirements and Disclosures

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.”

This standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” This standard removes, modifies, and adds additional requirements for disclosures related to fair value measurement in ASC 820. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted in any interim period. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

Note 3 — Discontinued Operations

During the fourth quarter of 2018, the Company initiated and began executing a strategic plan to sell its Consumer and Industrial Chemistry Technologies (“CICT”) segment. An investment banking advisory services firm was engaged and actively marketed this segment.

The Company met all of the criteria to classify the CICT segment’s assets and liabilities as held for sale in the fourth quarter 2018. The Company has classified the assets, liabilities, and results of operations for this segment as “Discontinued Operations” for all periods presented.

Disposal of the CICT reporting segment represented a strategic shift that will have a major effect on the Company’s operations and financial results.

On January 10, 2019, the Company entered into a Share Purchase Agreement with Archer-Daniels-Midland Company (“ADM”) for the sale of all of the shares representing membership interests in its wholly owned subsidiary, Florida Chemical Company, LLC, which represented the CICT segment.

Effective February 28, 2019, the Company completed the sale of the CICT segment to ADM for $175.0 million in cash consideration, with $4.4 million temporarily held in escrow

by ADM for post-closing working capital adjustments for up to 90 days and $13.1 million temporarily held in escrow to satisfy potential indemnification claims by ADM with anticipated releases at 6 months, 12 months, and 15 months. As of December 31, 2019, the escrow balance including interest was $9.9 million reflected in other current assets.

Concurrent with the closing of the sale of the CICT segment, the Company retained $11.1 million of historical inventory previously held by the CICT segment. In addition, the Company executed a long-term supply agreement for terpene. The term of the agreement runs through December 2023, with an option to extend for an additional year. The remaining minimum commitment of the agreement at December 31, 2019 is $72 million. Pursuant to the post-closing working capital dispute resolution procedures set forth in the Share Purchase Agreement, the Company and ADM engaged a neutral third party arbitrator to help reach agreement on the final post-closing working capital adjustment. In February 2020, the third party arbitrator ruled in favor of awarding ADM for the entire $4.1 million disputed amount resulting in a reduction to the gain on the sale of the business as of December 31, 2019.

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The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2019, 2018, and 2017 (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019			2018			2017
Discontinued operations:
Revenue	$	11,031		$	72,344		$	73,992
Operating expenses	(11,572		)	(65,940		)	(63,621		)
Depreciation and amortization	—			(2,760		)	(2,391		)
Research and development	(69		)	(590		)	(515		)
Income from operations	(610		)	3,054			7,465
Other income (expense)	35			341			(284		)
Gain on sale of businesses	64,160			—			—
Income before income taxes	63,585			3,395			7,181
Income tax expense	(19,129		)	(652		)	(2,730		)
Net income (loss) from discontinued operations	$	44,456		$	2,743		$	4,451

The assets and liabilities held for sale on the Consolidated Balance Sheets as of December 31, 2019 and 2018 are as follows (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019		2018
Assets:
Accounts receivable, net	$	—	$	10,547
Inventories, net	—		52,069
Other current assets	—		446
Property and equipment, net	—		15,899
Goodwill	—		19,480
Other intangible assets, net	—		20,029
Assets held for sale	—		118,470
Liabilities:
Accounts payable	$	—	$	8,883
Accrued liabilities	—		291
Liabilities held for sale	$	—	$	9,174

During the fourth quarter of 2016, the Company initiated a strategic restructuring of its business to enable a greater focus on its core businesses in energy chemistry and consumer and industrial chemistry. The Company executed a plan to sell or otherwise dispose of the Drilling Technologies and Production Technologies segments. An investment banking advisory services firm was engaged and actively marketed these segments.

The Company met all of the criteria to classify the Drilling Technologies and Production Technologies segments’ assets and liabilities as held for sale in the fourth quarter 2016. The Company has classified the assets, liabilities, and results of operations for these two segments as “Discontinued Operations” for all periods presented.

Disposal of the Drilling Technologies and Production Technologies reporting segments represented a strategic shift that would have a major effect on the Company’s operations and financial results.

On May 22, 2017, the Company completed the sale of substantially all of the assets and transfer of certain specified liabilities and obligations of the Company’s Drilling Technologies segment to National Oilwell Varco, L.P. (“NOV”) for $17.0 million in cash consideration, subject to normal working capital adjustments, with $1.5 million held back by NOV for up to 18 months to satisfy potential indemnification claims.

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On May 23, 2017, the Company completed the sale of substantially all of the assets and transfer of certain specified liabilities and obligations of the Company’s Production Technologies segment to Raptor Lift Solutions, LLC (“Raptor Lift”) for $2.9 million in cash consideration, with $0.4 million held back by Raptor Lift to satisfy potential indemnification claims.

On August 16, 2017, the Company completed the sale of substantially all of the remaining assets of the Company’s

Drilling Technologies segment to Galleon Mining Tools, Inc. for $1.0 million in cash consideration and a note receivable of $1.0 million due in one year.

The sale or disposal of the assets and transfer or liquidation of liabilities and obligations of these segments was completed in 2017. The Company has no continuing involvement with the discontinued operations.

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2018 and 2017 (in thousands):

	Drilling Technologies					Production Technologies
	2018		2017			2018		2017
Discontinued operations:
Revenue	$	—	$	11,534		$	—	$	4,002
Cost of revenue	—		(7,309		)	—		(3,236		)
Selling, general and administrative	—		(6,963		)	—		(1,759		)
Research and development	—		(5		)	—		(364		)
Gain (loss) on disposal of long-lived assets	—		97			—		—
Loss from operations	—		(2,646		)	—		(1,357		)
Other expense	—		(96		)	—		(52		)
Loss on sale of businesses	—		(1,600		)	—		(479		)
Loss on write-down of assets held for sale	—		(6,831		)	—		(9,718		)
Loss before income taxes	—		(11,173		)	—		(11,606		)
Income tax benefit	—		4,138			—		4,299
Net loss from discontinued operations	$	—	$	(7,035	)	$	—	$	(7,307	)

At December 31, 2017, all remaining assets and liabilities of the discontinued operations were assumed by the Company’s continuing operations. These balances included $0.3 million of net accounts receivable, $1.4 million of sales price hold-back that was received during 2018, and $1.4 million of accrued liabilities partially settled in 2018, with the remainder to be settled in 2019.

Note 4 — Revenue from Contracts with Customers

Effective January 1, 2018, the Company adopted ASC 606 using the full retrospective method applied to those contracts which were not completed as of December 31, 2015. As a result of electing the full retrospective adoption approach, results for reporting periods beginning after December 31, 2015 are presented under ASC 606.

There was no material impact upon the adoption of ASC 606. As revenue is primarily related to product sales accounted for at a point in time and service contracts that are primarily short-term in nature (typically less than 30 days), the Company did not record any adjustments to retained earnings at December 31, 2015 or for any periods previously presented.

Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled

to in exchange for those goods or services. In recognizing revenue for products and services, the Company determines the transaction price of purchase orders or contracts with customers, which may consist of fixed and variable consideration. Determining the transaction price may require significant judgment by management, which includes identifying performance obligations, estimating variable consideration to include in the transaction price, and determining whether promised goods or services can be distinguished in the context of the contract. Variable consideration typically consists of product returns and is estimated based on the amount of consideration the Company expects to receive. Revenue accruals are recorded on an

ongoing basis to reflect updated variable consideration information.

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For certain contracts, the Company recognizes revenue under the percentage-of-completion method of accounting, measured by the percentage of “costs incurred to date” to the “total estimated costs of completion.” This percentage is applied to the “total estimated revenue at completion” to calculate proportionate revenue earned to date. For the years ended December 31, 2019, 2018, and 2017, the percentage-of-completion revenue accounted for less than 0.1% of total revenue during the respective time periods. This resulted in immaterial unfulfilled performance obligations and immaterial contract assets and/or liabilities for which the Company did not record adjustments to opening retained earnings as of December 31, 2015 or for any periods previously presented.

The vast majority of the Company’s products are sold at a point in time and service contracts are short-term in nature. Sales are billed on a monthly basis with payment terms customarily 30-45 days from invoice receipt. In addition, sales taxes are excluded from revenues.

Disaggregation of Revenue

The Company has disaggregated revenues by product sales (point-in-time revenue recognition) and service revenue (over-time revenue recognition), where product sales accounted for over 95% of total revenue for the years ended December 31, 2019, 2018, and 2017.

The Company differentiates revenue and operating expenses (excluding depreciation and amortization) based on whether the source of revenue is attributable to products or services. Revenue and operating expenses (excluding depreciation and amortization) disaggregated by revenue source are as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
Revenue:
Products	$	115,471	$	172,412	$	237,211
Services	3,882		5,361		5,895
	$	119,353	$	177,773	$	243,106
Operating expenses (excluding depreciation and amortization):
Products	$	147,709	$	152,846	$	182,330
Services	1,516		6,962		6,414
	$	149,225	$	159,808	$	188,744

Arrangements with Multiple Performance Obligations

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Standalone selling prices are generally determined based on the prices charged to customers (“observable standalone price”) or an expected cost plus a margin approach. For combined products and services within a contract, the Company accounts for individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration is allocated between separate products and services within a contract based on the prices at the observable standalone price. For items that are not sold separately, the expected cost plus a margin approach is used to estimate the standalone selling price of each performance obligation.

Contract Balances

Under revenue contracts for both products and services, customers are invoiced once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, no revenue contracts give rise to contract assets or liabilities under ASC 606.

Practical Expedients and Exemptions

The Company has elected to apply several practical expedients as discussed below:

• Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded within segment selling and administrative expenses.

• The majority of the Company’s services are short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14, exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the

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performance obligation is part of a contract that has an original expected duration of one year or less.

• The Company’s payment terms are short-term in nature with settlements of one year or less. The Company has utilized the practical expedient in ASC 606-10-32-18, exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

• In most service contracts, the Company has the right to consideration from a customer in an amount that

corresponds directly with the value to the customer of the Company’s performance completed to date. For these contracts, the Company has utilized the practical expedient in ASC 606-10-55-18, allowing the Company to recognize revenue in the amount to which it has a right to invoice.

Accordingly, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

Note 5 — Supplemental Cash Flow Information

Supplemental cash flow information is as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Supplemental non-cash investing and financing activities:
Value of common stock issued in payment of accrued liability	$	—		$	—		$	188
Exercise of stock options by common stock surrender	—			—			5,863
Supplemental cash payment information:
Interest paid	$	599		$	2,502		$	1,851
Income taxes (received, net of payments) paid, net of refunds	(699		)	(139		)	(10,195		)

Note 6— Leases

Effective January 1, 2019, the Company adopted ASC 842 using the prospective method applied to those leases which were not completed as of December 31, 2018. The Company has leases for corporate offices, research and development facilities, warehouses, sales offices and equipment. The leases have remaining lease terms of 1 year to 19 years, some of which include options to extend the leases for up to 10 years.

Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Leases with an initial expected term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the expected lease term.

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The components of lease expense and supplemental cash flow information are as follows (in thousands):

	For the years ending
	December 31,
	2019		2018
Operating lease expense	$	2,609	$	—
Finance lease expense:
Amortization of right-of-use assets	1,237		—
Interest on lease liabilities	10		—
Total finance lease expense	1,247		—
Short-term lease expense	123		—
Total lease expense	$	3,979	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	2,336		—
Operating cash flows from finance leases	10		—
Financing cash flows from finance leases	51		—

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

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Supplemental balance sheet information related to leases is as follows (in thousands):

	December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	16,388
Current portion of lease liabilities	$	486
Long-term operating lease liabilities	16,973
Total operating lease liabilities	$	17,459
Finance Leases
Property and equipment	$	293
Accumulated depreciation	(28		)
Property and equipment, net	$	265
Current portion of lease liabilities	$	55
Long-term finance lease liabilities	158
Total finance lease liabilities	$	213
Weighted Average Remaining Lease Term
Operating leases	16.6 years
Finance leases	4.6 years
Weighted Average Discount Rate
Operating leases	8.9		%
Finance leases	9.0		%

Note 7 — Inventories

Inventories are as follows (in thousands):

	December 31,
	2019			2018
Raw materials	$	4,339		$	10,608
Work-in-process	—			—
Finished goods	23,056			18,798
Inventories	27,395			29,406
Less reserve for excess and obsolete inventory	(5,698		)	(2,117		)
Inventories, net	$	21,697		$	27,289

Changes in the reserve for excess and obsolete inventory are as follows (in thousands):

	2019			2018			2017
Balance, beginning of year	$	2,117		$	368		$	50
Charged to provisions	5,659			2,418			388
Deductions for disposals	(2,078		)	(669		)	(70		)
Balance, end of the year	$	5,698		$	2,117		$	368

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The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on an assessment of market values. Write-downs or write-offs of inventory are charged to cost of goods sold. At December 31, 2019, the Company recorded a reserve for excess terpene of $4.4 million.

Note 8 — Property and Equipment

Property and equipment are as follows (in thousands):

	December 31
	2019			2018
Land	$	4,440		$	4,372
Buildings and leasehold improvements	38,741			37,719
Machinery and equipment	27,694			26,995
Fixed assets in progress	—			581
Furniture and fixtures	1,671			1,573
Transportation equipment	1,440			1,852
Computer equipment and software	3,348			9,370
Property and equipment	77,334			82,462
Less accumulated depreciation	(37,505		)	(36,977		)
Property and equipment, net	$	39,829		$	45,485

Depreciation expense totaled $6.5 million, $7.8 million, and $8.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

During the years ended December 31, 2019, 2018, and 2017, no impairments were recognized related to property and equipment.

Note 9— Goodwill

The Company has no reporting units which have a goodwill balance at December 31, 2019.

Goodwill is tested for impairment annually in the fourth quarter, or more frequently if circumstances indicate a potential impairment. During the fourth quarter of 2017, the Company adopted ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. If the carrying amount exceeds the reporting unit’s fair value, the Company will recognize an impairment charge for the excess amount.

During the second quarter of 2018, the Company recognized a goodwill impairment charge of $37.2 million in the Energy Chemistry Technologies (“ECT”) reporting unit, which resulted from sustained under-performance and lower expectations related to the reporting unit. As a result of these factors, a qualitative analysis, and additional risks associated with the business, the Company concluded that sufficient indicators existed to require an interim quantitative assessment

of goodwill for that reporting unit as of June 30, 2018. The fair value of the reporting unit was estimated based on an analysis of the present value of future discounted cash flows. The significant estimates used in the discounted cash flows model included the Company’s weighted average cost of capital, projected cash flows and the long-term rate of growth. The assumptions were based on the actual historical performance of the reporting unit and took into account a recent weakening of operating results in an improving market environment. The excess of the reporting unit’s carrying value over the estimated fair value was recorded as the goodwill impairment charge during the three months ended June 30, 2018 and represented all of the ECT reporting unit’s goodwill.

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FLOTEK INDUSTRIES, INC.

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Changes in the carrying amount of goodwill for the ECT reporting unit are as follows (in thousands):

Balance at December 31, 2017:
Goodwill	$	37,180
Accumulated impairment losses	—
Goodwill balance, net	37,180
Activity during the year 2018:
Goodwill impairment recognized	(37,180		)
Acquisition goodwill recognized	—
Balance at December 31, 2018:
Goodwill	37,180
Accumulated impairment losses	(37,180		)
Goodwill balance, net	—
Activity during the year 2019:
Goodwill impairment recognized	—
Acquisition goodwill recognized	—
Balance at December 31, 2019:
Goodwill	—
Accumulated impairment losses	—
Goodwill balance, net	$	—

Note 10 — Other Intangible Assets

Other intangible assets are as follows (in thousands):

	December 31,
	2019				2018
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Finite lived intangible assets:
Patents and technology	$	17,493	$	6,715	$	18,884	$	6,689
Customer lists	15,367		6,013		15,367		5,259
Trademarks and brand names	1,351		1,160		1,485		1,149
Total finite lived intangible assets acquired	34,211		13,888		35,736		13,097
Deferred financing costs	—		—		1,924		496
Total amortizable intangible assets	34,211		$	13,888	37,660		$	13,593
Indefinite lived intangible assets:
Trademarks and brand names	2,760				2,760
Total other intangible assets	$	36,971			$	40,420
Carrying amount:
Other intangible assets, net	$	23,083			$	26,827

Intangible assets acquired are amortized on a straight-line basis over two to 95 years. Amortization of intangible assets acquired totaled $2.0 million, $1.4 million, and $1.5 million for the years end ended December 31, 2019, 2018, and 2017, respectively.

Amortization of deferred financing costs totaled $1.4 million, $0.4 million, and $0.5 million for the years ended December 31, 2019, 2018, and 2017, respectively.

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Estimated future amortization expense for other finite lived intangible assets, including deferred financing costs, at December 31, 2019 is as follows (in thousands):

Year ending December 31,
2020	$	1,941
2021	1,935
2022	1,915
2023	1,858
2024	1,854
Thereafter	10,109
Other amortizable intangible assets, net	$	19,612

During the years ended December 31, 2019, 2018, and 2017, no impairments were recognized related to other intangible assets.

Note 11 — Long-Term Debt and Credit Facility

Long-term debt is as follows (in thousands): 

	December 31,
	2019		2018
Long-term debt, classified as current:
Borrowings under revolving credit facility	$	—	$	49,731

On March 1, 2019, the Company repaid the outstanding balance of the Credit Facility.

Note 12 — Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement.

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

• Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs.

Liabilities Measured at Fair Value on a Recurring Basis

At December 31, 2019 and 2018, no liabilities were required to be measured at fair value on a recurring basis. There were no transfers in or out of either Level 1, Level 2, or Level 3 fair value measurements during the years ended December 31, 2019, 2018, and 2017.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company’s non-financial assets, including property and equipment, goodwill, and other intangible assets are measured at fair value on a non-recurring basis and are subject to fair value adjustment in certain circumstances. During the three months ended June 30, 2018, the Company recorded an impairment of $37.2 million for goodwill in the ECT reporting unit (see Note 9). No impairments of goodwill were recognized during the years ended December 31, 2019,and 2017. No impairment of property and equipment or other intangible assets were recognized during the years ended December 31, 2019, 2018, and 2017.

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Fair Value of Other Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair

value due to the short-term nature of these accounts. The Company had no cash equivalents at December 31, 2019 or 2018.

The carrying amount and estimated fair value of the Company’s long-term debt are as follows (in thousands):

	December 31,
	2019				2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Borrowings under revolving credit facility	$	—	$	—	$	49,731	$	49,731

The carrying amount of borrowings under the revolving credit facility approximates its fair value because the interest rate is variable.

Note 13 — Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive.

Potentially dilutive securities were excluded from the calculation of diluted loss per share for the years ended December 31, 2019, 2018, and 2017, since including them

would have an anti-dilutive effect on loss per share due to the loss from continuing operations incurred during the period. Securities convertible into shares of common stock that were not considered in the diluted loss per share calculations were 0.1 million restricted stock units and 3.0 million stock options for the year ended December 31, 2019, and 0.7 million restricted stock units for the year ended December 31, 2018, and 0.7 million stock options and 0.8 million restricted stock units for the year ended December 31, 2017.

A reconciliation of the number of shares used for the basic and diluted earnings (loss) per common share computations is as follows (in thousands):

	Years ended December 31,
	2019	2018	2017
Weighted average common shares outstanding - Basic	58,750	57,995	57,580
Assumed conversions:
Incremental common shares from stock options	—	—	—
Incremental common shares from restricted stock units	—	—	—
Weighted average common shares outstanding - Diluted	58,750	57,995	57,580

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Note 14 — Income Taxes

Components of the income tax (benefit) expense are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Current:
Federal	$	(22,923	)	$	—		$	(1,126	)
State	(2,295		)	97			587
Foreign	(238		)	(740		)	488
Total current	(25,456		)	(643		)	(51		)
Deferred:
Federal	23,910			(6,585		)	5,994
State	1,345			(89		)	214
Foreign	—			101			(45		)
Total deferred	25,255			(6,573		)	6,163
Income tax (benefit) expense	$	(201	)	$	(7,216	)	$	6,112

The components of (loss) income before income taxes are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
United States	$	(76,758	)	$	(80,034	)	$	(10,025	)
Foreign	(178		)	(623		)	(1,367		)
Loss before income taxes	$	(76,936	)	$	(80,657	)	$	(11,392	)

A reconciliation of the U.S. federal statutory tax rate to the effective income tax rate is as follows:

	Year ended December 31,
	2019		2018		2017
Federal statutory tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	0.6		0.8		(3.2	)
Non-U.S. income taxed at different rates	0.5		0.8		(4.3	)
(Increase) decrease in valuation allowance	(19.9	)	(3.6	)	0.1
Impact of 2017 Tax Cuts and Jobs Act	—		—		(64.2	)
Net operating loss carryback adjustment	—		—		—
Reduction in tax benefit related to stock-based awards	(0.1	)	(1.0	)	(16.9	)
Non-deductible expenditures and goodwill	—		(9.0	)	(3.9	)
Research and development credit	0.2		0.3		3.6
Other	(2.0	)	(0.4	)	0.1
Effective income tax rate	0.3	%	8.9	%	(53.7	)%

Fluctuations in effective tax rates have historically been impacted by permanent tax differences with no associated income tax impact, changes in state apportionment factors, including the effect on state deferred tax assets and liabilities, and non-U.S. income taxed at different rates.

Comprehensive tax reform legislation enacted in December 2017, commonly referred to as the Tax Cuts and Jobs Acts (“2017 Tax Act”), makes significant changes to U.S. federal income tax laws. The 2017 Tax Act, among other things, reduces the corporate income tax rate from 35% to 21%, partially limits the deductibility of business interest expense and net operating losses, provides additional limitations on the deductibility of executive compensation, imposes a one-time tax on unrepatriated earnings from certain foreign subsidiaries, taxes offshore earnings at reduced rates regardless of whether they are repatriated, and allows the immediate deduction of certain new investments instead of deductions for depreciation expense over time. The Company had not completed its determination of the 2017 Tax Act and recorded provisional amounts in its financial statements as of December 31, 2017. The Company recorded a provisional expense for the effects of the 2017 Tax Act of $7.3 million. The effects of the 2017

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Tax Act on the Company include three main categories: 1) remeasurement of the net deferred tax assets from 35% to 21%, which resulted in tax expense of $5.5 million; 2) a one-time tax on unrepatriated earnings from certain foreign subsidiaries of $0.2 million; and 3) additional limitations on the deductibility of executive compensation, which resulted in tax expense of $1.6 million. The Company completed its review of the 2017 Tax Act in 2018, and there were no material changes in the measurement period.

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	17,248		$	30,241
Allowance for doubtful accounts	1,037			1,073
Inventory valuation reserves	629			1,057
Equity compensation	353			548
Goodwill	965			1,089
Accrued compensation	587			342
Foreign tax credit carryforward	3,894			4,041
Settlement liability	3,530			—
Lease liability	3,992			—
Interest expense limitation	—			534
Other	96			50
Total gross deferred tax assets	32,331			38,975
Valuation allowance	(19,878		)	(4,042		)
Total deferred tax assets, net	12,453			34,933
Deferred tax liabilities:
Property and equipment	(3,696		)	(6,613		)
Intangible assets	(4,597		)	(9,657		)
ROU asset	(3,793		)	—
Prepaid insurance and other	(331		)	—
Total gross deferred tax liabilities	(12,417		)	(16,270		)
Net deferred tax assets	$	36		$	18,663

As of December 31, 2019, the Company had U.S. net operating loss carryforwards of $68.9 million, including $49.6 million expiring in various amounts in 2035 through 2037 which can offset 100% of taxable income and $19.3 million that has an indefinite carryforward period which can offset 80% of taxable income per year. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo an “ownership change” for purposes of Section 382 of the Tax Code.

Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance in the second quarter of 2018, the Company considered all available objective and

verifiable evidence, both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, and expectations and risks associated with estimates of future pre-tax income. As a result of this analysis, the Company determined that it is more likely than not that it will not realize the benefits of certain deferred tax assets and, therefore, recorded a $15.5 million valuation allowance against the carrying value of net deferred tax assets, except for deferred tax liabilities related to non-amortizable intangible assets and certain state jurisdictions. As all available evidence should be taken into consideration when assessing the need for a valuation allowance, the subsequent events that occurred in the first quarter of 2019 provided a source of income to support the release of $11.5 million of the valuation allowance which resulted in a deferred tax asset of $18.7 million. As such, the Company reversed this portion of the valuation allowance during the fourth quarter of 2018. At December 31, 2019, the

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valuation allowance against the net federal and state deferred tax assets was $19.9 million.

The Company has not calculated U.S. taxes on unremitted earnings of certain non-U.S. subsidiaries due to the Company’s intent to reinvest the unremitted earnings of the non-U.S. subsidiaries. At December 31, 2019, the Company had approximately $2.3 million in unremitted earnings for one of its foreign jurisdictions, which were not included for U.S. tax purposes. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded for a one-time U.S. tax liability on these earnings which have not previously been repatriated to the U.S. However, certain withholding taxes will need to be paid upon repatriation. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings.

The Company has performed an evaluation and concluded there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The

evaluation was performed for the tax years which remain subject to examination by tax jurisdictions as of December 31, 2019, which are the years ended December 31, 2015 through December 31, 2019 for U.S. federal taxes and the years ended December 31, 2014 through December 31, 2019 for state tax jurisdictions.

At December 31, 2019, the Company had no unrecognized tax benefits.

In January 2017, the Internal Revenue Service notified the Company that it would examine the Company’s “IRS” federal tax returns for the year ended December 31, 2014. The examination included (1) the corporate returns and (2) employment tax matters. The IRS fieldwork has been completed in relation to the corporate returns with no adverse findings. Further discussion of the employment tax matter can be found in Note 19 ---“Related Party Transaction.”

Note 15 — Common Stock

The Company’s Certificate of Incorporation, as amended November 9, 2009, authorizes the Company to issue up to 80 million shares of common stock, par value $0.0001 per share, and 100,000 shares of one or more series of preferred stock, par value $0.0001 per share.

A reconciliation of the changes in common shares issued is as follows:

	Year ended December 31,
	2019	2018
Shares issued at the beginning of the year	62,162,875	60,622,986
Issued as restricted stock award grants	924,022	1,539,889
Issued as restricted stock unit grants	570,000	—
Shares issued at the end of the year	63,656,897	62,162,875

Stock-Based Incentive Plans

Stockholders approved long term incentive plans in 2019, 2018, 2014, 2010, and 2007 (the “2019 Plan”, the “2018 Plan,” the “2014 Plan,” the “2010 Plan,” and the “2007 Plan,” respectively) under which the Company may grant equity awards to officers, key employees, non-employee directors, and service providers in the form of stock options, restricted stock, and certain other incentive awards. The maximum

number of shares that may be issued under the 2019 Plan, 2018 Plan, 2014 Plan, 2010 Plan, and 2007 Plan are 1.0 million 3.0 million, 5.2 million, 6.0 million, and 2.2 million, respectively. At December 31, 2019, the Company had a total of 3.9 million shares remaining to be granted under the 2019 Plan, 2018 Plan, 2014 Plan, and 2010 Plan. Shares may no longer be granted under the 2007 Plan.

29

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

All stock options are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. During the fourth quarter 2019, 3.0 million stock options were granted, 1.0 million time-vested and 2.0 million performance-based. The time-vested stock options will vest equally over the next five years. The performance-based options are restricted until performance criteria defined in the agreement are met. Proceeds received from stock option exercises are credited to common stock and additional paid-in capital, as appropriate. The Company uses historical data to estimate pre-vesting option forfeitures. Estimates are adjusted when actual forfeitures differ from the estimate. Stock-based compensation expense is recorded for all equity awards expected to vest. 

No stock options vested during the years ended December 31, 2019, 2018, and 2017.

Stock Options	Shares	Weighted-Average Exercise Price
Outstanding as of January 1, 2019	—	$	—
Granted	3,000,000	1.22
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of
December 31, 2019	3,000,000	$	1.22
Vested or expected to vest at
December 31, 2019	—	$	—
Options exercisable as of
December 31, 2019	—	$	—

The following table sets forth significant assumptions used in the Black-Scholes model for time-vested options and the Monte Carlo model for performance-based options to determine the fair value of the options at December 31, 2019.

	Time-Vested Options		Performance-Based Options
Risk-free interest rate	1.81	%	1.84	%
Expected volatility of common stock	73.59	%	71.57	%
Expected life of options in years	5.0		7.0
Dividend yield	—	%	—	%
Vesting period in years	5.0		7.0

Restricted Stock

The Company grants employees either time-vesting or performance-based restricted shares in accordance with terms specified in the Restricted Stock Agreements (“RSAs”). Time-

vesting restricted shares vest after a stipulated period of time has elapsed subsequent to the date of grant, generally three

30

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

years. Certain time-vested shares have also been issued with a portion of the shares granted vesting immediately.

Performance-based restricted shares are issued with performance criteria defined over a designated performance period and vest only when, and if, the outlined performance

criteria are met. During the year ended December 31, 2019, 63% of the restricted shares granted were time-vesting and 37% were performance-based. Grantees of restricted shares retain voting rights for the granted shares.

Restricted stock share activity for the year ended December 31, 2019 is as follows:

Restricted Stock Shares	Shares		Weighted- Average Fair Value at Date of Grant
Non-vested at January 1, 2019	1,050,372		$	3.47
Granted to employees	1,494,022		2.62
Vested	(615,941	)	3.72
Forfeited	(299,433	)	3.16
Non-vested at December 31, 2019	1,629,020		$	2.66

The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2019, 2018, and 2017 was $2.62, $10.62, and $11.92 per share, respectively. The total fair value of restricted stock that vested during the years ended December 31, 2019, 2018, and 2017 was $6.3 million, $8.6 million, and $15.4 million, respectively.

At December 31, 2019, there was $1.8 million of unrecognized compensation expense related to non-vested restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Units

During the year ended December 31, 2019, the Company granted performance-based restricted stock units (“RSUs”) for 1,071,530 shares equivalents. The performance period for these share equivalents continues until December 31, 2024.

During the year ended December 31, 2018, the Company granted performance-based RSUs for 604,682 share equivalents, which had a performance period through December 31, 2019. No RSUs were earned during this performance period.

Restricted stock units activity for the year ended December 31, 2019 is as follows:

Restricted Stock Units	Units		Weighted- Average Fair Value at Date of Grant
RSU equivalents at January 1, 2019	301,766		$	3.94
2018 equivalents forfeited	(272,046	)	6.39
Total equivalents	29,720		—
2019 equivalents granted	1,071,530		3.75
2019 equivalents forfeited	(62,776	)	1.66
RSU equivalents at December 31, 2019	1,038,474		$	3.24

At December 31, 2019, there was $2.1 million of unrecognized compensation expense related to 2019 and 2018 restricted stock units. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.3 years.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“ESPP”) was approved by stockholders on May 18, 2012. The Company registered 500,000 shares of its common stock, currently held as treasury shares, for issuance under the ESPP. The purpose of the ESPP is to provide employees with an opportunity to purchase shares of the Company’s common stock through accumulated payroll deductions. The ESPP allows participants

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FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to purchase common stock at a purchase price equal to 85% of the fair market value of the common stock on the last business day of a three-month offering period which coincides with calendar quarters. Payroll deductions may not exceed 10% of an employee’s compensation and participants may not purchase more than 1,000 shares in any one offering period. In addition, for each calendar year, an employee may not be granted purchase rights for Flotek Stock valued over $25,000, as determined at the time such purchase right is granted. The fair value of the discount associated with shares purchased under the plan is recognized as share-based compensation expense and was $0.1 million, $0.1 million, and $0.1 million during the years ended December 31, 2019, 2018, and 2017, respectively. The total fair value of the shares purchased under the plan during the years ended December 31, 2019, 2018, and 2017 was $0.1 million, $0.8 million, and $1.0 million, respectively. The employee payment associated with participation in the plan was satisfied through payroll deductions. Effective after the third quarter 2018 purchase, the Company temporarily suspended the ESPP due to lack of shares. Following shareholder approval for additional shares, the Company initiated the ESPP during the second quarter 2019.

Share-Based Compensation Expense

Non-cash share-based compensation expense related to restricted stock, restricted stock unit grants, and stock purchased under the Company’s ESPP was $7.1 million, $10.6 million, and $11.4 million during the years ended December 31, 2019, 2018, and 2017, respectively.

Treasury Stock

The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the years ended December 31, 2019, 2018, and 2017, the Company purchased 93,977 shares, 199,644 shares, and 238,216 shares, respectively, of the Company’s common stock at market value as payment of income tax withholding owed by employees upon the vesting of restricted shares and the exercise of stock options. Shares issued as restricted stock awards to employees that were forfeited are accounted for as treasury stock. During the year ended December 31, 2019, there were no shares surrendered

for the exercise of stock options. During the years ended December 31, 2018 and 2017, shares surrendered for the exercise of stock options were 478,287 and 3,225, respectively. These surrendered shares are also accounted for as treasury stock.

Stock Repurchase Program

In November 2012, the Company’s Board of Directors authorized the repurchase of up to $25 million of the Company’s common stock. Repurchases may be made in the open market or through privately negotiated transactions. Through December 31, 2019, the Company has repurchased $25 million of its common stock under this authorization.

In June 2015, the Company’s Board of Directors authorized the repurchase of up to an additional $50 million of the Company’s common stock. Repurchases may be made in the open market or through privately negotiated transactions. Through December 31, 2019, the Company repurchased $0.3 million of its common stock under this authorization.

During the year ended December 31, 2018, the Company did not repurchase any shares of its outstanding common stock. During the year ended December 31, 2017, the Company repurchased 905,000 shares of its outstanding common stock on the open market at a cost of $5.2 million, inclusive of transaction costs, or an average price of $5.75 per share. During the year ended December 31, 2016, the Company did not repurchase any shares of its outstanding common stock.

At December 31, 2019, the Company had $49.7 million remaining under its share repurchase program. A covenant under the Company’s Credit Facility limited the amount that may be used to repurchase the Company’s common stock. At December 31, 2019, this covenant did not permit additional share repurchases.

32

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16 — Commitments and Contingencies

Class Action Litigation

On March 30, 2017, the U.S. District Court for the Southern District of Texas granted the Company’s motion to dismiss the four consolidated putative securities class action lawsuits that were filed in November 2015, against the Company and certain of its officers. The lawsuits were previously consolidated into a single case, and a consolidated amended complaint had been filed. The consolidated amended complaint asserted that the Company made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. The complaint sought an award of damages in an unspecified amount on behalf of a putative class consisting of persons who purchased the Company’s common stock between October 23, 2014 and November 9, 2015, inclusive. The lead plaintiff appealed the District Court’s decision granting the motion to dismiss. On February 7, 2019, a three-judge panel of the United States Court of Appeals for the Fifth Circuit issued a unanimous opinion affirming the District Court’s judgment of dismissal in its entirety.

Other Litigation

The Company is subject to routine litigation and other claims that arise in the normal course of business. Management is not

aware of any pending or threatened lawsuits or proceedings that are expected to have a material effect on the Company’s financial position, results of operations or liquidity.

Other Commitments

Rent expense under operating leases totaled $2.9 million, $2.9 million, and $3.3 million during the years ended December 31, 2019, 2018, and 2017, respectively.

401(k) Retirement Plan

The Company maintains a 401(k) retirement plan for the benefit of eligible employees in the U.S. All employees are eligible to participate in the plan upon employment. On January 1, 2015, the Company implemented a new matching program. The Company matches contributions at 100% of up to 2% of an employee’s compensation and, if greater, the Company matches contributions at 50% from 5% to 8% of an employee’s compensation.

During the years ended December 31, 2019, 2018, and 2017, compensation expense included $0.7 million, $1.0 million and $1.0 million, respectively, related to the Company’s 401(k) match.

Concentrations and Credit Risk

The majority of the Company’s revenue is derived from the oil and gas industry. Customers include major oilfield services companies, major integrated oil and natural gas companies, independent oil and natural gas companies, pressure pumping service companies, and state-owned national oil companies. This concentration of customers in one industry increases credit and business risks.

The Company is subject to concentrations of credit risk within trade accounts receivable, as the Company does not generally require collateral as support for trade receivables. In addition, the majority of the Company’s cash is maintained at a major financial institution and balances often exceed insurable amounts.

Note 17 — Business Segment, Geographic and Major Customer Information

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by chief operating decision-makers in deciding how to allocate resources and assess performance. The operations of the Company are categorized into one reportable segment: Energy Chemistry Technologies.

Energy Chemistry Technologies designs, develops, manufactures, packages, and markets specialty chemistries used in oil and natural gas well drilling, cementing, completion, and stimulation. In addition, the Company’s chemistries are used in specialized enhanced and improved oil recovery markets. Activities in this segment also include

construction and management of automated material handling facilities and management of loading facilities and blending operations for oilfield services companies.

The Company evaluates performance based upon a variety of criteria. The primary financial measure is segment operating income. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to reportable segments.

33

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summarized financial information of the reportable segments is as follows (in thousands):

As of and for the years ended December 31,	Energy Chemistry Technologies			Corporate and Other			Total
2019
Net revenue from external customers	$	119,353		$	—		$	119,353
Loss from operations	(46,485		)	(30,140		)	(76,625		)
Depreciation and amortization	7,439			1,026			8,465
Capital expenditures	2,411			—			2,411
2018
Net revenue from external customers	$	177,773		$	—		$	177,773
Income (loss) from operations	(36,817		)	(32,994		)	(69,811		)
Depreciation and amortization	7,107			2,109			9,216
Capital expenditures	2,733			826			3,559
2017
Net revenue from external customers	$	243,106		$	—		$	243,106
Income (loss) from operations	33,611			(43,931		)	(10,320		)
Depreciation and amortization	7,323			2,445			9,768
Capital expenditures	3,279			918			4,197

Assets of the Company by reportable segments are as follows (in thousands):

	December 31, 2019		December 31, 2018
Energy Chemistry Technologies	$	117,357	$	139,205
Corporate and Other	114,490		28,208
Total segments	231,847		167,413
Held for sale	—		118,470
Total assets	$	231,847	$	285,883

Geographic Information

Revenue by country is based on the location where services are provided and products are used. No individual country other than the United States (“U.S.”) accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
U.S.	$	104,786	$	146,421	$	219,517
Other countries	14,567		31,352		23,589
Total	$	119,353	$	177,773	$	243,106

Long-lived assets held in countries other than the U.S. are not considered material to the consolidated financial statements.

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FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major Customers

Revenue from major customers, as a percentage of consolidated revenue, is as follows:

	Years ended December 31,
	2019	2018	2017
Customer A	20.4%	*	*
Customer B	10.3%	12.23%	*
Customer C	*	10.1%	*
Customer D	*	*	16.7%

35

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18 — Quarterly Financial Data (Unaudited)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	(in thousands, except per share data)
2019
Revenue (1)	$	43,256		$	34,692		$	21,879		$	19,526		$	119,353
Loss from operations (1)	(14,266		)	(13,859		)	(11,853		)	(36,647		)	(76,625		)
(Loss) income from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net (loss) income	32,992			(14,598		)	(11,110		)	(39,563		)	(32,279		)
Net loss attributable to noncontrolling interests	—			—			—			—			—
Net loss attributable to Flotek Industries, Inc. (Flotek)	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Amounts attributable to Flotek shareholders:
Loss from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net income (loss) attributable to Flotek	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Basic earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Diluted earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
2018
Revenue (1)	$	41,069		$	39,546		$	53,709		$	43,449		$	177,773
(Loss) income from operations (1)	(9,223		)	(47,140		)	(4,080		)	(9,368		)	(69,811		)
Loss from continuing operations (1)	$	(9,528	)	$	(68,987	)	$	(4,869	)	$	9,943		$	(73,441	)
(Loss) income from discontinued operations, net of tax	9,595			(6,404		)	937			(1,385		)	2,743
Net loss (income)	$	67		$	(75,391	)	$	(3,932	)	$	8,558		$	(70,698	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Basic earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Diluted earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
(1) Amounts exclude impact of discontinued operations.
(2) The sum of the quarterly earnings (loss) per share (basic and diluted) may not agree to the earnings (loss) per share for the year due to the timing of common stock issuances.

36

FLOTEK INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 19 — Related Party Transaction

In January 2017, the IRS notified the Company that it was examining the Company’s federal tax returns for the year ended December 31, 2014. As a result of this examination, the IRS informed the Company on May 1, 2019 that certain employment taxes related to the compensation of our CEO, Mr. Chisholm, were not properly withheld in 2014 and proposed an adjustment. Mr. Chisholm’s affiliated companies through which he provided his services have agreed to indemnify the Company for any such taxes, and Mr. Chisholm has executed a personal guaranty in favor of the Company, supporting this indemnification.

At June 30, 2019, the Company recorded a liability of $2.4 million related to the estimated employment tax under-withholding for the years 2014 through 2018. By September 30, 2019, the liability totaled $1.8 million, after the Company paid $0.6 million to the IRS for these taxes and made an additional accrual covering the estimated under-withholding

tax liability through 2019. In addition, at June 30, 2019 the Company recorded a receivable from the affiliated companies totaling $2.4 million. In October 2019, an amendment to the employment agreement was executed, giving the Company the contractual right of offset for any amounts owed to the Company against, and giving the Company the right to withhold payments equal to amounts reasonably estimated to potentially become due to the Company by the affiliated companies from, any amounts owed under the employment agreement. The Company netted the related party receivable against the severance payable as of December 31, 2019. At December 31, 2019, the Company recorded $1.8 million for potential liability to the IRS.

Note 20 — Subsequent Events

On February 26, 2020, Flotek Chemistry, LLC, a wholly-owned subsidiary of the Company, entered into an amendment to the terpene supply agreement between Flotek Chemistry and Florida Chemical Company, LLC. Pursuant to the terms and conditions of the amendment, the terpene supply agreement is amended to, among other things, (a) reduce the minimum quantity of terpene that Flotek Chemistry is required to purchase by approximately 3/4ths in 2020 and by approximately half in each of 2021, 2022 and 2023, (b) provide a fixed per pound price for terpene in 2020, (c) reduce the maximum amount of terpene subject to the terpene supply Agreement by approximately 1/3rd, and (d) change the payment terms to net 45 days. In order to make the terms and conditions of the Amendment effective, Flotek Chemistry made a one-time payment of $15.8 million to Florida Chemical Company, LLC, which is included in accrued liabilities at December 31, 2019.

As of December 31, 2019, the Company concluded that the amended long-term supply agreement met the definition of a

loss contract. As such, the Company recognized a loss as of December 31, 2019 equal to the price paid for terpene supply agreement amendment which aligns purchase commitments to expected usage for blended products.

Pursuant to the post-closing working capital dispute resolution procedures set forth in the Share Purchase Agreement, the Company and ADM engaged a neutral third party auditor to help reach agreement on the final post-closing working capital adjustment. In February 2020, the third party auditor ruled in favor of awarding ADM for the entire $4.1 million disputed amount resulting in a reduction to the gain on the sale of the business as of December 31, 2019.

37

Item 9A. Controls and Procedures.

Restated Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance that control objectives are attained. The Company’s disclosure controls and procedures are designed to provide such reasonable assurance.

Subsequent to the filing of its Annual Report on 10-K for the fiscal year ended December 31, 2019, the Company identified two deficiencies in its internal control over financial reporting.  Specifically, the Company’s management determined that the Company did not, as of December 31, 2019, design and maintain effective internal controls over the elimination of intercompany profits in inventory reported between September 1, 2018 and December 31, 2019, or the recording of legal rights to certain intangible assets related to the sale of Florida Chemical Company on February 28, 2019. 

The Company does not believe that the control deficiencies resulted in a material misstatement of the Company’s consolidated financial statements included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2019.  The Company subsequently adjusted prior periods in 2019 to reflect appropriate revisions, as previously disclosed in the Company’s press release dated May 18, 2020, and its Current Report on Form 8-K furnished on May 19, 2020.

After further review, the Company has determined that the control deficiencies constitute material weaknesses in its internal control over financial reporting as of December 31, 2019. In addition, the Company’s management, including its principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures, as required by Rule 13a-15(e) of the Exchange Act as of December 31, 2019 and has concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2019 due to the material weaknesses in internal control over financial reporting described above.

The Company believes that, notwithstanding the material weaknesses mentioned above, the consolidated financial statements contained in this Form 10-K present fairly, in all material respects, the consolidated financial positions, results of operations and cash flows of the Company and its subsidiaries in conformity with generally accepted accounting principles in the United States as of the dates and for the periods stated therein.

Restated Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. The Company’s management, including the principal executive and principal financial officers, assessed the effectiveness of internal control over financial reporting as of December 31, 2019, based on criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (“COSO”) in Internal Control – Integrated Framework. Upon evaluation, the Company’s management has concluded that the Company’s internal control over financial reporting was not effective in connection with the preparation of the consolidated financial statements as of December 31, 2019.

Subsequent to the filing of its Annual Report on 10-K for the fiscal year ended December 31, 2019, the Company identified two deficiencies in its internal control over financial reporting.  Specifically, the Company’s management determined that the Company did not, as of December 31, 2019, design and maintain effective internal controls over the elimination of intercompany profits in inventory reported between September 1, 2018 and December 31, 2019, or the recording of legal rights to certain intangible assets related to the sale of Florida Chemical Company on February 28, 2019. 

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 has been audited by Moss Adams LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Restated Changes in Internal Control over Financial Reporting

Subsequent to the filing of its Annual Report on 10-K for the fiscal year ended December 31, 2019, the Company identified two control deficiencies that constitute material weaknesses related to the elimination of intercompany profits in inventory and recording legal rights to certain intangible assets described above. The Company believes that it has taken appropriate action in its design and implementation of internal controls to remediate the two control deficiencies described above. In addition, the Company will continue to evaluate its internal controls and monitor the effectiveness of the actions taken to remediate the control deficiencies.

38

There have been no changes in the Company’s system of internal control over financial reporting during the three months ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

39

PART IV

Item 15. Exhibits and Financial Statement Schedules.

EXHIBIT INDEX

Exhibit Number		Exhibit Title
2.1		Share Purchase Agreement, dated as of January 10, 2019, by and between the Company and Archer-Daniels-Midland Company (portions of this exhibit have been omitted pursuant to a confidential treatment request, which has been granted) (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on March 4, 2019).
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2007).
3.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended September 30, 2009).
3.3		Second Amended and Restated Bylaws, dated October 11, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on October 17, 2017).
4.1		Form of Certificate of Common Stock (incorporated by reference to Appendix E to the Company’s Definitive Proxy Statement filed on September 27, 2001).
4.2		Description of Capital Stock of the Company.
10.1	†	Fifth Amended and Restated Service Agreement, dated as of April 15, 2014, between the Company, Protechnics II, Inc. and Chisholm Management, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 21, 2014).
10.2	†	Letter Agreement, dated February 13, 2017, among the Company, Protechnics II, Inc. and Chisholm Management, Inc. amending the Fifth Amended and Restated Service Agreement among such parties (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on February 17, 2017).
10.3	†	Employment Agreement, dated effective March 16, 2018, between the Company and Joshua A. Snively, Sr. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 22, 2018).
10.4	†	Form of Restricted Stock Agreement, dated March 16, 2018, between the Company and Joshua A. Snively, Sr. and Matthew B. Marietta (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on March 22, 2018).
10.5	†	2018 Long-Term Incentive Plan (incorporated by reference to Exhibit A to the Company’s definitive proxy statement on Schedule 14A filed on March 30, 2018).
10.6	†	Employment Agreement, dated effective December 20, 2018, between the Company and Elizabeth T. Wilkinson (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 27, 2018).
10.7	†	Form of Restricted Stock Agreement, dated December 27, 2018, between the Company and Elizabeth T. Wilkinson (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 27, 2018).
10.8	†	2019 Non-Employee Director Incentive Plan (incorporated by reference to Exhibit A to the Company’s definitive proxy statement on Schedule 14A filed on April 24, 2019).
10.9	†	Amendment to 2012 Employee Stock Purchase Plan (incorporated by reference to Exhibit B to the Company’s definitive proxy statement on Schedule 14A filed on April 24, 2019).
10.10	†	Amendment to 2018 Long-Term Incentive Plan (incorporated by reference to Exhibit C to the Company’s definitive proxy statement on Schedule 14A filed on April 24, 2019).
10.11	***	Supply Agreement (Terpene), dated as of February 28, 2019, by and among the Company, Florida Chemical Company, LLC and Archer-Daniels-Midland Company (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2019).
10.12	***	Supply Agreement (Citrus Burst), dated as of February 28, 2019, by and between Florida Chemical Company, LLC and Flotek Chemistry, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2019).
10.13		Cooperation Agreement, dated as of March 19, 2019, by and among the Company and BLR Partners LP and its affiliates (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 20, 2019).
10.14	†	Employment Agreement, dated effective as of April 1, 2019, by and between the Company and John W. Chisholm (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 24, 2019).
10.15	†	First Amended and Restated Employment Agreement, dated effective as of April 1, 2019, by and between the Company and Elizabeth T. Wilkinson (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 24, 2019).
10.16	†	Termination and Release Agreement, dated as of May 20, 2019, by and among the Company, John W. Chisholm, Protechnics II, Inc. and Chisholm Management, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended June 30, 2019).

40

Exhibit Number		Exhibit Title
10.17	†	Stand-Alone Cash-Settled Restricted Stock Unit Agreement, dated as of May 20, 2019, by and between the Company and John W. Chisholm (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended June 30, 2019).
10.18	†	Restricted Stock Agreement, dated as of May 24, 2019, by and between the Company and John W. Chisholm (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q for the quarter ended June 30, 2019).
10.19	†	Form of Restricted Stock Agreement pursuant to the Company’s 2018 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Form 10-Q for the quarter ended June 30, 2019).
10.20	†	Form of Restricted Stock Agreement pursuant to the Company’s 2019 Non-Employee Director Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-Q for the quarter ended June 30, 2019).
10.21	†	Amendment No. 1 to Employment Agreement, dated October 18, 2019, by and between the Company and John W. Chisholm (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 24, 2019).
10.22	†	Guaranty, dated May 8, 2019, by John W. Chisholm in favor of the Company (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on October 24, 2019).
10.23	†	Employment Agreement, dated effective as of December 22, 2019, by and between the Company and John W. Gibson, Jr. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 27, 2019).
10.24	†	Stand-Alone Restricted Stock Unit Award Agreement, dated as of December 22, 2019, by and between the Company and John W. Gibson, Jr. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 27, 2019).
10.25	†	Stand-Alone Time-Based Stock Option Award Agreement, dated as of December 22, 2019, by and between the Company and John W. Gibson, Jr. (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on December 27, 2019).
10.26	†	Stand-Alone Performance-Based Stock Option Award Agreement, dated as of December 22, 2019, by and between the Company and John W. Gibson, Jr. (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on December 27, 2019).
21.1		List of Subsidiaries.
23.1	*	Consent of Moss Adams, LLP.
31.1	*	Rule 13a-14(a) Certification of Principal Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	**	Section 1350 Certification of Principal Executive Officer.
32.2	**	Section 1350 Certification of Principal Financial Officer.
101.INS	*	Inline XBRL Instance Document.
101.SCH	*	Inline XBRL Schema Document.
101.CAL	*	Inline XBRL Calculation Linkbase Document.
101.LAB	*	Inline XBRL Label Linkbase Document.
101.PRE	*	Inline XBRL Presentation Linkbase Document.
101.DEF	*	Inline XBRL Definition Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*		Filed with this Form 10-K/A.
**		Furnished with this Form 10-K/A, not filed.
***		Portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K in order for them to remain confidential.
†		Management contracts or compensatory plans or agreements.

41

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FLOTEK INDUSTRIES, INC.
By:	/s/    John W. Gibson, Jr.
	John W. Gibson, Jr.
	President, Chief Executive Officer and Chairman of the Board

Date: June 10, 2020

42

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements filed on Form S-8 (Nos. 333-157276, 333-172596, 333-174983, 333-183617, 333-198757, 333-213407, 333-225865, and 333-231749) and on Form S-3 (Nos. 333-161552, 333-166442, 333-166443, 333-173806, 333-174199, 333-189555, 333-212864 and 333-219618) of our reports dated March 6, 2020, relating to the consolidated financial statements of Flotek Industries, Inc. and subsidiaries which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of new accounting standards on the financial statements and an adverse opinion on the effectiveness of internal control over financial reporting of Flotek Industries, Inc. and subsidiaries appearing in this amendment No. 2 to the Annual Report (Form 10-K) for the year ended December 31, 2019.

/s/ Moss Adams LLP

Houston, Texas

June 10, 2020

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, John W. Gibson, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Flotek Industries, Inc.;

2. To the best of my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. To the best of my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    John W. Gibson, Jr.

John W. Gibson, Jr.

President, Chief Executive Officer and Chairman of the Board

Date: June 10, 2020

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Elizabeth T. Wilkinson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Flotek Industries, Inc.;

2. To the best of my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. To the best of my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    Elizabeth T. Wilkinson

Elizabeth T. Wilkinson

Chief Financial Officer

Date: June 10, 2020

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Flotek Industries, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/John W. Gibson, Jr.

John W. Gibson, Jr.

President, Chief Executive Officer and Chairman of the Board

Date: June 10, 2020

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Flotek Industries, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    Elizabeth T. Wilkinson

Elizabeth T. Wilkinson

Chief Financial Officer

Date: June 10, 2020

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Class Action Litigation

On March 30, 2017, the U.S. District Court for the Southern District of Texas granted the Company’s motion to dismiss the four consolidated putative securities class action lawsuits that were filed in November 2015, against the Company and certain of its officers. The lawsuits were previously consolidated into a single case, and a consolidated amended complaint had been filed. The consolidated amended complaint asserted that the Company made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. The complaint sought an award of damages in an unspecified amount on behalf of a putative class consisting of persons who purchased the Company’s common stock between October 23, 2014 and November 9, 2015, inclusive. The lead plaintiff appealed the District Court’s decision granting the motion to dismiss. On February 7, 2019, a three-judge panel of the United States Court of Appeals for the Fifth Circuit issued a unanimous opinion affirming the District Court’s judgment of dismissal in its entirety.

Other Litigation

The Company is subject to routine litigation and other claims that arise in the normal course of business. Management is not

aware of any pending or threatened lawsuits or proceedings that are expected to have a material effect on the Company’s financial position, results of operations or liquidity.

Other Commitments

Rent expense under operating leases totaled $2.9 million, $2.9 million, and $3.3 million during the years ended December 31, 2019, 2018, and 2017, respectively.

401(k) Retirement Plan

The Company maintains a 401(k) retirement plan for the benefit of eligible employees in the U.S. All employees are eligible to participate in the plan upon employment. On January 1, 2015, the Company implemented a new matching program. The Company matches contributions at 100% of up to 2% of an employee’s compensation and, if greater, the Company matches contributions at 50% from 5% to 8% of an employee’s compensation.

During the years ended December 31, 2019, 2018, and 2017, compensation expense included $0.7 million, $1.0 million and $1.0 million, respectively, related to the Company’s 401(k) match.

Concentrations and Credit Risk

The majority of the Company’s revenue is derived from the oil and gas industry. Customers include major oilfield services companies, major integrated oil and natural gas companies, independent oil and natural gas companies, pressure pumping service companies, and state-owned national oil companies. This concentration of customers in one industry increases credit and business risks.

The Company is subject to concentrations of credit risk within trade accounts receivable, as the Company does not generally require collateral as support for trade receivables. In addition, the majority of the Company’s cash is maintained at a major financial institution and balances often exceed insurable amounts.

XML

Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On February 26, 2020, Flotek Chemistry, LLC, a wholly-owned subsidiary of the Company, entered into an amendment to the terpene supply agreement between Flotek Chemistry and Florida Chemical Company, LLC. Pursuant to the terms and conditions of the amendment, the terpene supply agreement is amended to, among other things, (a) reduce the minimum quantity of terpene that Flotek Chemistry is required to purchase by approximately 3/4ths in 2020 and by approximately half in each of 2021, 2022 and 2023, (b) provide a fixed per pound price for terpene in 2020, (c) reduce the maximum amount of terpene subject to the terpene supply Agreement by approximately 1/3rd, and (d) change the payment terms to net 45 days. In order to make the terms and conditions of the Amendment effective, Flotek Chemistry made a one-time payment of $15.8 million to Florida Chemical Company, LLC, which is included in accrued liabilities at December 31, 2019.

As of December 31, 2019, the Company concluded that the amended long-term supply agreement met the definition of a

loss contract. As such, the Company recognized a loss as of December 31, 2019 equal to the price paid for terpene supply agreement amendment which aligns purchase commitments to expected usage for blended products.

Pursuant to the post-closing working capital dispute resolution procedures set forth in the Share Purchase Agreement, the Company and ADM engaged a neutral third party auditor to help reach agreement on the final post-closing working capital adjustment. In February 2020, the third party auditor ruled in favor of awarding ADM for the entire $4.1 million disputed amount resulting in a reduction to the gain on the sale of the business as of December 31, 2019.

XML

Organization and Nature of Operations (Details)	Dec. 31, 2019 country
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of countries with domestic and international markets (over)	7

XML

Common Stock (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Schedule of reconciliation of changes in common shares issued

A reconciliation of the changes in common shares issued is as follows:

	Year ended December 31,
	2019	2018
Shares issued at the beginning of the year	62,162,875	60,622,986
Issued as restricted stock award grants	924,022	1,539,889
Issued as restricted stock unit grants	570,000	—
Shares issued at the end of the year	63,656,897	62,162,875

Schedule of Stock Options

No stock options vested during the years ended December 31, 2019, 2018, and 2017.

Stock Options	Shares	Weighted-Average Exercise Price
Outstanding as of January 1, 2019	—	$	—
Granted	3,000,000	1.22
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of
December 31, 2019	3,000,000	$	1.22
Vested or expected to vest at
December 31, 2019	—	$	—
Options exercisable as of
December 31, 2019	—	$	—

Schedule of Valuation Assumptions

The following table sets forth significant assumptions used in the Black-Scholes model for time-vested options and the Monte Carlo model for performance-based options to determine the fair value of the options at December 31, 2019.

	Time-Vested Options		Performance-Based Options
Risk-free interest rate	1.81	%	1.84	%
Expected volatility of common stock	73.59	%	71.57	%
Expected life of options in years	5.0		7.0
Dividend yield	—	%	—	%
Vesting period in years	5.0		7.0

Schedule of restricted stock activity

Restricted stock share activity for the year ended December 31, 2019 is as follows:

Restricted Stock Shares	Shares		Weighted- Average Fair Value at Date of Grant
Non-vested at January 1, 2019	1,050,372		$	3.47
Granted to employees	1,494,022		2.62
Vested	(615,941	)	3.72
Forfeited	(299,433	)	3.16
Non-vested at December 31, 2019	1,629,020		$	2.66

Schedule of restricted stock unit activity

Restricted stock units activity for the year ended December 31, 2019 is as follows:

Restricted Stock Units	Units		Weighted- Average Fair Value at Date of Grant
RSU equivalents at January 1, 2019	301,766		$	3.94
2018 equivalents forfeited	(272,046	)	6.39
Total equivalents	29,720		—
2019 equivalents granted	1,071,530		3.75
2019 equivalents forfeited	(62,776	)	1.66
RSU equivalents at December 31, 2019	1,038,474		$	3.24

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Inventories (Schedule of Inventory) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Components of Inventory
Raw materials	$ 4,339	$ 10,608
Work-in-process	0	0
Finished goods	23,056	18,798
Inventories	27,395	29,406
Less reserve for excess and obsolete inventory	(5,698)	(2,117)	$ (368)	$ (50)
Inventories, net	21,697	$ 27,289
Excess terpene
Components of Inventory
Less reserve for excess and obsolete inventory	$ (4,400)

XML

Business Segment, Geographic and Major Customer Information (Assets by Reportable Segments) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Assets	$ 231,847	$ 285,883
Held for sale	0	118,470
Operating Segments
Segment Reporting Information [Line Items]
Assets	231,847	167,413
Operating Segments | Energy Chemistry Technologies
Segment Reporting Information [Line Items]
Assets	117,357	139,205
Corporate and Other
Segment Reporting Information [Line Items]
Assets	$ 114,490	$ 28,208

XML

Related Party Transaction (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2019	Jun. 30, 2019
IRS Tax Indemnification | Chief Executive Officer
Related Party Transaction [Line Items]
Income taxes paid	$ 0.6
Due from related parties			$ 2.4
IRS Tax Indemnification
Related Party Transaction [Line Items]
Loss contingency accrual	$ 1.8	$ 1.8	$ 2.4

XML

Goodwill (Additional Disclosures) (Details)	3 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Dec. 31, 2019 USD ($) reporting_unit	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reporting units | reporting_unit		0
Goodwill [Line Items]
Goodwill impairment recognized		$ 0	$ 37,180,000	$ 0
Energy Chemical Technologies
Goodwill [Line Items]
Goodwill impairment recognized	$ 37,200,000

XML

Other Intangible Assets (Estimated Future Amortization Expense) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2020	$ 1,941
2021	1,935
2022	1,915
2023	1,858
2024	1,854
Thereafter	10,109
Other amortizable intangible assets, net	$ 19,612

XML

Discontinued Operations (Additional Disclosures) (Details) $ in Millions			1 Months Ended	9 Months Ended
	Feb. 28, 2019 USD ($)	May 22, 2017 USD ($)	Feb. 29, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Aug. 16, 2017 USD ($)	May 23, 2017 USD ($)	Dec. 31, 2016 segment
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of segments with assets and liabilities classified as discontinued operations | segment									2
Production Technologies: | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash consideration							$ 1.0	$ 2.9
Escrow deposit								$ 0.4
Notes receivables							$ 1.0
National Oilwell Varco, L.P. | Drilling Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash consideration		$ 17.0
Escrow deposit		$ 1.5
Term of escrow deposit		18 months
Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash consideration	$ 175.0
Discontinued operation, inventory retained				$ 11.1
Supply commitment, remaining minimum amount committed					$ 72.0
Drilling Technologies And Production Technologies
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable assumed						$ 0.3
Escrow assumed						1.4
Accrued liabilities assumed						$ 1.4
Working Adjustment Period 1 | Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contingent liabilities remaining	$ 4.4
Contingent liabilities remaining period	90 days
Working Adjustment Period 2-4 | Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contingent liabilities remaining	$ 13.1
Working Adjustment Period 2 | Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contingent liabilities remaining period	6 months
Working Adjustment Period 3 | Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contingent liabilities remaining period	12 months
Working Adjustment Period 4 | Consumer and Industrial Chemistry Technologies | Discontinued operations, disposed of by sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contingent liabilities remaining period	15 months
Subsequent event
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Litigation settlement, amount awarded to other party			$ 4.1
Subsequent event | Archer-Daniels-Midland Company
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Litigation settlement, amount awarded to other party			$ 4.1
Other Current Assets [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Discontinued Operation, Escrow Balance					$ 9.9

XML

Leases (Additional Disclosures) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, renewal term	10 years
Operating lease, right-of-use asset	$ 16,388		$ 0
Operating lease liability noncurrent	16,973
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, right-of-use asset		$ 18,400
Operating lease liability noncurrent	$ 18,400	$ 18,400
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, remaining lease term	1 year
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, remaining lease term	19 years

XML

Commitments and Contingencies (401(k) Retirement Plan) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Defined Contribution Plan Disclosure [Line Items]
Compensation expense related to 401(k) retirement plan	$ 0.7	$ 1.0	$ 1.0
Up to 2 Percent
Defined Contribution Plan Disclosure [Line Items]
Company match	100.00%
Employee contribution	2.00%
From 4 to 8 Percent
Defined Contribution Plan Disclosure [Line Items]
Company match	50.00%
From 4 to 8 Percent | Minimum
Defined Contribution Plan Disclosure [Line Items]
Employee contribution	5.00%
From 4 to 8 Percent | Maximum
Defined Contribution Plan Disclosure [Line Items]
Employee contribution	8.00%

XML

Income Taxes (Additional Disclosures) (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2017	Dec. 31, 2019	Dec. 31, 2018	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Operating loss carryforwards			$ 68,900,000
Deferred tax assets, operating loss carryforwards, subject to expiration			49,600,000
Deferred tax assets, operating loss carryforwards, not subject to expiration			19,300,000
Provisional expense for the effects of the 2017 Tax Act		$ 7,300,000
Provisional expense for remeasurement of net deferred tax assets for the effects of the 2017 Tax Act		5,500,000
Provisional expense for unrepatriated earnings from foreign subsidiaries for the effects of the 2017 Tax Act		200,000
Provisional expense for limitations on the deductibility of executive compensation for the effects of the 2017 Tax Act		$ 1,600,000
Valuation allowance			19,878,000	$ 4,042,000	$ 15,500,000
Increase (decrease) in valuation allowance	$ (11,500,000)
Net deferred tax assets	$ 18,700,000		36,000	$ 18,663,000
Unremitted earnings outside the US			2,300,000
Unrecognized tax benefits			$ 0

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Income Taxes (Components of Income Tax Provision) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Current:
Federal	$ (22,923)	$ 0	$ (1,126)
State	(2,295)	97	587
Foreign	(238)	(740)	488
Total current	(25,456)	(643)	(51)
Deferred:
Federal	23,910	(6,585)	5,994
State	1,345	(89)	214
Foreign	0	101	(45)
Total deferred	25,255	(6,573)	6,163
Income tax (benefit) expense	$ (201)	$ (7,216)	$ 6,112

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Common Stock (Restricted Stock and Units) (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Restricted Stock, Time-vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period in years	3 years
Percentage by award type	63.00%
Restricted Stock, Performance-based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage by award type	37.00%
Restricted Stock
Shares
Non-vested at beginning of period (in shares)	1,050,372
Granted to employees (in shares)	1,494,022
Vested (in shares)	(615,941)
Forfeited (in shares)	(299,433)
Non-vested at end of period (in shares)	1,629,020	1,050,372
Weighted-Average Fair Value - Date of Grant (in dollars per share)
Non-vested at beginning of period (in dollars per share)	$ 3.47
Forfeited (in dollars per share)	3.16
Vested (in dollars per share)	3.72
Granted to employees (in dollars per share)	2.62	$ 10.62	$ 11.92
Non-vested at end of period (in dollars per share)	$ 2.66	$ 3.47
Fair value of vested restricted stock	$ 6.3	$ 8.6	$ 15.4
Award unrecognized compensation expense	$ 1.8
Award unrecognized compensation expense, expected period for recognition	2 years
Restricted Stock Units (RSUs)
Shares
Non-vested at beginning of period (in shares)	301,766
Vested (in shares)	(29,720)
Non-vested at end of period (in shares)	1,038,474	301,766
Weighted-Average Fair Value - Date of Grant (in dollars per share)
Non-vested at beginning of period (in dollars per share)	$ 3.94
Vested (in dollars per share)	0
Non-vested at end of period (in dollars per share)	$ 3.24	$ 3.94
Award unrecognized compensation expense, expected period for recognition	1 year 3 months 18 days
Awards granted (in shares)	1,071,530	604,682
2018 | Restricted Stock Units (RSUs)
Shares
Forfeited (in shares)	(272,046)
Weighted-Average Fair Value - Date of Grant (in dollars per share)
Forfeited (in dollars per share)	$ 6.39
2019 | Restricted Stock Units (RSUs)
Shares
Granted to employees (in shares)	1,071,530
Forfeited (in shares)	(62,776)
Weighted-Average Fair Value - Date of Grant (in dollars per share)
Forfeited (in dollars per share)	$ 1.66
Granted to employees (in dollars per share)	$ 3.75

XML

Common Stock (Stock-Based Incentive Plans) (Details)	Dec. 31, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares remaining to be granted (in shares)	3,900,000
2019 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares that may be issued (in shares)	1,000,000.0
2018 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares that may be issued (in shares)	3,000,000.0
2014 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares that may be issued (in shares)	5,200,000
2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares that may be issued (in shares)	6,000,000.0
2007 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares that may be issued (in shares)	2,200,000

XML

Long-Term Debt and Credit Facility (Schedule of Long-Term Debt) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Less current portion of long-term debt	$ 0	$ 49,731
Borrowings under revolving credit facility
Debt Instrument [Line Items]
Less current portion of long-term debt	$ 0	$ 49,731

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The consolidated financial statements include the accounts of Flotek Industries, Inc. and all wholly-owned subsidiary corporations. Where Flotek owns less than 100% of the share capital of its subsidiaries, but is still considered to have sufficient ownership to control the business, results of the business operations are consolidated within the Company’s financial statements. The ownership interests held by other parties are shown as noncontrolling interests.

During the fourth quarter of 2018, the Company classified the Consumer and Industrial Chemistry Technologies segment as held for sale based on management’s intention to sell this business, which occurred in January 2019. The Company’s historical financial statements have been revised to present the operating results of the Consumer and Industrial Chemistry Technologies segment as discontinued operations. The results of operations of this segment are presented as “Income (loss) from discontinued operations” in the statement of operations and the related cash flows of this segment have been reclassified to discontinued operations for all periods presented. The assets and liabilities of the Consumer and Industrial Chemistry Technologies segment have been reclassified to “Assets held for sale” and “Liabilities held for

sale”, respectively, in the consolidated balance sheet for all periods presented.

During 2017, the Company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of each of the Drilling Technologies and Production Technologies segments.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase.

Cash Management

The Company uses a controlled disbursement account for its main cash account. Under this system, outstanding checks can be in excess of the cash balances at the bank before the disbursement account is funded, creating a book overdraft. Book overdrafts on this account are presented as a current liability in accounts payable in the consolidated balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable arise from product sales and services and are stated at estimated net realizable value. This value incorporates an allowance for doubtful accounts to reflect any loss anticipated on accounts receivable balances. The Company regularly evaluates its accounts receivable to estimate amounts that will not be collected and records the appropriate provision for doubtful accounts as a charge to operating expenses. The allowance for doubtful accounts is based on a combination of the age of the receivables, individual customer circumstances, credit conditions, and historical

write-offs and collections. The Company writes off specific accounts receivable when they are determined to be uncollectible.

The majority of the Company’s customers are engaged in the energy industry. The cyclical nature of the energy industry may affect customers’ operating performance and cash flows, which directly impact the Company’s ability to collect on outstanding obligations. Additionally, certain customers are located in international areas that are inherently subject to risks of economic, political, and civil instability, which can impact the collectability of receivables.

Changes in the allowance for doubtful accounts for continuing operations are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Balance, beginning of year	$	1,190		$	673		$	579
Charged to provision for doubtful accounts, net of recoveries	512			839			157
Write-offs	(175		)	(322		)	(63		)
Balance, end of year	$	1,527		$	1,190		$	673

Inventories

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost, determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor, and production overhead. The Company quarterly reviews inventories on hand and current market conditions to determine if the cost of finished goods inventories exceeds current market prices and impairs the cost basis of the inventory accordingly. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if those amounts are determined to be less than cost.

Property and Equipment

Property and equipment are stated at cost. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. Depreciation or amortization of property and equipment, including assets held under capital leases, is calculated using the straight-line method over the asset’s estimated useful life as follows:

Buildings and leasehold improvements	2-30 years
Machinery and equipment	7-10 years
Furniture and fixtures	3 years
Transportation equipment	2-5 years
Computer equipment and software	3-7 years

Property and equipment are reviewed for impairment on an quarterly basis or whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Indicative events or circumstances include, but are not limited to, matters such as a significant decline in market value or a significant change in business climate. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows from the use of the asset and its eventual disposition. The amount of impairment loss recognized is the excess of the asset’s carrying amount over its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less cost to sell. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received.

Internal Use Computer Software Costs

Direct costs incurred to purchase and develop computer software for internal use are capitalized during the application development and implementation stages. These software costs have been primarily for enterprise-level business and finance software that is customized to meet the Company’s specific operational needs. Capitalized costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life of the software beginning when the software project is substantially complete and placed in service. Costs incurred during the preliminary project stage and costs for training, data conversion, and maintenance are expensed as incurred.

The Company amortizes software costs using the straight-line method over the expected life of the software, generally three to seven years. The unamortized amount of capitalized software was $1.0 million at December 31, 2019.

Goodwill

Goodwill is the excess of cost of an acquired entity over the amounts assigned to identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not subject to amortization, but is tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include an adverse change in the business climate or a change in the assessment of future operations of a reporting unit.

The Company assesses whether a goodwill impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative impairment test is performed to determine whether goodwill impairment exists at the reporting unit.

The quantitative impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the estimated fair value of each reporting unit with goodwill to its carrying amount, including goodwill. To determine fair value estimates, the Company uses the income approach based on discounted cash flow analyses, combined, when appropriate, with a market-based approach. The market-based approach considers valuation comparisons of recent public sale transactions of similar businesses and earnings multiples of publicly traded businesses operating in industries consistent with the reporting unit. If the carrying amount of a reporting unit, including goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit.

Other Intangible Assets

The Company’s other intangible assets have finite and indefinite lives and consist of customer relationships, trademarks, brand names, and purchased patents.

The cost of intangible assets with finite lives is amortized using the straight-line method over the estimated period of economic

benefit, ranging from two to 95 years. Asset lives are adjusted whenever there is a change in the estimated period of economic benefit. No residual value has been assigned to these intangible assets.

Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models.

Intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include, but are not limited to, a significant adverse change in the business climate, unanticipated competition, or a change in projected operations or results of a reporting unit.

The Company assesses whether an indefinite lived intangible impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the indefinite-lived intangible asset is impaired or if the Company elects to not perform a qualitative assessment, the Company then performs the quantitative impairment test. The quantitative impairment test for an indefinite-lived intangible asset consists of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flows.

Business Combinations

The Company includes the results of operations of its acquisitions in its consolidated results, prospectively from the date of acquisition. Acquisitions are accounted for by applying the acquisition method. The Company allocates the fair value of purchase consideration to the assets acquired, liabilities

assumed, and any noncontrolling interests in the acquired entity generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity is recorded as goodwill. The primary items that generate goodwill include the value of the synergies between the acquired company and Flotek and the value of the acquired assembled workforce. Acquisition-related expenses are recognized separately from the business acquisition and are recognized as expenses as incurred.

Fair Value Measurements

The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value. Inputs refer broadly to assumptions market participants would use to value an asset or liability and may be observable or unobservable. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). “Level 1” measurements are measurements using quoted prices in active markets for identical assets and liabilities. “Level 2” measurements are measurements using quoted prices in markets that are not active or that are based on quoted prices for similar assets or liabilities. “Level 3” measurements are measurements that use significant unobservable inputs which require a company to develop its own assumptions. When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available.

Revenue Recognition

The Company recognizes revenues to depict the transfer of control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Refer to Note 4 – “Revenue from Contracts with Customers” for further discussion on Revenue.

The Company recognizes revenue based on the Accounting Standards Codification (“ASC”) 606 five-step model when all of the following criteria have been met: (i) a contract with a customer exists, (ii) performance obligations have been identified, (iii) the price to the customer has been determined, (iv) the price to the customer has been allocated to the performance obligations, and (v) performance obligations are satisfied.

Products and services are sold with fixed or determinable prices. Certain sales include right of return provisions, which are considered when recognizing revenue and deferred accordingly. Deposits and other funds received in advance of delivery are deferred until the transfer of control is complete.

For certain contracts, the Company recognizes revenue under the percentage-of-completion method of accounting, measured by the percentage of “costs incurred to date” to the

“total estimated costs of completion.” This percentage is applied to the “total estimated revenue at completion” to calculate proportionate revenue earned to date. For the years ended December 31, 2019, 2018, and 2017, the percentage-of-completion revenue accounted for less than 0.1% of total revenue during the respective time periods.

As an accounting policy election, the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues.

Foreign Currency Translation

Financial statements of foreign subsidiaries are prepared using the currency of the primary economic environment of the foreign subsidiaries as the functional currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect as of the end of identified reporting periods. Revenue and expense transactions are translated using the average monthly exchange rate for the reporting period. Resultant translation adjustments are recognized as other comprehensive income (loss) within stockholders’ equity.

Comprehensive Income (Loss)

Comprehensive income (loss) encompasses all changes in stockholders’ equity, except those arising from investments from and distributions to stockholders. The Company’s comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments.

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged to expense as incurred.

Income Taxes

The Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets and liabilities are recognized related to the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company’s assets and liabilities using statutory tax rates at the applicable year end. Deferred tax assets are also recognized for operating loss and tax credit carry forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations

in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization.

A valuation allowance is recorded to reduce previously recorded tax assets when it becomes more likely than not that such assets will not be realized. The Company evaluates, at least annually, net operating loss carry forwards and other net deferred tax assets and considers all available evidence, both positive and negative, to determine whether a valuation allowance is necessary relative to net operating loss carry forwards and other net deferred tax assets. In making this determination, the Company considers cumulative losses in recent years as significant negative evidence. The Company considers recent years to mean the current year plus the two preceding years. The Company considers the recent cumulative income or loss position as objectively verifiable evidence for the projection of future income, which consists primarily of determining the average of the pre-tax income of the current and prior two years after adjusting for certain items not indicative of future performance. Based on this analysis, the Company determines whether a valuation allowance is necessary.

Historically, U.S. Federal income taxes are not provided on unremitted earnings of subsidiaries operating outside the U.S. because it is the Company’s intention to permanently reinvest undistributed earnings in the subsidiary. These earnings would become subject to income tax if they were remitted as dividends or loaned to a U.S. affiliate. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded at December 31, 2017, for a one-time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable.

The Company has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense.

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders, adjusted for the effect of assumed conversions of convertible notes and preferred stock, by the weighted average number of common shares outstanding, including potentially dilutive common share equivalents, if the effect is dilutive. Potentially dilutive common shares equivalents consist of incremental shares of common stock issuable upon exercise of stock options and warrants,

settlement of restricted stock units, and conversion of convertible notes and convertible preferred stock.

Debt Issuance Costs

Costs related to debt issuance are capitalized and amortized as interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Upon the repayment of debt, the Company accelerates the recognition of an appropriate amount of the costs as interest expense.

Capitalization of Interest

Interest costs are capitalized for qualifying in-process software development projects. Capitalization of interest commences when activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying assets and amortized over the estimated useful lives of the assets.

Stock-Based Compensation

Stock-based compensation expense for share-based payments, related to stock options, restricted stock awards, and restricted stock units, is recognized based on their grant-date fair values. The Company recognizes compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Estimated forfeitures are based on historical experience.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Significant items subject to estimates and assumptions include application of the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets.

Assets and Liabilities Held for Sale

The Company classifies disposal groups as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the disposal group; (2) the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups; (3) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group have been initiated; (4) the sale of the disposal group is probable, and transfer of the disposal group

is expected to qualify for recognition as a completed sale, within one year, except if events of circumstances beyond the Company’s control extend the period of time required to sell the disposal group beyond one year; (5) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A disposal group that is classified as held for sale is initially measured at the lower of its carrying amount or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Subsequent changes in the fair value of a disposal group less any costs to sell are reported as an adjustment to the carrying amount of the disposal group, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group for all periods presented in the line items assets held for sale and liabilities held for sale, respectively, in the consolidated balance sheets.

Discontinued Operations

The results of operations of a component of the Company that can be clearly distinguished, operationally and for financial reporting purposes, that either has been disposed of or is classified as held for sale is reported in discontinued operations, if the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not impact net loss.

New Accounting Pronouncements

(a) Application of New Accounting Standards

Effective January 1, 2019, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2016-02, “Leases” This standard (ASC 842) requires the recognition of Right of Use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP (ASC 840). The Company adopted ASC 842 using the optional transition method. Consequently, the Company’s reporting for the comparative periods presented prior to 2019 in the financial statements will continue to be in accordance with ASC 840. Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of

deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Refer to Note 6 - “Leases” for further information surrounding adoption of this new standard.

Effective January 1, 2019, the Company adopted ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting.” This standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” This standard supersedes most of the existing revenue recognition requirements in U.S. GAAP under Accounting Standards Codification (“ASC”) 605 and establishes a new revenue standard, ASC 606. This new standard requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 using the full retrospective method. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. Refer to Note 4 — “Revenue from Contracts with Customers” for further information surrounding adoption of this new standard.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This standard addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively, where applicable, as there were no historical transactions affected by this implementation.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-01, “Clarifying the

Definition of a Business.” This standard provided additional guidance on whether an integrated set of assets and activities constitutes a business. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods were not adjusted. In addition, the Company had no activity during the year ended December 31, 2019 that was required to be treated differently under this ASU than previously issued guidance.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-09, “Scope of Modification Accounting.” This standard provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods presented were not adjusted. There were no changes to the terms or conditions of current share-based payment awards during the year ended December 31, 2019.

(b) New Accounting Requirements and Disclosures

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.”

This standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” This standard removes, modifies, and adds additional requirements for disclosures related to fair value measurement in ASC 820. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted in any interim period. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

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Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

Effective January 1, 2018, the Company adopted ASC 606 using the full retrospective method applied to those contracts which were not completed as of December 31, 2015. As a result of electing the full retrospective adoption approach, results for reporting periods beginning after December 31, 2015 are presented under ASC 606.

There was no material impact upon the adoption of ASC 606. As revenue is primarily related to product sales accounted for at a point in time and service contracts that are primarily short-term in nature (typically less than 30 days), the Company did not record any adjustments to retained earnings at December 31, 2015 or for any periods previously presented.

Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled

to in exchange for those goods or services. In recognizing revenue for products and services, the Company determines the transaction price of purchase orders or contracts with customers, which may consist of fixed and variable consideration. Determining the transaction price may require significant judgment by management, which includes identifying performance obligations, estimating variable consideration to include in the transaction price, and determining whether promised goods or services can be distinguished in the context of the contract. Variable consideration typically consists of product returns and is estimated based on the amount of consideration the Company expects to receive. Revenue accruals are recorded on an

ongoing basis to reflect updated variable consideration information.

For certain contracts, the Company recognizes revenue under the percentage-of-completion method of accounting, measured by the percentage of “costs incurred to date” to the “total estimated costs of completion.” This percentage is applied to the “total estimated revenue at completion” to calculate proportionate revenue earned to date. For the years ended December 31, 2019, 2018, and 2017, the percentage-of-completion revenue accounted for less than 0.1% of total revenue during the respective time periods. This resulted in immaterial unfulfilled performance obligations and immaterial contract assets and/or liabilities for which the Company did not record adjustments to opening retained earnings as of December 31, 2015 or for any periods previously presented.

The vast majority of the Company’s products are sold at a point in time and service contracts are short-term in nature. Sales are billed on a monthly basis with payment terms customarily 30-45 days from invoice receipt. In addition, sales taxes are excluded from revenues.

Disaggregation of Revenue

The Company has disaggregated revenues by product sales (point-in-time revenue recognition) and service revenue (over-time revenue recognition), where product sales accounted for over 95% of total revenue for the years ended December 31, 2019, 2018, and 2017.

The Company differentiates revenue and operating expenses (excluding depreciation and amortization) based on whether the source of revenue is attributable to products or services. Revenue and operating expenses (excluding depreciation and amortization) disaggregated by revenue source are as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
Revenue:
Products	$	115,471	$	172,412	$	237,211
Services	3,882		5,361		5,895
	$	119,353	$	177,773	$	243,106
Operating expenses (excluding depreciation and amortization):
Products	$	147,709	$	152,846	$	182,330
Services	1,516		6,962		6,414
	$	149,225	$	159,808	$	188,744

Arrangements with Multiple Performance Obligations

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the total transaction price is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. Standalone selling prices are generally determined based on the prices charged to customers (“observable standalone price”) or an expected cost plus a margin approach. For combined products and services within a contract, the Company accounts for individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration is allocated between separate products and services within a contract based on the prices at the observable standalone price. For items that are not sold separately, the expected cost plus a margin approach is used to estimate the standalone selling price of each performance obligation.

Contract Balances

Under revenue contracts for both products and services, customers are invoiced once the performance obligations have been satisfied, at which point payment is unconditional. Accordingly, no revenue contracts give rise to contract assets or liabilities under ASC 606.

Practical Expedients and Exemptions

The Company has elected to apply several practical expedients as discussed below:

• Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded within segment selling and administrative expenses.

• The majority of the Company’s services are short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14, exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the

performance obligation is part of a contract that has an original expected duration of one year or less.

• The Company’s payment terms are short-term in nature with settlements of one year or less. The Company has utilized the practical expedient in ASC 606-10-32-18, exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

• In most service contracts, the Company has the right to consideration from a customer in an amount that

corresponds directly with the value to the customer of the Company’s performance completed to date. For these contracts, the Company has utilized the practical expedient in ASC 606-10-55-18, allowing the Company to recognize revenue in the amount to which it has a right to invoice.

Accordingly, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

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Property and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

Property and equipment are as follows (in thousands):

	December 31
	2019			2018
Land	$	4,440		$	4,372
Buildings and leasehold improvements	38,741			37,719
Machinery and equipment	27,694			26,995
Fixed assets in progress	—			581
Furniture and fixtures	1,671			1,573
Transportation equipment	1,440			1,852
Computer equipment and software	3,348			9,370
Property and equipment	77,334			82,462
Less accumulated depreciation	(37,505		)	(36,977		)
Property and equipment, net	$	39,829		$	45,485

Depreciation expense totaled $6.5 million, $7.8 million, and $8.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

During the years ended December 31, 2019, 2018, and 2017, no impairments were recognized related to property and equipment.

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement of Comprehensive Income [Abstract]
Loss from continuing operations	$ (76,735)	$ (73,441)	$ (17,504)
Income (loss) from discontinued operations, net of tax	44,456	2,743	(9,891)
Net loss	(32,279)	(70,698)	(27,395)
Other comprehensive income (loss):
Foreign currency translation adjustment	150
Foreign currency translation adjustment	150	(232)	72
Comprehensive loss	(32,129)	(70,930)	(27,323)
Net loss attributable to noncontrolling interests	0	358	0
Comprehensive loss attributable to Flotek	$ (32,129)	$ (70,572)	$ (27,323)

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Cover Page - USD ($)	12 Months Ended
	Dec. 31, 2019	Mar. 03, 2020	Jun. 28, 2019
Cover [Abstract]
Document Type	10-K/A
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	1-13270
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	90-0023731
Entity Address, Address Line One	8846 N. Sam Houston Parkway W.
Entity Address, City or Town	Houston,
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77064
City Area Code	713
Local Phone Number	849-9911
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	FTK
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 150,815,000
Entity Common Stock, Shares Outstanding		58,951,784
Documents Incorporated by Reference	.
Entity Registrant Name	FLOTEK INDUSTRIES INC/CN/
Entity Central Index Key	0000928054
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

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Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement.

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

• Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs.

Liabilities Measured at Fair Value on a Recurring Basis

At December 31, 2019 and 2018, no liabilities were required to be measured at fair value on a recurring basis. There were no transfers in or out of either Level 1, Level 2, or Level 3 fair value measurements during the years ended December 31, 2019, 2018, and 2017.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company’s non-financial assets, including property and equipment, goodwill, and other intangible assets are measured at fair value on a non-recurring basis and are subject to fair value adjustment in certain circumstances. During the three months ended June 30, 2018, the Company recorded an impairment of $37.2 million for goodwill in the ECT reporting unit (see Note 9). No impairments of goodwill were recognized during the years ended December 31, 2019,and 2017. No impairment of property and equipment or other intangible assets were recognized during the years ended December 31, 2019, 2018, and 2017.

Fair Value of Other Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair

value due to the short-term nature of these accounts. The Company had no cash equivalents at December 31, 2019 or 2018.

The carrying amount and estimated fair value of the Company’s long-term debt are as follows (in thousands):

	December 31,
	2019				2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Borrowings under revolving credit facility	$	—	$	—	$	49,731	$	49,731

The carrying amount of borrowings under the revolving credit facility approximates its fair value because the interest rate is variable.

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in the carrying value of goodwill

Changes in the carrying amount of goodwill for the ECT reporting unit are as follows (in thousands):

Balance at December 31, 2017:
Goodwill	$	37,180
Accumulated impairment losses	—
Goodwill balance, net	37,180
Activity during the year 2018:
Goodwill impairment recognized	(37,180		)
Acquisition goodwill recognized	—
Balance at December 31, 2018:
Goodwill	37,180
Accumulated impairment losses	(37,180		)
Goodwill balance, net	—
Activity during the year 2019:
Goodwill impairment recognized	—
Acquisition goodwill recognized	—
Balance at December 31, 2019:
Goodwill	—
Accumulated impairment losses	—
Goodwill balance, net	$	—

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Elements [Abstract]

Components of supplemental cash flow information

Supplemental cash flow information is as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Supplemental non-cash investing and financing activities:
Value of common stock issued in payment of accrued liability	$	—		$	—		$	188
Exercise of stock options by common stock surrender	—			—			5,863
Supplemental cash payment information:
Interest paid	$	599		$	2,502		$	1,851
Income taxes (received, net of payments) paid, net of refunds	(699		)	(139		)	(10,195		)

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Summary of Significant Accounting Policies (New Accounting Pronouncements) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 16,388		$ 0
Long-term operating lease liabilities	16,973
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets		$ 18,400
Long-term operating lease liabilities	$ 18,400	$ 18,400

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Supplemental non-cash investing and financing activities:
Value of common stock issued in payment of accrued liability	$ 0	$ 0	$ 188
Exercise of stock options by common stock surrender	0	0	5,863
Supplemental cash payment information:
Interest paid	599	2,502	1,851
Income taxes (received, net of payments) paid, net of refunds	$ (699)	$ (139)	$ (10,195)

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Income Taxes (Domestic and Foreign Income) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
United States	$ (76,758)	$ (80,034)	$ (10,025)
Foreign	(178)	(623)	(1,367)
Loss before income taxes	$ (76,936)	$ (80,657)	$ (11,392)

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Common Stock (Employee Stock Purchase Plan) (Details) - USD ($) $ in Millions		12 Months Ended
	May 18, 2012	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense		$ 7.1	$ 10.6	$ 11.4
Total fair value of the shares purchased under the plan		0.1	0.8	1.0
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Registered shares of common stock (in shares)	500,000
Percent of common stock fair market value	85.00%
Offering period	3 months
Maximum employee compensation payroll deductions may not exceed	10.00%
Maximum shares employees may purchase in any one offering period (in shares)	1,000
Share-based compensation expense		$ 0.1	$ 0.1	$ 0.1

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Common Stock (Stock Option Activity and Additional Details) (Details) - shares	3 Months Ended	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Granted (in shares)		3,000,000
Number of stock options vested (in shares)		0	0	0
Time-Vested options
Class of Stock [Line Items]
Granted (in shares)	1,000,000.0
Vesting period in years		5 years
Performance-Based options
Class of Stock [Line Items]
Granted (in shares)	2,000,000.0
Vesting period in years		7 years

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Fair Value Measurements (Additional Disclosures) (Details) - USD ($)	3 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impairment of goodwill		$ 0	$ 37,180,000	$ 0
Impairment related to property and equipment		0	0	0
Impairment of related to other intangible assets		0	0	$ 0
Cash equivalents		$ 0	$ 0
Energy Chemical Technologies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impairment of goodwill	$ 37,200,000

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Business Segment, Geographic and Major Customer Information (Additional Disclosures) (Details)	12 Months Ended
	Dec. 31, 2019 segment
Segment Reporting [Abstract]
Number of reportable segments	1

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Common Stock (Reconciliation of Common Shares Issued and Additional Disclosures) (Details)		12 Months Ended
	Nov. 09, 2009 series $ / shares shares	Dec. 31, 2019 $ / shares shares	Dec. 31, 2018 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, shares authorized (in shares)	80,000,000	80,000,000	80,000,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001	$ 0.0001
Preferred stock. shares authorized (in shares)	100,000	100,000	100,000
Preferred stock, minimum number of series authorized | series	1
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001	$ 0.0001
Increase (Decrease) in Stockholders' Equity
Shares issued at the beginning of the year (in shares)		62,162,875	60,622,986
Issued as restricted stock award grants (in shares)		924,022	1,539,889
Shares issued at the end of the year (in shares)		63,656,897	62,162,875
Restricted Stock Units (RSUs)
Increase (Decrease) in Stockholders' Equity
Issued as restricted stock award grants (in shares)		570,000	0

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Consolidated Statements of Operations - USD ($) shares in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Statement [Abstract]
Revenue	$ 119,353,000	$ 177,773,000	$ 243,106,000
Costs and expenses:
Operating expenses (excluding depreciation and amortization)	149,225,000	159,808,000	188,744,000
Corporate general and administrative	27,975,000	31,467,000	41,492,000
Depreciation and amortization	8,465,000	9,216,000	9,768,000
Research and development	8,863,000	10,356,000	13,130,000
(Gain) loss on disposal of long-lived assets	1,450,000	(443,000)	292,000
Impairment of goodwill	0	37,180,000	0
Total costs and expenses	195,978,000	247,584,000	253,426,000
Loss from operations	(76,625,000)	(69,811,000)	(10,320,000)
Other (expense) income:
Interest expense	(2,019,000)	(2,866,000)	(2,168,000)
Loss on sale of business	0	(360,000)	0
Loss on write-down of assets held for sale	0	(2,580,000)	0
Other (expense) income, net	1,708,000	(5,040,000)	1,096,000
Total other expense	(311,000)	(10,846,000)	(1,072,000)
Loss before income taxes	(76,936,000)	(80,657,000)	(11,392,000)
Income tax benefit (expense)	201,000	7,216,000	(6,112,000)
Loss from continuing operations	(76,735,000)	(73,441,000)	(17,504,000)
Income (loss) from discontinued operations, net of tax	44,456,000	2,743,000	(9,891,000)
Net loss	(32,279,000)	(70,698,000)	(27,395,000)
Net loss attributable to noncontrolling interests	0	358,000	0
Net loss attributable to Flotek Industries, Inc. (Flotek)	(32,279,000)	(70,340,000)	(27,395,000)
Amounts attributable to Flotek shareholders:
Loss from continuing operations	(76,735,000)	(73,083,000)	(17,504,000)
Income (loss) from discontinued operations, net of tax	$ 44,456,000	$ 2,743,000	$ (9,891,000)
Basic earnings (loss) per common share:
Continuing operations (in dollars per share)	$ (1.31)	$ (1.26)	$ (0.30)
Discontinued operations, net of tax (in dollars per share)	0.76	0.05	(0.17)
Basic earnings (loss) per common share (in dollars per share)	(0.55)	(1.21)	(0.47)
Diluted earnings (loss) per common share:
Continuing operations (in dollars per share)	(1.31)	(1.26)	(0.30)
Discontinued operations, net of tax (in dollars per share)	0.76	0.05	(0.17)
Diluted earnings (loss) per common share (in dollars per share)	$ (0.55)	$ (1.21)	$ (0.47)
Weighted average common shares:
Weighted average common shares used in computing basic earnings (loss) per common share (in shares)	58,750	57,995	57,580
Weighted average common shares used in computing diluted earnings (loss) per common share (in shares)	58,750	57,995	57,580

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Long-Term Debt and Credit Facility

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Long-Term Debt and Credit Facility

Long-Term Debt and Credit Facility

Long-term debt is as follows (in thousands): 

	December 31,
	2019		2018
Long-term debt, classified as current:
Borrowings under revolving credit facility	$	—	$	49,731

On March 1, 2019, the Company repaid the outstanding balance of the Credit Facility.

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Organization and Nature of Operations

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Operations

Organization and Nature of Operations

Flotek Industries, Inc. (“Flotek” or the “Company”) is a global, diversified, technology-driven company that develops and supplies chemistries and services to the oil and gas industries. Flotek also supplied high value compounds to companies that make food and beverages, cleaning products, cosmetics, and other products that are sold in consumer and industrial markets, classified as discontinued operations at December 31, 2018.

The Company’s oilfield business designs, develops, manufactures, packages, distributes, delivers, and markets reservoir-centric fluid systems, including specialty and conventional chemistries, for use in oil and gas well drilling, cementing, completion, remediation, and stimulation activities designed to maximize recovery in both new and mature fields. Activities in this segment also include construction and management of automated material handling facilities as well as management of loading facilities and blending operations for oilfield services companies. In the segment reported as discontinued operations at December 31, 2018, the Company processed citrus oil to produce (1) high

value compounds used as additives by companies in the flavors and fragrances markets and (2) environmentally friendly chemistries for use in numerous industries around the world, including the oil and gas industry.

Flotek operates in seven domestic and international markets. Customers include major integrated oil and gas companies, oilfield services companies, independent oil and gas companies, pressure-pumping service companies, national and state-owned oil companies, and international supply chain management companies. The Company also served customers who purchase non-energy-related citrus oil and related products, including household and commercial cleaning product companies, fragrance and cosmetic companies, and food manufacturing companies, in the segment reported as discontinued operations at December 31, 2018.

Flotek was initially incorporated under the laws of the Province of British Columbia on May 17, 1985. On October 23, 2001, Flotek changed its corporate domicile to the state of Delaware.

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Discontinued Operations

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

During the fourth quarter of 2018, the Company initiated and began executing a strategic plan to sell its Consumer and Industrial Chemistry Technologies (“CICT”) segment. An investment banking advisory services firm was engaged and actively marketed this segment.

The Company met all of the criteria to classify the CICT segment’s assets and liabilities as held for sale in the fourth quarter 2018. The Company has classified the assets, liabilities, and results of operations for this segment as “Discontinued Operations” for all periods presented.

Disposal of the CICT reporting segment represented a strategic shift that will have a major effect on the Company’s operations and financial results.

On January 10, 2019, the Company entered into a Share Purchase Agreement with Archer-Daniels-Midland Company (“ADM”) for the sale of all of the shares representing membership interests in its wholly owned subsidiary, Florida Chemical Company, LLC, which represented the CICT segment.

Effective February 28, 2019, the Company completed the sale of the CICT segment to ADM for $175.0 million in cash consideration, with $4.4 million temporarily held in escrow

by ADM for post-closing working capital adjustments for up to 90 days and $13.1 million temporarily held in escrow to satisfy potential indemnification claims by ADM with anticipated releases at 6 months, 12 months, and 15 months. As of December 31, 2019, the escrow balance including interest was $9.9 million reflected in other current assets.

Concurrent with the closing of the sale of the CICT segment, the Company retained $11.1 million of historical inventory previously held by the CICT segment. In addition, the Company executed a long-term supply agreement for terpene. The term of the agreement runs through December 2023, with an option to extend for an additional year. The remaining minimum commitment of the agreement at December 31, 2019 is $72 million. Pursuant to the post-closing working capital dispute resolution procedures set forth in the Share Purchase Agreement, the Company and ADM engaged a neutral third party arbitrator to help reach agreement on the final post-closing working capital adjustment. In February 2020, the third party arbitrator ruled in favor of awarding ADM for the entire $4.1 million disputed amount resulting in a reduction to the gain on the sale of the business as of December 31, 2019.

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2019, 2018, and 2017 (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019			2018			2017
Discontinued operations:
Revenue	$	11,031		$	72,344		$	73,992
Operating expenses	(11,572		)	(65,940		)	(63,621		)
Depreciation and amortization	—			(2,760		)	(2,391		)
Research and development	(69		)	(590		)	(515		)
Income from operations	(610		)	3,054			7,465
Other income (expense)	35			341			(284		)
Gain on sale of businesses	64,160			—			—
Income before income taxes	63,585			3,395			7,181
Income tax expense	(19,129		)	(652		)	(2,730		)
Net income (loss) from discontinued operations	$	44,456		$	2,743		$	4,451

The assets and liabilities held for sale on the Consolidated Balance Sheets as of December 31, 2019 and 2018 are as follows (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019		2018
Assets:
Accounts receivable, net	$	—	$	10,547
Inventories, net	—		52,069
Other current assets	—		446
Property and equipment, net	—		15,899
Goodwill	—		19,480
Other intangible assets, net	—		20,029
Assets held for sale	—		118,470
Liabilities:
Accounts payable	$	—	$	8,883
Accrued liabilities	—		291
Liabilities held for sale	$	—	$	9,174

During the fourth quarter of 2016, the Company initiated a strategic restructuring of its business to enable a greater focus on its core businesses in energy chemistry and consumer and industrial chemistry. The Company executed a plan to sell or otherwise dispose of the Drilling Technologies and Production Technologies segments. An investment banking advisory services firm was engaged and actively marketed these segments.

The Company met all of the criteria to classify the Drilling Technologies and Production Technologies segments’ assets and liabilities as held for sale in the fourth quarter 2016. The Company has classified the assets, liabilities, and results of operations for these two segments as “Discontinued Operations” for all periods presented.

Disposal of the Drilling Technologies and Production Technologies reporting segments represented a strategic shift that would have a major effect on the Company’s operations and financial results.

On May 22, 2017, the Company completed the sale of substantially all of the assets and transfer of certain specified liabilities and obligations of the Company’s Drilling Technologies segment to National Oilwell Varco, L.P. (“NOV”) for $17.0 million in cash consideration, subject to normal working capital adjustments, with $1.5 million held back by NOV for up to 18 months to satisfy potential indemnification claims.

On May 23, 2017, the Company completed the sale of substantially all of the assets and transfer of certain specified liabilities and obligations of the Company’s Production Technologies segment to Raptor Lift Solutions, LLC (“Raptor Lift”) for $2.9 million in cash consideration, with $0.4 million held back by Raptor Lift to satisfy potential indemnification claims.

On August 16, 2017, the Company completed the sale of substantially all of the remaining assets of the Company’s

Drilling Technologies segment to Galleon Mining Tools, Inc. for $1.0 million in cash consideration and a note receivable of $1.0 million due in one year.

The sale or disposal of the assets and transfer or liquidation of liabilities and obligations of these segments was completed in 2017. The Company has no continuing involvement with the discontinued operations.

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2018 and 2017 (in thousands):

	Drilling Technologies					Production Technologies
	2018		2017			2018		2017
Discontinued operations:
Revenue	$	—	$	11,534		$	—	$	4,002
Cost of revenue	—		(7,309		)	—		(3,236		)
Selling, general and administrative	—		(6,963		)	—		(1,759		)
Research and development	—		(5		)	—		(364		)
Gain (loss) on disposal of long-lived assets	—		97			—		—
Loss from operations	—		(2,646		)	—		(1,357		)
Other expense	—		(96		)	—		(52		)
Loss on sale of businesses	—		(1,600		)	—		(479		)
Loss on write-down of assets held for sale	—		(6,831		)	—		(9,718		)
Loss before income taxes	—		(11,173		)	—		(11,606		)
Income tax benefit	—		4,138			—		4,299
Net loss from discontinued operations	$	—	$	(7,035	)	$	—	$	(7,307	)

At December 31, 2017, all remaining assets and liabilities of the discontinued operations were assumed by the Company’s continuing operations. These balances included $0.3 million of net accounts receivable, $1.4 million of sales price hold-back that was received during 2018, and $1.4 million of accrued liabilities partially settled in 2018, with the remainder to be settled in 2019.

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Inventories

12 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories are as follows (in thousands):

	December 31,
	2019			2018
Raw materials	$	4,339		$	10,608
Work-in-process	—			—
Finished goods	23,056			18,798
Inventories	27,395			29,406
Less reserve for excess and obsolete inventory	(5,698		)	(2,117		)
Inventories, net	$	21,697		$	27,289

Changes in the reserve for excess and obsolete inventory are as follows (in thousands):

	2019			2018			2017
Balance, beginning of year	$	2,117		$	368		$	50
Charged to provisions	5,659			2,418			388
Deductions for disposals	(2,078		)	(669		)	(70		)
Balance, end of the year	$	5,698		$	2,117		$	368

The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on an assessment of market values. Write-downs or write-offs of inventory are charged to cost of goods sold. At December 31, 2019, the Company recorded a reserve for excess terpene of $4.4 million.

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Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of other intangible assets

Other intangible assets are as follows (in thousands):

	December 31,
	2019				2018
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Finite lived intangible assets:
Patents and technology	$	17,493	$	6,715	$	18,884	$	6,689
Customer lists	15,367		6,013		15,367		5,259
Trademarks and brand names	1,351		1,160		1,485		1,149
Total finite lived intangible assets acquired	34,211		13,888		35,736		13,097
Deferred financing costs	—		—		1,924		496
Total amortizable intangible assets	34,211		$	13,888	37,660		$	13,593
Indefinite lived intangible assets:
Trademarks and brand names	2,760				2,760
Total other intangible assets	$	36,971			$	40,420
Carrying amount:
Other intangible assets, net	$	23,083			$	26,827

Schedule of estimated future amortization expense

Estimated future amortization expense for other finite lived intangible assets, including deferred financing costs, at December 31, 2019 is as follows (in thousands):

Year ending December 31,
2020	$	1,941
2021	1,935
2022	1,915
2023	1,858
2024	1,854
Thereafter	10,109
Other amortizable intangible assets, net	$	19,612

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Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of components of lease expense and supplemental cash flow information

The components of lease expense and supplemental cash flow information are as follows (in thousands):

	For the years ending
	December 31,
	2019		2018
Operating lease expense	$	2,609	$	—
Finance lease expense:
Amortization of right-of-use assets	1,237		—
Interest on lease liabilities	10		—
Total finance lease expense	1,247		—
Short-term lease expense	123		—
Total lease expense	$	3,979	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	2,336		—
Operating cash flows from finance leases	10		—
Financing cash flows from finance leases	51		—

Schedule of maturities of lease liabilities

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

Schedule of maturities of lease liabilities

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

Schedule of supplemental balance sheet information

Supplemental balance sheet information related to leases is as follows (in thousands):

	December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	16,388
Current portion of lease liabilities	$	486
Long-term operating lease liabilities	16,973
Total operating lease liabilities	$	17,459
Finance Leases
Property and equipment	$	293
Accumulated depreciation	(28		)
Property and equipment, net	$	265
Current portion of lease liabilities	$	55
Long-term finance lease liabilities	158
Total finance lease liabilities	$	213
Weighted Average Remaining Lease Term
Operating leases	16.6 years
Finance leases	4.6 years
Weighted Average Discount Rate
Operating leases	8.9		%
Finance leases	9.0		%

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Common Stock

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Common Stock

Common Stock

The Company’s Certificate of Incorporation, as amended November 9, 2009, authorizes the Company to issue up to 80 million shares of common stock, par value $0.0001 per share, and 100,000 shares of one or more series of preferred stock, par value $0.0001 per share.

A reconciliation of the changes in common shares issued is as follows:

	Year ended December 31,
	2019	2018
Shares issued at the beginning of the year	62,162,875	60,622,986
Issued as restricted stock award grants	924,022	1,539,889
Issued as restricted stock unit grants	570,000	—
Shares issued at the end of the year	63,656,897	62,162,875

Stock-Based Incentive Plans

Stockholders approved long term incentive plans in 2019, 2018, 2014, 2010, and 2007 (the “2019 Plan”, the “2018 Plan,” the “2014 Plan,” the “2010 Plan,” and the “2007 Plan,” respectively) under which the Company may grant equity awards to officers, key employees, non-employee directors, and service providers in the form of stock options, restricted stock, and certain other incentive awards. The maximum

number of shares that may be issued under the 2019 Plan, 2018 Plan, 2014 Plan, 2010 Plan, and 2007 Plan are 1.0 million 3.0 million, 5.2 million, 6.0 million, and 2.2 million, respectively. At December 31, 2019, the Company had a total of 3.9 million shares remaining to be granted under the 2019 Plan, 2018 Plan, 2014 Plan, and 2010 Plan. Shares may no longer be granted under the 2007 Plan.

Stock Options

All stock options are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. During the fourth quarter 2019, 3.0 million stock options were granted, 1.0 million time-vested and 2.0 million performance-based. The time-vested stock options will vest equally over the next five years. The performance-based options are restricted until performance criteria defined in the agreement are met. Proceeds received from stock option exercises are credited to common stock and additional paid-in capital, as appropriate. The Company uses historical data to estimate pre-vesting option forfeitures. Estimates are adjusted when actual forfeitures differ from the estimate. Stock-based compensation expense is recorded for all equity awards expected to vest. 

No stock options vested during the years ended December 31, 2019, 2018, and 2017.

Stock Options	Shares	Weighted-Average Exercise Price
Outstanding as of January 1, 2019	—	$	—
Granted	3,000,000	1.22
Exercised	—	—
Forfeited	—	—
Expired	—	—
Outstanding as of
December 31, 2019	3,000,000	$	1.22
Vested or expected to vest at
December 31, 2019	—	$	—
Options exercisable as of
December 31, 2019	—	$	—

The following table sets forth significant assumptions used in the Black-Scholes model for time-vested options and the Monte Carlo model for performance-based options to determine the fair value of the options at December 31, 2019.

	Time-Vested Options		Performance-Based Options
Risk-free interest rate	1.81	%	1.84	%
Expected volatility of common stock	73.59	%	71.57	%
Expected life of options in years	5.0		7.0
Dividend yield	—	%	—	%
Vesting period in years	5.0		7.0

Restricted Stock

The Company grants employees either time-vesting or performance-based restricted shares in accordance with terms specified in the Restricted Stock Agreements (“RSAs”). Time-

vesting restricted shares vest after a stipulated period of time has elapsed subsequent to the date of grant, generally three

years. Certain time-vested shares have also been issued with a portion of the shares granted vesting immediately.

Performance-based restricted shares are issued with performance criteria defined over a designated performance period and vest only when, and if, the outlined performance

criteria are met. During the year ended December 31, 2019, 63% of the restricted shares granted were time-vesting and 37% were performance-based. Grantees of restricted shares retain voting rights for the granted shares.

Restricted stock share activity for the year ended December 31, 2019 is as follows:

Restricted Stock Shares	Shares		Weighted- Average Fair Value at Date of Grant
Non-vested at January 1, 2019	1,050,372		$	3.47
Granted to employees	1,494,022		2.62
Vested	(615,941	)	3.72
Forfeited	(299,433	)	3.16
Non-vested at December 31, 2019	1,629,020		$	2.66

The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2019, 2018, and 2017 was $2.62, $10.62, and $11.92 per share, respectively. The total fair value of restricted stock that vested during the years ended December 31, 2019, 2018, and 2017 was $6.3 million, $8.6 million, and $15.4 million, respectively.

At December 31, 2019, there was $1.8 million of unrecognized compensation expense related to non-vested restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Units

During the year ended December 31, 2019, the Company granted performance-based restricted stock units (“RSUs”) for 1,071,530 shares equivalents. The performance period for these share equivalents continues until December 31, 2024.

During the year ended December 31, 2018, the Company granted performance-based RSUs for 604,682 share equivalents, which had a performance period through December 31, 2019. No RSUs were earned during this performance period.

Restricted stock units activity for the year ended December 31, 2019 is as follows:

Restricted Stock Units	Units		Weighted- Average Fair Value at Date of Grant
RSU equivalents at January 1, 2019	301,766		$	3.94
2018 equivalents forfeited	(272,046	)	6.39
Total equivalents	29,720		—
2019 equivalents granted	1,071,530		3.75
2019 equivalents forfeited	(62,776	)	1.66
RSU equivalents at December 31, 2019	1,038,474		$	3.24

At December 31, 2019, there was $2.1 million of unrecognized compensation expense related to 2019 and 2018 restricted stock units. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.3 years.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“ESPP”) was approved by stockholders on May 18, 2012. The Company registered 500,000 shares of its common stock, currently held as treasury shares, for issuance under the ESPP. The purpose of the ESPP is to provide employees with an opportunity to purchase shares of the Company’s common stock through accumulated payroll deductions. The ESPP allows participants

to purchase common stock at a purchase price equal to 85% of the fair market value of the common stock on the last business day of a three-month offering period which coincides with calendar quarters. Payroll deductions may not exceed 10% of an employee’s compensation and participants may not purchase more than 1,000 shares in any one offering period. In addition, for each calendar year, an employee may not be granted purchase rights for Flotek Stock valued over $25,000, as determined at the time such purchase right is granted. The fair value of the discount associated with shares purchased under the plan is recognized as share-based compensation expense and was $0.1 million, $0.1 million, and $0.1 million during the years ended December 31, 2019, 2018, and 2017, respectively. The total fair value of the shares purchased under the plan during the years ended December 31, 2019, 2018, and 2017 was $0.1 million, $0.8 million, and $1.0 million, respectively. The employee payment associated with participation in the plan was satisfied through payroll deductions. Effective after the third quarter 2018 purchase, the Company temporarily suspended the ESPP due to lack of shares. Following shareholder approval for additional shares, the Company initiated the ESPP during the second quarter 2019.

Share-Based Compensation Expense

Non-cash share-based compensation expense related to restricted stock, restricted stock unit grants, and stock purchased under the Company’s ESPP was $7.1 million, $10.6 million, and $11.4 million during the years ended December 31, 2019, 2018, and 2017, respectively.

Treasury Stock

The Company accounts for treasury stock using the cost method and includes treasury stock as a component of stockholders’ equity. During the years ended December 31, 2019, 2018, and 2017, the Company purchased 93,977 shares, 199,644 shares, and 238,216 shares, respectively, of the Company’s common stock at market value as payment of income tax withholding owed by employees upon the vesting of restricted shares and the exercise of stock options. Shares issued as restricted stock awards to employees that were forfeited are accounted for as treasury stock. During the year ended December 31, 2019, there were no shares surrendered

for the exercise of stock options. During the years ended December 31, 2018 and 2017, shares surrendered for the exercise of stock options were 478,287 and 3,225, respectively. These surrendered shares are also accounted for as treasury stock.

Stock Repurchase Program

In November 2012, the Company’s Board of Directors authorized the repurchase of up to $25 million of the Company’s common stock. Repurchases may be made in the open market or through privately negotiated transactions. Through December 31, 2019, the Company has repurchased $25 million of its common stock under this authorization.

In June 2015, the Company’s Board of Directors authorized the repurchase of up to an additional $50 million of the Company’s common stock. Repurchases may be made in the open market or through privately negotiated transactions. Through December 31, 2019, the Company repurchased $0.3 million of its common stock under this authorization.

During the year ended December 31, 2018, the Company did not repurchase any shares of its outstanding common stock. During the year ended December 31, 2017, the Company repurchased 905,000 shares of its outstanding common stock on the open market at a cost of $5.2 million, inclusive of transaction costs, or an average price of $5.75 per share. During the year ended December 31, 2016, the Company did not repurchase any shares of its outstanding common stock.

At December 31, 2019, the Company had $49.7 million remaining under its share repurchase program. A covenant under the Company’s Credit Facility limited the amount that may be used to repurchase the Company’s common stock. At December 31, 2019, this covenant did not permit additional share repurchases.

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Related Party Transaction

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transaction

In January 2017, the IRS notified the Company that it was examining the Company’s federal tax returns for the year ended December 31, 2014. As a result of this examination, the IRS informed the Company on May 1, 2019 that certain employment taxes related to the compensation of our CEO, Mr. Chisholm, were not properly withheld in 2014 and proposed an adjustment. Mr. Chisholm’s affiliated companies through which he provided his services have agreed to indemnify the Company for any such taxes, and Mr. Chisholm has executed a personal guaranty in favor of the Company, supporting this indemnification.

At June 30, 2019, the Company recorded a liability of $2.4 million related to the estimated employment tax under-withholding for the years 2014 through 2018. By September 30, 2019, the liability totaled $1.8 million, after the Company paid $0.6 million to the IRS for these taxes and made an additional accrual covering the estimated under-withholding

tax liability through 2019. In addition, at June 30, 2019 the Company recorded a receivable from the affiliated companies totaling $2.4 million. In October 2019, an amendment to the employment agreement was executed, giving the Company the contractual right of offset for any amounts owed to the Company against, and giving the Company the right to withhold payments equal to amounts reasonably estimated to potentially become due to the Company by the affiliated companies from, any amounts owed under the employment agreement. The Company netted the related party receivable against the severance payable as of December 31, 2019. At December 31, 2019, the Company recorded $1.8 million for potential liability to the IRS.

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Summary of Significant Accounting Policies (Basis of Presentation) (Details)	Dec. 31, 2019
Accounting Policies [Abstract]
Percentage of capital owned in subsidiaries (less than)	100.00%

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum lease payments under operating leases

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

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Other Intangible Assets (Additional Disclosures) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Amortization of other intangible assets	$ 2,000,000.0	$ 1,400,000	$ 1,500,000
Amortization of deferred financing costs	1,428,000	400,000	472,000
Impairment loss	$ 0	$ 0	$ 0
Minimum
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Amortization period	2 years
Maximum
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Amortization period	95 years

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Leases Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Operating Leases
Operating lease right-of-use assets	$ 16,388	$ 0
Current portion of lease liabilities	486
Long-term operating lease liabilities	16,973
Total operating lease liabilities	17,459
Finance Leases
Property and equipment	293
Accumulated depreciation	(28)
Property and equipment, net	265
Current portion of lease liabilities	55
Long-term finance lease liabilities	158	0
Total finance lease liabilities	$ 213	$ 213
Weighted Average Remaining Lease Term
Operating leases	16 years 7 months 6 days
Finance leases	4 years 7 months 6 days
Weighted Average Discount Rate
Operating leases	8.90%
Finance leases	9.00%

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Business Segment, Geographic and Major Customer Information (Reportable Segments) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Revenue	$ 19,526	$ 21,879	$ 34,692	$ 43,256	$ 43,449	$ 53,709	$ 39,546	$ 41,069	$ 119,353	$ 177,773	$ 243,106
Loss from operations	$ (36,647)	$ (11,853)	$ (13,859)	$ (14,266)	$ (9,368)	$ (4,080)	$ (47,140)	$ (9,223)	(76,625)	(69,811)	(10,320)
Depreciation and amortization									8,465	9,216	9,768
Capital expenditures									2,411	3,559	4,197
Operating Segments | Energy Chemistry Technologies
Segment Reporting Information [Line Items]
Revenue									119,353	177,773	243,106
Loss from operations									(46,485)	(36,817)	33,611
Depreciation and amortization									7,439	7,107	7,323
Capital expenditures									2,411	2,733	3,279
Corporate and Other
Segment Reporting Information [Line Items]
Revenue									0	0	0
Loss from operations									(30,140)	(32,994)	(43,931)
Depreciation and amortization									1,026	2,109	2,445
Capital expenditures									$ 0	$ 826	$ 918

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Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Quarterly Financial Data [Abstract]
Revenue	$ 19,526	$ 21,879	$ 34,692	$ 43,256	$ 43,449	$ 53,709	$ 39,546	$ 41,069	$ 119,353	$ 177,773	$ 243,106
Loss from operations	(36,647)	(11,853)	(13,859)	(14,266)	(9,368)	(4,080)	(47,140)	(9,223)	(76,625)	(69,811)	(10,320)
Loss from continuing operations	(37,138)	(11,227)	(12,990)	(15,380)	9,943	(4,869)	(68,987)	(9,528)	(76,735)	(73,441)	(17,504)
Income (loss) from discontinued operations, net of tax	(2,425)	117	(1,608)	48,372	(1,385)	937	(6,404)	9,595	44,456	2,743	(9,891)
Net loss	(39,563)	(11,110)	(14,598)	32,992	$ 8,558	$ (3,932)	$ (75,391)	$ 67	(32,279)	(70,698)	(27,395)
Net loss attributable to noncontrolling interests	0	0	0	0					0	358	0
Net loss attributable to Flotek Industries, Inc. (Flotek)	(39,563)	(11,110)	(14,598)	32,992					(32,279)	(70,340)	(27,395)
Amounts attributable to Flotek shareholders:
Loss from continuing operations	(37,138)	(11,227)	(12,990)	(15,380)					(76,735)	(73,083)	(17,504)
Income (loss) from discontinued operations, net of tax	$ (2,425)	$ 117	$ (1,608)	$ 48,372					$ 44,456	$ 2,743	$ (9,891)
Basic earnings (loss) per common share:
Continuing operations (in dollars per share)	$ (0.64)	$ (0.19)	$ (0.22)	$ (0.26)	$ 0.18	$ (0.08)	$ (1.19)	$ (0.17)	$ (1.31)	$ (1.26)	$ (0.30)
Discontinued operations (in dollars per share)	(0.04)	0	(0.03)	0.83	(0.02)	0.02	(0.11)	0.17	0.76	0.05	(0.17)
Basic earnings (loss) per common share (in dollars per share)	(0.68)	(0.19)	(0.25)	0.57	0.16	(0.06)	(1.30)	0	(0.55)	(1.21)	(0.47)
Diluted earnings (loss) per common share:
Continuing operations (in dollars per share)	(0.64)	(0.19)	(0.22)	(0.26)	0.18	(0.08)	(1.19)	(0.17)	(1.31)	(1.26)	(0.30)
Discontinued operations (in dollars per share)	(0.04)	0	(0.03)	0.83	(0.02)	0.02	(0.11)	0.17	0.76	0.05	(0.17)
Diluted earnings (loss) per common share (in dollars per share)	$ (0.68)	$ (0.19)	$ (0.25)	$ 0.57	$ 0.16	$ (0.06)	$ (1.30)	$ 0	$ (0.55)	$ (1.21)	$ (0.47)

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Property and Equipment (Additional Disclosures) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Depreciation expense, inclusive of expense captured in cost of revenue	$ 6,500,000	$ 7,800,000	$ 8,400,000
Impairment related to property and equipment	$ 0	$ 0	$ 0

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Income Taxes (Components of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018
Deferred tax assets:
Net operating loss carryforwards	$ 17,248		$ 30,241
Allowance for doubtful accounts	1,037		1,073
Inventory valuation reserves	629		1,057
Equity compensation	353		548
Goodwill	965		1,089
Accrued compensation	587		342
Foreign tax credit carryforward	3,894		4,041
Settlement liability	3,530		0
Lease liability	3,992		0
Interest expense limitation	0		534
Other	96		50
Total gross deferred tax assets	32,331		38,975
Valuation allowance	(19,878)		(4,042)	$ (15,500)
Total deferred tax assets, net	12,453		34,933
Deferred tax liabilities:
Property and equipment	(3,696)		(6,613)
Intangible assets	(4,597)		(9,657)
ROU asset	(3,793)		0
Prepaid insurance and other	(331)		0
Total gross deferred tax liabilities	(12,417)		(16,270)
Net deferred tax assets	$ 36	$ 18,700	$ 18,663

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Commitments and Contingencies (Operating Leases) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Future minimum lease payments under operating leases
2020	$ 2,012
2021	1,962
2022	1,916
2023	1,976
2024	2,017
Thereafter	23,692
Total lease payments	33,575
Rent expense	$ 2,900
Rent expense under operating leases		$ 2,900	$ 3,300

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Common Stock (Schedule of significant assumptions) (Details)	12 Months Ended
	Dec. 31, 2019
Time-Vested Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.81%
Expected volatility of common stock	73.59%
Expected life of options in years	5 years
Dividend yield	0.00%
Vesting period in years	5 years
Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.84%
Expected volatility of common stock	71.57%
Expected life of options in years	7 years
Dividend yield	0.00%
Vesting period in years	7 years

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Earnings (Loss) Per Share (Basic and Diluted Earnings (Loss) Per Common Share) (Details) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Weighted average common shares outstanding - Basic (in shares)	58,750	57,995	57,580
Assumed conversions:
Weighted average common shares outstanding - Diluted (in shares)	58,750	57,995	57,580
Stock options
Class of Stock [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share (in shares)			700
Assumed conversions:
Incremental common shares (in shares)	0	0	0
Restricted Stock Units (RSUs)
Class of Stock [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share (in shares)	100	700	800
Assumed conversions:
Incremental common shares (in shares)	0	0	0

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Summary of Significant Accounting Policies (Other Intangible Assets) (Details)	12 Months Ended
	Dec. 31, 2019
Minimum
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	2 years
Maximum
Finite-Lived Intangible Assets [Line Items]
Intangible assets, useful life	95 years

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Discontinued Operations (Summary Of Financial Information That Has Been Segregated From Continuing Operations (Details) - USD ($) $ in Thousands	3 Months Ended				12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Discontinued operations:
Net loss from discontinued operations	$ (2,425)	$ 117	$ (1,608)	$ 48,372	$ 44,456	$ 2,743	$ (9,891)
Assets:
Assets held for sale	0				0	118,470
Discontinued Operations, Held-for-sale | Consumer and Industrial Chemistry Technologies
Discontinued operations:
Revenue					11,031	72,344	73,992
Operating expenses					(11,572)	(65,940)	(63,621)
Depreciation and amortization					0	(2,760)	(2,391)
Research and development					(69)	(590)	(515)
Income (loss) from operations					(610)	3,054	7,465
Other income (expense)					35	341	(284)
Loss on sale of businesses					64,160	0	0
Income (loss) before income taxes					63,585	3,395	7,181
Income tax benefit (expense)					(19,129)	(652)	(2,730)
Net loss from discontinued operations					44,456	2,743	$ 4,451
Assets:
Accounts receivable, net	0				0	10,547
Inventories, net	0				0	52,069
Other current assets	0				0	446
Property and equipment, net	0				0	15,899
Goodwill	0				0	19,480
Other intangible assets, net	0				0	20,029
Assets held for sale	0				0	118,470
Liabilities:
Accounts payable	0				0	8,883
Accrued liabilities	0				0	291
Liabilities held for sale	$ 0				0	9,174
Discontinued Operations, Held-for-sale | Drilling Technologies
Discontinued operations:
Revenue					0	11,534
Cost of revenue					0	(7,309)
Selling, general and administrative					0	(6,963)
Research and development					0	(5)
Gain (loss) on disposal of long-lived assets					0	97
Income (loss) from operations					0	(2,646)
Other income (expense)					0	(96)
Loss on sale of businesses					0	(1,600)
Loss on write-down of assets held for sale					0	(6,831)
Income (loss) before income taxes					0	(11,173)
Income tax benefit (expense)					0	4,138
Net loss from discontinued operations					0	(7,035)
Discontinued Operations, Held-for-sale | Production Technologies
Discontinued operations:
Revenue					0	4,002
Cost of revenue					0	(3,236)
Selling, general and administrative					0	(1,759)
Research and development					0	(364)
Gain (loss) on disposal of long-lived assets					0	0
Income (loss) from operations					0	(1,357)
Other income (expense)					0	(52)
Loss on sale of businesses					0	(479)
Loss on write-down of assets held for sale					0	(9,718)
Income (loss) before income taxes					0	(11,606)
Income tax benefit (expense)					0	4,299
Net loss from discontinued operations					$ 0	$ (7,307)

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Leases Components of Lease Expense and Supplementary Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Leases [Abstract]
Operating lease expense	$ 2,609	$ 0
Amortization of right-of-use assets	1,237	0
Interest on lease liabilities	10	0
Total finance lease expense	1,247	0
Short-term lease expense	123	0
Total lease expense	3,979	0
Operating cash flows from operating leases	2,336	0
Operating cash flows from finance leases	10	0
Financing cash flows from finance leases	$ 51	$ 0	$ 0

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Carrying value and estimated fair value of long-term debt

The carrying amount and estimated fair value of the Company’s long-term debt are as follows (in thousands):

	December 31,
	2019				2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Borrowings under revolving credit facility	$	—	$	—	$	49,731	$	49,731

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Components of property, plant and equipment

Property and equipment are as follows (in thousands):

	December 31
	2019			2018
Land	$	4,440		$	4,372
Buildings and leasehold improvements	38,741			37,719
Machinery and equipment	27,694			26,995
Fixed assets in progress	—			581
Furniture and fixtures	1,671			1,573
Transportation equipment	1,440			1,852
Computer equipment and software	3,348			9,370
Property and equipment	77,334			82,462
Less accumulated depreciation	(37,505		)	(36,977		)
Property and equipment, net	$	39,829		$	45,485

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Revenue from Contracts with Customers (Tables)

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Differentiation of revenue and cost of revenue

Revenue and operating expenses (excluding depreciation and amortization) disaggregated by revenue source are as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
Revenue:
Products	$	115,471	$	172,412	$	237,211
Services	3,882		5,361		5,895
	$	119,353	$	177,773	$	243,106
Operating expenses (excluding depreciation and amortization):
Products	$	147,709	$	152,846	$	182,330
Services	1,516		6,962		6,414
	$	149,225	$	159,808	$	188,744

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Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings (Accumulated Deficit)	Non-controlling Interests
Beginning balance (in shares) at Dec. 31, 2016		59,685,000	2,029,000
Beginning balance at Dec. 31, 2016	$ 287,701	$ 6	$ (20,269)	$ 318,392	$ (956)	$ (9,830)	$ 358
Increase (Decrease) in Stockholders' Equity
Net loss	(27,395)					(27,395)
Foreign currency translation adjustment	72
Stock issued under employee stock purchase plan (in shares)			(113,000)
Stock issued under employee stock purchase plan	654			654
Common stock issued in payment of accrued liability (in shares)		0
Common stock issued in payment of accrued liability	188			188
Stock options exercised (in shares)		663,000
Stock options exercised	$ 5,884	$ 0		5,884
Restricted stock awards granted (in shares)		275,000
Restricted stock awards forfeited (in shares)			122,000
Treasury stock purchased (in shares)	238,216		200,000
Treasury stock purchased	$ (1,729)		$ (1,729)
Stock surrendered for exercise of stock options (in shares)	3,225		478,000
Stock surrendered for exercise of stock options	$ (5,863)		$ (5,863)
Stock compensation expense	10,949			10,949
Repurchase of common stock (in shares)			905,000
Repurchase of common stock	5,203		$ 5,203
Ending balance (in shares) at Dec. 31, 2017		60,623,000	3,621,000
Ending balance at Dec. 31, 2017	265,258	$ 6	$ (33,064)	336,067	(884)	(37,225)	358
Increase (Decrease) in Stockholders' Equity
Net loss	(70,698)					(70,340)	(358)
Foreign currency translation adjustment	(232)
Stock issued under employee stock purchase plan (in shares)			(111,000)
Stock issued under employee stock purchase plan	341			341
Common stock issued in payment of accrued liability	$ 0
Restricted stock awards granted (in shares)	1,539,889	1,540,000
Restricted stock awards forfeited (in shares)			158,000
Treasury stock purchased (in shares)	199,644		102,000
Treasury stock purchased	$ (173)		$ (173)
Stock surrendered for exercise of stock options (in shares)	478,287
Stock compensation expense	$ 7,128			7,128
Repurchase of common stock (in shares)	0
Ending balance (in shares) at Dec. 31, 2018		62,163,000	3,770,000
Ending balance at Dec. 31, 2018	$ 201,624	$ 6	$ (33,237)	343,536	(1,116)	(107,565)	0
Increase (Decrease) in Stockholders' Equity
Net loss	(32,279)					(32,279)
Foreign currency translation adjustment	150				150
Stock issued under employee stock purchase plan (in shares)			(18,000)
Stock issued under employee stock purchase plan	35			35
Common stock issued in payment of accrued liability	$ 0
Stock options exercised (in shares)	0
Restricted stock awards granted (in shares)	924,022	924,000
Restricted stock awards forfeited (in shares)			299,000
Treasury stock purchased (in shares)	93,977		94,000
Treasury stock purchased	$ (247)		$ (247)
Stock surrendered for exercise of stock options (in shares)	0
Stock compensation expense	$ 3,993			3,993
Ending balance (in shares) at Dec. 31, 2019		63,657,000	4,145,000
Ending balance at Dec. 31, 2019	$ 173,276	$ 6	$ (33,484)	$ 347,564	$ (966)	$ (139,844)	$ 0

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 100,575	$ 3,044
Restricted cash	663	0
Accounts receivable, net of allowance for doubtful accounts of $1,527 and $1,190 at December 31, 2019 and 2018, respectively	15,638	37,047
Inventories, net	21,697	27,289
Income taxes receivable	631	3,161
Assets held for sale	0	118,470
Other current assets	13,191	5,771
Total current assets	152,395	194,782
Property and equipment, net	39,829	45,485
Operating lease right-of-use assets	16,388	0
Deferred tax assets, net	152	18,663
Other intangible assets, net	23,083	26,827
Other long-term assets	0	126
TOTAL ASSETS	231,847	285,883
Current liabilities:
Accounts payable	16,231	15,011
Accrued liabilities	24,552	10,335
Interest payable	0	8
Liabilities held for sale	0	9,174
Current portion of lease liabilities	541	0
Long-term debt, classified as current	0	49,731
Total current liabilities and total liabilities	41,324	84,259
Long-term operating lease liabilities	16,973
Long-term finance lease liabilities	158	0
Deferred tax liabilities, net	116	0
TOTAL LIABILITIES	58,571	84,259
Commitments and contingencies (Note16)
Stockholders’ Equity:
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.0001 par value, 80,000,000 shares authorized; 63,656,897 shares issued and 57,882,396 shares outstanding at December 31, 2019; 62,162,875 shares issued and 57,342,279 shares outstanding at December 31, 2018	6	6
Additional paid-in capital	347,564	343,536
Accumulated other comprehensive income (loss)	(966)	(1,116)
Retained earnings (accumulated deficit)	(139,844)	(107,565)
Treasury stock, at cost; 4,145,481 and 3,770,224 shares at December 31, 2019 and 2018, respectively	(33,484)	(33,237)
Total stockholders’ equity	173,276	201,624
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 231,847	$ 285,883

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2019

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Supplemental cash flow information is as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Supplemental non-cash investing and financing activities:
Value of common stock issued in payment of accrued liability	$	—		$	—		$	188
Exercise of stock options by common stock surrender	—			—			5,863
Supplemental cash payment information:
Interest paid	$	599		$	2,502		$	1,851
Income taxes (received, net of payments) paid, net of refunds	(699		)	(139		)	(10,195		)

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Goodwill

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

The Company has no reporting units which have a goodwill balance at December 31, 2019.

Goodwill is tested for impairment annually in the fourth quarter, or more frequently if circumstances indicate a potential impairment. During the fourth quarter of 2017, the Company adopted ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. If the carrying amount exceeds the reporting unit’s fair value, the Company will recognize an impairment charge for the excess amount.

During the second quarter of 2018, the Company recognized a goodwill impairment charge of $37.2 million in the Energy Chemistry Technologies (“ECT”) reporting unit, which resulted from sustained under-performance and lower expectations related to the reporting unit. As a result of these factors, a qualitative analysis, and additional risks associated with the business, the Company concluded that sufficient indicators existed to require an interim quantitative assessment

of goodwill for that reporting unit as of June 30, 2018. The fair value of the reporting unit was estimated based on an analysis of the present value of future discounted cash flows. The significant estimates used in the discounted cash flows model included the Company’s weighted average cost of capital, projected cash flows and the long-term rate of growth. The assumptions were based on the actual historical performance of the reporting unit and took into account a recent weakening of operating results in an improving market environment. The excess of the reporting unit’s carrying value over the estimated fair value was recorded as the goodwill impairment charge during the three months ended June 30, 2018 and represented all of the ECT reporting unit’s goodwill.

Changes in the carrying amount of goodwill for the ECT reporting unit are as follows (in thousands):

Balance at December 31, 2017:
Goodwill	$	37,180
Accumulated impairment losses	—
Goodwill balance, net	37,180
Activity during the year 2018:
Goodwill impairment recognized	(37,180		)
Acquisition goodwill recognized	—
Balance at December 31, 2018:
Goodwill	37,180
Accumulated impairment losses	(37,180		)
Goodwill balance, net	—
Activity during the year 2019:
Goodwill impairment recognized	—
Acquisition goodwill recognized	—
Balance at December 31, 2019:
Goodwill	—
Accumulated impairment losses	—
Goodwill balance, net	$	—

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Earnings (Loss) Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding combined with dilutive common share equivalents outstanding, if the effect is dilutive.

Potentially dilutive securities were excluded from the calculation of diluted loss per share for the years ended December 31, 2019, 2018, and 2017, since including them

would have an anti-dilutive effect on loss per share due to the loss from continuing operations incurred during the period. Securities convertible into shares of common stock that were not considered in the diluted loss per share calculations were 0.1 million restricted stock units and 3.0 million stock options for the year ended December 31, 2019, and 0.7 million restricted stock units for the year ended December 31, 2018, and 0.7 million stock options and 0.8 million restricted stock units for the year ended December 31, 2017.

A reconciliation of the number of shares used for the basic and diluted earnings (loss) per common share computations is as follows (in thousands):

	Years ended December 31,
	2019	2018	2017
Weighted average common shares outstanding - Basic	58,750	57,995	57,580
Assumed conversions:
Incremental common shares from stock options	—	—	—
Incremental common shares from restricted stock units	—	—	—
Weighted average common shares outstanding - Diluted	58,750	57,995	57,580

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Business Segment, Geographic and Major Customer Information

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Business Segment, Geographic and Major Customer Information

Business Segment, Geographic and Major Customer Information

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by chief operating decision-makers in deciding how to allocate resources and assess performance. The operations of the Company are categorized into one reportable segment: Energy Chemistry Technologies.

Energy Chemistry Technologies designs, develops, manufactures, packages, and markets specialty chemistries used in oil and natural gas well drilling, cementing, completion, and stimulation. In addition, the Company’s chemistries are used in specialized enhanced and improved oil recovery markets. Activities in this segment also include

construction and management of automated material handling facilities and management of loading facilities and blending operations for oilfield services companies.

The Company evaluates performance based upon a variety of criteria. The primary financial measure is segment operating income. Various functions, including certain sales and marketing activities and general and administrative activities, are provided centrally by the corporate office. Costs associated with corporate office functions, other corporate income and expense items, and income taxes are not allocated to reportable segments.

Summarized financial information of the reportable segments is as follows (in thousands):

As of and for the years ended December 31,	Energy Chemistry Technologies			Corporate and Other			Total
2019
Net revenue from external customers	$	119,353		$	—		$	119,353
Loss from operations	(46,485		)	(30,140		)	(76,625		)
Depreciation and amortization	7,439			1,026			8,465
Capital expenditures	2,411			—			2,411
2018
Net revenue from external customers	$	177,773		$	—		$	177,773
Income (loss) from operations	(36,817		)	(32,994		)	(69,811		)
Depreciation and amortization	7,107			2,109			9,216
Capital expenditures	2,733			826			3,559
2017
Net revenue from external customers	$	243,106		$	—		$	243,106
Income (loss) from operations	33,611			(43,931		)	(10,320		)
Depreciation and amortization	7,323			2,445			9,768
Capital expenditures	3,279			918			4,197

Assets of the Company by reportable segments are as follows (in thousands):

	December 31, 2019		December 31, 2018
Energy Chemistry Technologies	$	117,357	$	139,205
Corporate and Other	114,490		28,208
Total segments	231,847		167,413
Held for sale	—		118,470
Total assets	$	231,847	$	285,883

Geographic Information

Revenue by country is based on the location where services are provided and products are used. No individual country other than the United States (“U.S.”) accounted for more than 10% of revenue. Revenue by geographic location is as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
U.S.	$	104,786	$	146,421	$	219,517
Other countries	14,567		31,352		23,589
Total	$	119,353	$	177,773	$	243,106

Long-lived assets held in countries other than the U.S. are not considered material to the consolidated financial statements.

Major Customers

Revenue from major customers, as a percentage of consolidated revenue, is as follows:

	Years ended December 31,
	2019	2018	2017
Customer A	20.4%	*	*
Customer B	10.3%	12.23%	*
Customer C	*	10.1%	*
Customer D	*	*	16.7%

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of Flotek Industries, Inc. and all wholly-owned subsidiary corporations. Where Flotek owns less than 100% of the share capital of its subsidiaries, but is still considered to have sufficient ownership to control the business, results of the business operations are consolidated within the Company’s financial statements. The ownership interests held by other parties are shown as noncontrolling interests.

During the fourth quarter of 2018, the Company classified the Consumer and Industrial Chemistry Technologies segment as held for sale based on management’s intention to sell this business, which occurred in January 2019. The Company’s historical financial statements have been revised to present the operating results of the Consumer and Industrial Chemistry Technologies segment as discontinued operations. The results of operations of this segment are presented as “Income (loss) from discontinued operations” in the statement of operations and the related cash flows of this segment have been reclassified to discontinued operations for all periods presented. The assets and liabilities of the Consumer and Industrial Chemistry Technologies segment have been reclassified to “Assets held for sale” and “Liabilities held for

sale”, respectively, in the consolidated balance sheet for all periods presented.

During 2017, the Company completed the sale or disposal of the assets and transfer or liquidation of liabilities and obligations of each of the Drilling Technologies and Production Technologies segments.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries.

Cash Equivalents & Cash Management

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturities of three months or less at the date of purchase.

Cash Management

The Company uses a controlled disbursement account for its main cash account. Under this system, outstanding checks can be in excess of the cash balances at the bank before the disbursement account is funded, creating a book overdraft. Book overdrafts on this account are presented as a current liability in accounts payable in the consolidated balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable arise from product sales and services and are stated at estimated net realizable value. This value incorporates an allowance for doubtful accounts to reflect any loss anticipated on accounts receivable balances. The Company regularly evaluates its accounts receivable to estimate amounts that will not be collected and records the appropriate provision for doubtful accounts as a charge to operating expenses. The allowance for doubtful accounts is based on a combination of the age of the receivables, individual customer circumstances, credit conditions, and historical

write-offs and collections. The Company writes off specific accounts receivable when they are determined to be uncollectible.

The majority of the Company’s customers are engaged in the energy industry. The cyclical nature of the energy industry may affect customers’ operating performance and cash flows, which directly impact the Company’s ability to collect on outstanding obligations. Additionally, certain customers are located in international areas that are inherently subject to risks of economic, political, and civil instability, which can impact the collectability of receivables.

Inventories

Inventories

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost, determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor, and production overhead. The Company quarterly reviews inventories on hand and current market conditions to determine if the cost of finished goods inventories exceeds current market prices and impairs the cost basis of the inventory accordingly. Obsolete inventory or inventory in excess of management’s estimated usage requirement is written down to its estimated market value if those amounts are determined to be less than cost.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. Depreciation or amortization of property and equipment, including assets held under capital leases, is calculated using the straight-line method over the asset’s estimated useful life as follows:

Buildings and leasehold improvements	2-30 years
Machinery and equipment	7-10 years
Furniture and fixtures	3 years
Transportation equipment	2-5 years
Computer equipment and software	3-7 years

Property and equipment are reviewed for impairment on an quarterly basis or whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Indicative events or circumstances include, but are not limited to, matters such as a significant decline in market value or a significant change in business climate. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows from the use of the asset and its eventual disposition. The amount of impairment loss recognized is the excess of the asset’s carrying amount over its fair value. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less cost to sell. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying amount of the asset and the net proceeds received.

Internal Use Computer Software Costs

Internal Use Computer Software Costs

Direct costs incurred to purchase and develop computer software for internal use are capitalized during the application development and implementation stages. These software costs have been primarily for enterprise-level business and finance software that is customized to meet the Company’s specific operational needs. Capitalized costs are included in property and equipment and are amortized on a straight-line basis over the estimated useful life of the software beginning when the software project is substantially complete and placed in service. Costs incurred during the preliminary project stage and costs for training, data conversion, and maintenance are expensed as incurred.

The Company amortizes software costs using the straight-line method over the expected life of the software, generally three to seven years.

Goodwill

Goodwill

Goodwill is the excess of cost of an acquired entity over the amounts assigned to identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not subject to amortization, but is tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include an adverse change in the business climate or a change in the assessment of future operations of a reporting unit.

The Company assesses whether a goodwill impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative impairment test is performed to determine whether goodwill impairment exists at the reporting unit.

The quantitative impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the estimated fair value of each reporting unit with goodwill to its carrying amount, including goodwill. To determine fair value estimates, the Company uses the income approach based on discounted cash flow analyses, combined, when appropriate, with a market-based approach. The market-based approach considers valuation comparisons of recent public sale transactions of similar businesses and earnings multiples of publicly traded businesses operating in industries consistent with the reporting unit. If the carrying amount of a reporting unit, including goodwill, exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit.

Other Intangible Assets

Other Intangible Assets

The Company’s other intangible assets have finite and indefinite lives and consist of customer relationships, trademarks, brand names, and purchased patents.

The cost of intangible assets with finite lives is amortized using the straight-line method over the estimated period of economic

benefit, ranging from two to 95 years. Asset lives are adjusted whenever there is a change in the estimated period of economic benefit. No residual value has been assigned to these intangible assets.

Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models.

Intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually during the fourth quarter, or more frequently if an event occurs or circumstances change that would indicate a potential impairment. These circumstances may include, but are not limited to, a significant adverse change in the business climate, unanticipated competition, or a change in projected operations or results of a reporting unit.

The Company assesses whether an indefinite lived intangible impairment exists using both qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount. If, based on this qualitative assessment, it is determined that it is not more likely than not that the fair value of the indefinite lived intangible is less than its carrying amount, the Company does not perform a quantitative assessment.

If the qualitative assessment indicates that it is more likely than not that the indefinite-lived intangible asset is impaired or if the Company elects to not perform a qualitative assessment, the Company then performs the quantitative impairment test. The quantitative impairment test for an indefinite-lived intangible asset consists of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flows.

Business Combinations

Business Combinations

The Company includes the results of operations of its acquisitions in its consolidated results, prospectively from the date of acquisition. Acquisitions are accounted for by applying the acquisition method. The Company allocates the fair value of purchase consideration to the assets acquired, liabilities

assumed, and any noncontrolling interests in the acquired entity generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed, and any noncontrolling interests in the acquired entity is recorded as goodwill. The primary items that generate goodwill include the value of the synergies between the acquired company and Flotek and the value of the acquired assembled workforce. Acquisition-related expenses are recognized separately from the business acquisition and are recognized as expenses as incurred.

Fair Value Measurements

Fair Value Measurements

The Company categorizes financial assets and liabilities using a three-tier fair value hierarchy, based on the nature of the inputs used to determine fair value. Inputs refer broadly to assumptions market participants would use to value an asset or liability and may be observable or unobservable. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). “Level 1” measurements are measurements using quoted prices in active markets for identical assets and liabilities. “Level 2” measurements are measurements using quoted prices in markets that are not active or that are based on quoted prices for similar assets or liabilities. “Level 3” measurements are measurements that use significant unobservable inputs which require a company to develop its own assumptions. When determining the fair value of assets and liabilities, the Company uses the most reliable measurement available.

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets and liabilities into the three levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement.

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Observable inputs other than Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•

Level 3 — Significant unobservable inputs that are supported by little or no market activity or that are based on the reporting entity’s assumptions about the inputs.

Revenue Recognition

Revenue Recognition

The Company recognizes revenues to depict the transfer of control of promised goods or services to its customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Refer to Note 4 – “Revenue from Contracts with Customers” for further discussion on Revenue.

The Company recognizes revenue based on the Accounting Standards Codification (“ASC”) 606 five-step model when all of the following criteria have been met: (i) a contract with a customer exists, (ii) performance obligations have been identified, (iii) the price to the customer has been determined, (iv) the price to the customer has been allocated to the performance obligations, and (v) performance obligations are satisfied.

Products and services are sold with fixed or determinable prices. Certain sales include right of return provisions, which are considered when recognizing revenue and deferred accordingly. Deposits and other funds received in advance of delivery are deferred until the transfer of control is complete.

For certain contracts, the Company recognizes revenue under the percentage-of-completion method of accounting, measured by the percentage of “costs incurred to date” to the

“total estimated costs of completion.” This percentage is applied to the “total estimated revenue at completion” to calculate proportionate revenue earned to date. For the years ended December 31, 2019, 2018, and 2017, the percentage-of-completion revenue accounted for less than 0.1% of total revenue during the respective time periods.

As an accounting policy election, the Company excludes from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of revenues.

Foreign Currency Translation

Foreign Currency Translation

Financial statements of foreign subsidiaries are prepared using the currency of the primary economic environment of the foreign subsidiaries as the functional currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect as of the end of identified reporting periods. Revenue and expense transactions are translated using the average monthly exchange rate for the reporting period. Resultant translation adjustments are recognized as other comprehensive income (loss) within stockholders’ equity.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) encompasses all changes in stockholders’ equity, except those arising from investments from and distributions to stockholders. The Company’s comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments.

Research and Development Costs

Research and Development Costs

Expenditures for research activities relating to product development and improvement are charged to expense as incurred.

Income Taxes

Income Taxes

The Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities and are measured using the tax rates expected to be in effect when the differences reverse. Deferred tax assets and liabilities are recognized related to the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company’s assets and liabilities using statutory tax rates at the applicable year end. Deferred tax assets are also recognized for operating loss and tax credit carry forwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations

in the period that includes the enactment date. A valuation allowance is used to reduce deferred tax assets when uncertainty exists regarding their realization.

A valuation allowance is recorded to reduce previously recorded tax assets when it becomes more likely than not that such assets will not be realized. The Company evaluates, at least annually, net operating loss carry forwards and other net deferred tax assets and considers all available evidence, both positive and negative, to determine whether a valuation allowance is necessary relative to net operating loss carry forwards and other net deferred tax assets. In making this determination, the Company considers cumulative losses in recent years as significant negative evidence. The Company considers recent years to mean the current year plus the two preceding years. The Company considers the recent cumulative income or loss position as objectively verifiable evidence for the projection of future income, which consists primarily of determining the average of the pre-tax income of the current and prior two years after adjusting for certain items not indicative of future performance. Based on this analysis, the Company determines whether a valuation allowance is necessary.

Historically, U.S. Federal income taxes are not provided on unremitted earnings of subsidiaries operating outside the U.S. because it is the Company’s intention to permanently reinvest undistributed earnings in the subsidiary. These earnings would become subject to income tax if they were remitted as dividends or loaned to a U.S. affiliate. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded at December 31, 2017, for a one-time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable.

The Company has performed an evaluation and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders, adjusted for the effect of assumed conversions of convertible notes and preferred stock, by the weighted average number of common shares outstanding, including potentially dilutive common share equivalents, if the effect is dilutive. Potentially dilutive common shares equivalents consist of incremental shares of common stock issuable upon exercise of stock options and warrants,

settlement of restricted stock units, and conversion of convertible notes and convertible preferred stock.

Debt Issuance Costs

Debt Issuance Costs

Costs related to debt issuance are capitalized and amortized as interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Upon the repayment of debt, the Company accelerates the recognition of an appropriate amount of the costs as interest expense.

Capitalization of Interest

Capitalization of Interest

Interest costs are capitalized for qualifying in-process software development projects. Capitalization of interest commences when activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Interest costs are capitalized until the assets are ready for their intended use. Capitalized interest is added to the cost of the underlying assets and amortized over the estimated useful lives of the assets.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation expense for share-based payments, related to stock options, restricted stock awards, and restricted stock units, is recognized based on their grant-date fair values. The Company recognizes compensation expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Estimated forfeitures are based on historical experience.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Significant items subject to estimates and assumptions include application of the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets.

Assets and Liabilities Held for Sale and Discontinued Operations

Assets and Liabilities Held for Sale

The Company classifies disposal groups as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the disposal group; (2) the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups; (3) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group have been initiated; (4) the sale of the disposal group is probable, and transfer of the disposal group

is expected to qualify for recognition as a completed sale, within one year, except if events of circumstances beyond the Company’s control extend the period of time required to sell the disposal group beyond one year; (5) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A disposal group that is classified as held for sale is initially measured at the lower of its carrying amount or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Subsequent changes in the fair value of a disposal group less any costs to sell are reported as an adjustment to the carrying amount of the disposal group, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group for all periods presented in the line items assets held for sale and liabilities held for sale, respectively, in the consolidated balance sheets.

Discontinued Operations

The results of operations of a component of the Company that can be clearly distinguished, operationally and for financial reporting purposes, that either has been disposed of or is classified as held for sale is reported in discontinued operations, if the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results.

Reclassifications

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications did not impact net loss.

New Accounting Pronouncements

New Accounting Pronouncements

(a) Application of New Accounting Standards

Effective January 1, 2019, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2016-02, “Leases” This standard (ASC 842) requires the recognition of Right of Use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP (ASC 840). The Company adopted ASC 842 using the optional transition method. Consequently, the Company’s reporting for the comparative periods presented prior to 2019 in the financial statements will continue to be in accordance with ASC 840. Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of

deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Refer to Note 6 - “Leases” for further information surrounding adoption of this new standard.

Effective January 1, 2019, the Company adopted ASU No. 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting.” This standard expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted the accounting guidance in Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” This standard supersedes most of the existing revenue recognition requirements in U.S. GAAP under Accounting Standards Codification (“ASC”) 605 and establishes a new revenue standard, ASC 606. This new standard requires entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 using the full retrospective method. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. Refer to Note 4 — “Revenue from Contracts with Customers” for further information surrounding adoption of this new standard.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This standard addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively, where applicable, as there were no historical transactions affected by this implementation.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-01, “Clarifying the

Definition of a Business.” This standard provided additional guidance on whether an integrated set of assets and activities constitutes a business. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods were not adjusted. In addition, the Company had no activity during the year ended December 31, 2019 that was required to be treated differently under this ASU than previously issued guidance.

Effective January 1, 2018, the Company adopted the accounting guidance in ASU No. 2017-09, “Scope of Modification Accounting.” This standard provided guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. Implementation of this standard did not have a material effect on the consolidated financial statements and related disclosures. The Company applied this standard prospectively and, therefore, prior periods presented were not adjusted. There were no changes to the terms or conditions of current share-based payment awards during the year ended December 31, 2019.

(b) New Accounting Requirements and Disclosures

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments.”

This standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement.” This standard removes, modifies, and adds additional requirements for disclosures related to fair value measurement in ASC 820. The pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted in any interim period. The Company is currently evaluating the impact the pronouncement will have on the consolidated financial statements and related disclosures.

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Inventories (Schedule of Inventory Reserve) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Inventory Valuation Reserves [Roll Forward]
Balance, beginning of year	$ 2,117	$ 368	$ 50
Charged to provisions	5,659	2,418	388
Deductions for disposals	(2,078)	(669)	(70)
Balance, end of the year	$ 5,698	$ 2,117	$ 368

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Business Segment, Geographic and Major Customer Information (Revenue by Geographic Location) (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenue by geographic location
Revenue	$ 19,526	$ 21,879	$ 34,692	$ 43,256	$ 43,449	$ 53,709	$ 39,546	$ 41,069	$ 119,353	$ 177,773	$ 243,106
U.S.
Revenue by geographic location
Revenue									104,786	146,421	219,517
Other countries
Revenue by geographic location
Revenue									$ 14,567	$ 31,352	$ 23,589

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Subsequent Events (Details) - USD ($) $ in Millions		1 Months Ended
	Feb. 26, 2020	Feb. 29, 2020
Subsequent Event [Line Items]
Payment for amendment agreement	$ 15.8
Subsequent event
Subsequent Event [Line Items]
Reduction to the gain on the sale of the business		$ 4.1

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Goodwill (Changes in the Carrying Value of Goodwill) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Changes in the carrying value of goodwill:
Goodwill impairment recognized	$ 0	$ (37,180,000)	$ 0
Energy Chemistry Technologies
Changes in the carrying value of goodwill:
Goodwill, gross	37,180,000	37,180,000
Accumulated impairment losses	(37,180,000)	0
Goodwill, net	0	0	37,180,000
Goodwill impairment recognized	0	(37,180,000)
Acquisition goodwill recognized	0	0
Goodwill, gross	0	37,180,000	37,180,000
Accumulated impairment losses	0	(37,180,000)	0
Goodwill, net	$ 0	$ 0	$ 37,180,000

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Summary of Significant Accounting Policies (Property and Equipment) (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($)
Property, Plant and Equipment [Line Items]
Unamortized amount of capitalized software	$ 1.0
Buildings and leasehold improvements | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	2 years
Buildings and leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	30 years
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	7 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	10 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years
Transportation equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	2 years
Transportation equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	5 years
Computer equipment and software | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	3 years
Computer equipment and software | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life	7 years

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Data [Abstract]

Schedule of quarterly financial data

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	(in thousands, except per share data)
2019
Revenue (1)	$	43,256		$	34,692		$	21,879		$	19,526		$	119,353
Loss from operations (1)	(14,266		)	(13,859		)	(11,853		)	(36,647		)	(76,625		)
(Loss) income from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net (loss) income	32,992			(14,598		)	(11,110		)	(39,563		)	(32,279		)
Net loss attributable to noncontrolling interests	—			—			—			—			—
Net loss attributable to Flotek Industries, Inc. (Flotek)	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Amounts attributable to Flotek shareholders:
Loss from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net income (loss) attributable to Flotek	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Basic earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Diluted earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
2018
Revenue (1)	$	41,069		$	39,546		$	53,709		$	43,449		$	177,773
(Loss) income from operations (1)	(9,223		)	(47,140		)	(4,080		)	(9,368		)	(69,811		)
Loss from continuing operations (1)	$	(9,528	)	$	(68,987	)	$	(4,869	)	$	9,943		$	(73,441	)
(Loss) income from discontinued operations, net of tax	9,595			(6,404		)	937			(1,385		)	2,743
Net loss (income)	$	67		$	(75,391	)	$	(3,932	)	$	8,558		$	(70,698	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Basic earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Diluted earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
(1) Amounts exclude impact of discontinued operations.
(2) The sum of the quarterly earnings (loss) per share (basic and diluted) may not agree to the earnings (loss) per share for the year due to the timing of common stock issuances.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of components of income tax provision (benefit)

Components of the income tax (benefit) expense are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Current:
Federal	$	(22,923	)	$	—		$	(1,126	)
State	(2,295		)	97			587
Foreign	(238		)	(740		)	488
Total current	(25,456		)	(643		)	(51		)
Deferred:
Federal	23,910			(6,585		)	5,994
State	1,345			(89		)	214
Foreign	—			101			(45		)
Total deferred	25,255			(6,573		)	6,163
Income tax (benefit) expense	$	(201	)	$	(7,216	)	$	6,112

Schedule of domestic and foreign net income (loss) before taxes

The components of (loss) income before income taxes are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
United States	$	(76,758	)	$	(80,034	)	$	(10,025	)
Foreign	(178		)	(623		)	(1,367		)
Loss before income taxes	$	(76,936	)	$	(80,657	)	$	(11,392	)

Schedule of effective income tax rate reconciliation

A reconciliation of the U.S. federal statutory tax rate to the effective income tax rate is as follows:

	Year ended December 31,
	2019		2018		2017
Federal statutory tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	0.6		0.8		(3.2	)
Non-U.S. income taxed at different rates	0.5		0.8		(4.3	)
(Increase) decrease in valuation allowance	(19.9	)	(3.6	)	0.1
Impact of 2017 Tax Cuts and Jobs Act	—		—		(64.2	)
Net operating loss carryback adjustment	—		—		—
Reduction in tax benefit related to stock-based awards	(0.1	)	(1.0	)	(16.9	)
Non-deductible expenditures and goodwill	—		(9.0	)	(3.9	)
Research and development credit	0.2		0.3		3.6
Other	(2.0	)	(0.4	)	0.1
Effective income tax rate	0.3	%	8.9	%	(53.7	)%

Schedule of deferred tax assets and liabilities

The components of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	17,248		$	30,241
Allowance for doubtful accounts	1,037			1,073
Inventory valuation reserves	629			1,057
Equity compensation	353			548
Goodwill	965			1,089
Accrued compensation	587			342
Foreign tax credit carryforward	3,894			4,041
Settlement liability	3,530			—
Lease liability	3,992			—
Interest expense limitation	—			534
Other	96			50
Total gross deferred tax assets	32,331			38,975
Valuation allowance	(19,878		)	(4,042		)
Total deferred tax assets, net	12,453			34,933
Deferred tax liabilities:
Property and equipment	(3,696		)	(6,613		)
Intangible assets	(4,597		)	(9,657		)
ROU asset	(3,793		)	—
Prepaid insurance and other	(331		)	—
Total gross deferred tax liabilities	(12,417		)	(16,270		)
Net deferred tax assets	$	36		$	18,663

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Schedule of changes in the allowance for doubtful accounts

Changes in the allowance for doubtful accounts for continuing operations are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Balance, beginning of year	$	1,190		$	673		$	579
Charged to provision for doubtful accounts, net of recoveries	512			839			157
Write-offs	(175		)	(322		)	(63		)
Balance, end of year	$	1,527		$	1,190		$	673

Schedule of depreciation or amortization of property and equipment

Depreciation or amortization of property and equipment, including assets held under capital leases, is calculated using the straight-line method over the asset’s estimated useful life as follows:

Buildings and leasehold improvements	2-30 years
Machinery and equipment	7-10 years
Furniture and fixtures	3 years
Transportation equipment	2-5 years
Computer equipment and software	3-7 years

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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Components of the income tax (benefit) expense are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
Current:
Federal	$	(22,923	)	$	—		$	(1,126	)
State	(2,295		)	97			587
Foreign	(238		)	(740		)	488
Total current	(25,456		)	(643		)	(51		)
Deferred:
Federal	23,910			(6,585		)	5,994
State	1,345			(89		)	214
Foreign	—			101			(45		)
Total deferred	25,255			(6,573		)	6,163
Income tax (benefit) expense	$	(201	)	$	(7,216	)	$	6,112

The components of (loss) income before income taxes are as follows (in thousands):

	Years ended December 31,
	2019			2018			2017
United States	$	(76,758	)	$	(80,034	)	$	(10,025	)
Foreign	(178		)	(623		)	(1,367		)
Loss before income taxes	$	(76,936	)	$	(80,657	)	$	(11,392	)

A reconciliation of the U.S. federal statutory tax rate to the effective income tax rate is as follows:

	Year ended December 31,
	2019		2018		2017
Federal statutory tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	0.6		0.8		(3.2	)
Non-U.S. income taxed at different rates	0.5		0.8		(4.3	)
(Increase) decrease in valuation allowance	(19.9	)	(3.6	)	0.1
Impact of 2017 Tax Cuts and Jobs Act	—		—		(64.2	)
Net operating loss carryback adjustment	—		—		—
Reduction in tax benefit related to stock-based awards	(0.1	)	(1.0	)	(16.9	)
Non-deductible expenditures and goodwill	—		(9.0	)	(3.9	)
Research and development credit	0.2		0.3		3.6
Other	(2.0	)	(0.4	)	0.1
Effective income tax rate	0.3	%	8.9	%	(53.7	)%

Fluctuations in effective tax rates have historically been impacted by permanent tax differences with no associated income tax impact, changes in state apportionment factors, including the effect on state deferred tax assets and liabilities, and non-U.S. income taxed at different rates.

Comprehensive tax reform legislation enacted in December 2017, commonly referred to as the Tax Cuts and Jobs Acts (“2017 Tax Act”), makes significant changes to U.S. federal income tax laws. The 2017 Tax Act, among other things, reduces the corporate income tax rate from 35% to 21%, partially limits the deductibility of business interest expense and net operating losses, provides additional limitations on the deductibility of executive compensation, imposes a one-time tax on unrepatriated earnings from certain foreign subsidiaries, taxes offshore earnings at reduced rates regardless of whether they are repatriated, and allows the immediate deduction of certain new investments instead of deductions for depreciation expense over time. The Company had not completed its determination of the 2017 Tax Act and recorded provisional amounts in its financial statements as of December 31, 2017. The Company recorded a provisional expense for the effects of the 2017 Tax Act of $7.3 million. The effects of the 2017

Tax Act on the Company include three main categories: 1) remeasurement of the net deferred tax assets from 35% to 21%, which resulted in tax expense of $5.5 million; 2) a one-time tax on unrepatriated earnings from certain foreign subsidiaries of $0.2 million; and 3) additional limitations on the deductibility of executive compensation, which resulted in tax expense of $1.6 million. The Company completed its review of the 2017 Tax Act in 2018, and there were no material changes in the measurement period.

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	17,248		$	30,241
Allowance for doubtful accounts	1,037			1,073
Inventory valuation reserves	629			1,057
Equity compensation	353			548
Goodwill	965			1,089
Accrued compensation	587			342
Foreign tax credit carryforward	3,894			4,041
Settlement liability	3,530			—
Lease liability	3,992			—
Interest expense limitation	—			534
Other	96			50
Total gross deferred tax assets	32,331			38,975
Valuation allowance	(19,878		)	(4,042		)
Total deferred tax assets, net	12,453			34,933
Deferred tax liabilities:
Property and equipment	(3,696		)	(6,613		)
Intangible assets	(4,597		)	(9,657		)
ROU asset	(3,793		)	—
Prepaid insurance and other	(331		)	—
Total gross deferred tax liabilities	(12,417		)	(16,270		)
Net deferred tax assets	$	36		$	18,663

As of December 31, 2019, the Company had U.S. net operating loss carryforwards of $68.9 million, including $49.6 million expiring in various amounts in 2035 through 2037 which can offset 100% of taxable income and $19.3 million that has an indefinite carryforward period which can offset 80% of taxable income per year. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo an “ownership change” for purposes of Section 382 of the Tax Code.

Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance in the second quarter of 2018, the Company considered all available objective and

verifiable evidence, both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, and expectations and risks associated with estimates of future pre-tax income. As a result of this analysis, the Company determined that it is more likely than not that it will not realize the benefits of certain deferred tax assets and, therefore, recorded a $15.5 million valuation allowance against the carrying value of net deferred tax assets, except for deferred tax liabilities related to non-amortizable intangible assets and certain state jurisdictions. As all available evidence should be taken into consideration when assessing the need for a valuation allowance, the subsequent events that occurred in the first quarter of 2019 provided a source of income to support the release of $11.5 million of the valuation allowance which resulted in a deferred tax asset of $18.7 million. As such, the Company reversed this portion of the valuation allowance during the fourth quarter of 2018. At December 31, 2019, the

valuation allowance against the net federal and state deferred tax assets was $19.9 million.

The Company has not calculated U.S. taxes on unremitted earnings of certain non-U.S. subsidiaries due to the Company’s intent to reinvest the unremitted earnings of the non-U.S. subsidiaries. At December 31, 2019, the Company had approximately $2.3 million in unremitted earnings for one of its foreign jurisdictions, which were not included for U.S. tax purposes. Due to the 2017 Tax Act, U.S. federal transition taxes have been recorded for a one-time U.S. tax liability on these earnings which have not previously been repatriated to the U.S. However, certain withholding taxes will need to be paid upon repatriation. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings.

The Company has performed an evaluation and concluded there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The

evaluation was performed for the tax years which remain subject to examination by tax jurisdictions as of December 31, 2019, which are the years ended December 31, 2015 through December 31, 2019 for U.S. federal taxes and the years ended December 31, 2014 through December 31, 2019 for state tax jurisdictions.

At December 31, 2019, the Company had no unrecognized tax benefits.

In January 2017, the Internal Revenue Service notified the Company that it would examine the Company’s “IRS” federal tax returns for the year ended December 31, 2014. The examination included (1) the corporate returns and (2) employment tax matters. The IRS fieldwork has been completed in relation to the corporate returns with no adverse findings. Further discussion of the employment tax matter can be found in Note 19 ---“Related Party Transaction.”

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Data [Abstract]

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
	(in thousands, except per share data)
2019
Revenue (1)	$	43,256		$	34,692		$	21,879		$	19,526		$	119,353
Loss from operations (1)	(14,266		)	(13,859		)	(11,853		)	(36,647		)	(76,625		)
(Loss) income from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net (loss) income	32,992			(14,598		)	(11,110		)	(39,563		)	(32,279		)
Net loss attributable to noncontrolling interests	—			—			—			—			—
Net loss attributable to Flotek Industries, Inc. (Flotek)	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Amounts attributable to Flotek shareholders:
Loss from continuing operations (1)	$	(15,380	)	$	(12,990	)	$	(11,227	)	$	(37,138	)	$	(76,735	)
Income (loss) from discontinued operations, net of tax	48,372			(1,608		)	117			(2,425		)	44,456
Net income (loss) attributable to Flotek	$	32,992		$	(14,598	)	$	(11,110	)	$	(39,563	)	$	(32,279	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Basic earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.26	)	$	(0.22	)	$	(0.19	)	$	(0.64	)	$	(1.31	)
Discontinued operations	0.83			(0.03		)	—			(0.04		)	0.76
Diluted earnings (loss) per common share	$	0.57		$	(0.25	)	$	(0.19	)	$	(0.68	)	$	(0.55	)
2018
Revenue (1)	$	41,069		$	39,546		$	53,709		$	43,449		$	177,773
(Loss) income from operations (1)	(9,223		)	(47,140		)	(4,080		)	(9,368		)	(69,811		)
Loss from continuing operations (1)	$	(9,528	)	$	(68,987	)	$	(4,869	)	$	9,943		$	(73,441	)
(Loss) income from discontinued operations, net of tax	9,595			(6,404		)	937			(1,385		)	2,743
Net loss (income)	$	67		$	(75,391	)	$	(3,932	)	$	8,558		$	(70,698	)
Basic earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Basic earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
Diluted earnings (loss) per common share (2):
Continuing operations	$	(0.17	)	$	(1.19	)	$	(0.08	)	$	0.18		$	(1.26	)
Discontinued operations	0.17			(0.11		)	0.02			(0.02		)	0.05
Diluted earnings (loss) per common share	$	—		$	(1.30	)	$	(0.06	)	$	0.16		$	(1.21	)
(1) Amounts exclude impact of discontinued operations.
(2) The sum of the quarterly earnings (loss) per share (basic and diluted) may not agree to the earnings (loss) per share for the year due to the timing of common stock issuances.

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Property and Equipment (Components of Property, Plant and Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Components of Property, Plant and Equipment
Property and equipment	$ 77,334	$ 82,462
Less accumulated depreciation	(37,505)	(36,977)
Property and equipment, net	39,829	45,485
Land
Components of Property, Plant and Equipment
Property and equipment	4,440	4,372
Buildings and leasehold improvements
Components of Property, Plant and Equipment
Property and equipment	38,741	37,719
Machinery and equipment
Components of Property, Plant and Equipment
Property and equipment	27,694	26,995
Fixed assets in progress
Components of Property, Plant and Equipment
Property and equipment	0	581
Furniture and fixtures
Components of Property, Plant and Equipment
Property and equipment	1,671	1,573
Transportation equipment
Components of Property, Plant and Equipment
Property and equipment	1,440	1,852
Computer equipment and software
Components of Property, Plant and Equipment
Property and equipment	$ 3,348	$ 9,370

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Business Segment, Geographic and Major Customer Information (Major Customers) (Details) - Customer Concentration Risk - Sales Revenue, Net	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Customer A
Revenue, Major Customer [Line Items]
Concentration risk, percentage	20.40%
Customer B
Revenue, Major Customer [Line Items]
Concentration risk, percentage	10.30%	12.23%
Customer C
Revenue, Major Customer [Line Items]
Concentration risk, percentage		10.10%
Customer D
Revenue, Major Customer [Line Items]
Concentration risk, percentage			16.70%

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Other Intangible Assets (Schedule of Intangible Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 34,211	$ 37,660
Finite-lived intangible assets, accumulated amortization	13,888	13,593
Total other intangible assets	36,971	40,420
Other intangible assets, net	23,083	26,827
Acquired Intangible Assets [Member]
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	34,211	35,736
Finite-lived intangible assets, accumulated amortization	13,888	13,097
Patents and technology
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	17,493	18,884
Finite-lived intangible assets, accumulated amortization	6,715	6,689
Customer lists
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	15,367	15,367
Finite-lived intangible assets, accumulated amortization	6,013	5,259
Trademarks and brand names
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	1,351	1,485
Finite-lived intangible assets, accumulated amortization	1,160	1,149
Deferred financing costs
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	0	1,924
Finite-lived intangible assets, accumulated amortization	0	496
Trademarks and brand names
Schedule of Finite and Indefinite Lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	$ 2,760	$ 2,760

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Business Segment, Geographic and Major Customer Information (Tables)

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Financial information regarding reportable segments

Summarized financial information of the reportable segments is as follows (in thousands):

As of and for the years ended December 31,	Energy Chemistry Technologies			Corporate and Other			Total
2019
Net revenue from external customers	$	119,353		$	—		$	119,353
Loss from operations	(46,485		)	(30,140		)	(76,625		)
Depreciation and amortization	7,439			1,026			8,465
Capital expenditures	2,411			—			2,411
2018
Net revenue from external customers	$	177,773		$	—		$	177,773
Income (loss) from operations	(36,817		)	(32,994		)	(69,811		)
Depreciation and amortization	7,107			2,109			9,216
Capital expenditures	2,733			826			3,559
2017
Net revenue from external customers	$	243,106		$	—		$	243,106
Income (loss) from operations	33,611			(43,931		)	(10,320		)
Depreciation and amortization	7,323			2,445			9,768
Capital expenditures	3,279			918			4,197

Assets of the Company by reportable segments are as follows (in thousands):

	December 31, 2019		December 31, 2018
Energy Chemistry Technologies	$	117,357	$	139,205
Corporate and Other	114,490		28,208
Total segments	231,847		167,413
Held for sale	—		118,470
Total assets	$	231,847	$	285,883

Revenue by geographic location

Revenue by geographic location is as follows (in thousands):

	Years ended December 31,
	2019		2018		2017
U.S.	$	104,786	$	146,421	$	219,517
Other countries	14,567		31,352		23,589
Total	$	119,353	$	177,773	$	243,106

Revenue by major customers

Revenue from major customers, as a percentage of consolidated revenue, is as follows:

	Years ended December 31,
	2019	2018	2017
Customer A	20.4%	*	*
Customer B	10.3%	12.23%	*
Customer C	*	10.1%	*
Customer D	*	*	16.7%

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Earnings (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Components of basic and diluted earnings per common share

A reconciliation of the number of shares used for the basic and diluted earnings (loss) per common share computations is as follows (in thousands):

	Years ended December 31,
	2019	2018	2017
Weighted average common shares outstanding - Basic	58,750	57,995	57,580
Assumed conversions:
Incremental common shares from stock options	—	—	—
Incremental common shares from restricted stock units	—	—	—
Weighted average common shares outstanding - Diluted	58,750	57,995	57,580

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Summary of Significant Accounting Policies (Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Changes in the allowance for doubtful accounts
Balance, beginning of year	$ 1,190	$ 673	$ 579
Charged to provision for doubtful accounts, net of recoveries	512	839	157
Write-offs	(175)	(322)	(63)
Balance, end of year	$ 1,527	$ 1,190	$ 673

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Income Taxes (Reconciliation of Effective Tax Rate) (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Federal statutory tax rate	21.00%	21.00%	35.00%
State income taxes, net of federal benefit	0.60%	0.80%	(3.20%)
Non-U.S. income taxed at different rates	0.50%	0.80%	(4.30%)
(Increase) decrease in valuation allowance	(19.90%)	(3.60%)	0.10%
Impact of 2017 Tax Cuts and Jobs Act	0	0	(0.642)
Net operating loss carryback adjustment	0.00%	0.00%	0.00%
Reduction in tax benefit related to stock-based awards	(0.10%)	(1.00%)	(16.90%)
Non-deductible expenditures and goodwill	0.00%	(9.00%)	(3.90%)
Research and development credit	0.20%	0.30%	3.60%
Other	(2.00%)	(0.40%)	0.10%
Effective income tax rate	0.30%	8.90%	(53.70%)

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Common Stock (Share-Based Compensation, Treasury Stock, and Stock Repurchase Plan) (Details) - USD ($)	12 Months Ended				60 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2019	Jun. 30, 2015	Nov. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-cash share-based compensation expense	$ 7,100,000	$ 10,600,000	$ 11,400,000
Common stock shares purchased as payment of income tax withholding (in shares)	93,977	199,644	238,216
Stock surrendered for exercise of stock options (in shares)	0	478,287	3,225
Common stock shares purchased, cost			$ 5,203,000
Common stock shares purchased by the company (in shares)		0
Remaining authorized repurchase amount	$ 49,700,000				$ 49,700,000
Share Repurchase Program, November 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock repurchase shares authorized							$ 25,000,000
Common stock shares purchased, cost	$ 25,000,000		$ 5,200,000
Common stock shares purchased by the company (in shares)			905,000	0
Common stock shares purchased, average cost per share (in dollars per share)			$ 5.75
Share Repurchase Program, June 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock repurchase shares authorized						$ 50,000,000
Common stock shares purchased, cost					$ 300,000

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Common Stock (Schedule of Stock Options) (Details) - $ / shares	3 Months Ended	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding beginning balance (in shares)		0
Granted (in shares)		3,000,000
Stock options exercised (in shares)		0
Forfeited (in shares)		0
Expired (in shares)		0
Outstanding ending balance (in shares)	3,000,000	3,000,000	0
Vested or expected to be vested (in shares)	0	0
Options exercisable (in shares)	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding Weighted-Average Exercisable Price [Roll Forward]
Outstanding beginning balance (in USD per share)	$ 1.22	$ 1.22	$ 0
Granted (in USD per share)		1.22
Exercised (in USD per share)		0
Forfeited (in USD per share)		0
Expired (in USD per share)		0
Vested or expected to be vested (in USD per share)	0	0
Options exercisable (in USD per share)	$ 0	$ 0
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Anti-dilutive securities excluded from calculation of earnings per share (in shares)				700,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted (in shares)	3,000,000.0
Performance-Based Options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Granted (in shares)	2,000,000.0

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Fair Value Measurements (Fair Value of Other Financial Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Carrying Amount
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Borrowings under revolving credit facility	$ 0	$ 49,731
Fair Value
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Borrowings under revolving credit facility	$ 0	$ 49,731

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Leases Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Operating Leases
2020	$ 2,012
2021	1,962
2022	1,916
2023	1,976
2024	2,017
Thereafter	23,692
Total lease payments	33,575
Less: Interest	(16,116)
Present value of lease liabilities	17,459
Finance Leases
2020		$ 70
2021		70
2022		47
2023		40
2024		23
Thereafter		0
Total lease payments		250
Less: Interest		(37)
Present value of lease liabilities	$ 213	$ 213

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Summary of Significant Accounting Policies (Revenue Recognition) (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Percentage of total revenue accounted for percentage-of-completion revenue, less than	0.10%	0.10%	0.10%

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Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Disaggregation of Revenue [Line Items]
Percentage of total revenue accounted for percentage-of-completion revenue, less than									0.10%	0.10%	0.10%
Product sales as a percentage of total revenue									95.00%	95.00%	95.00%
Revenue	$ 19,526	$ 21,879	$ 34,692	$ 43,256	$ 43,449	$ 53,709	$ 39,546	$ 41,069	$ 119,353	$ 177,773	$ 243,106
Operating expenses (excluding depreciation and amortization)									149,225	159,808	188,744
Products
Disaggregation of Revenue [Line Items]
Revenue									115,471	172,412	237,211
Operating expenses (excluding depreciation and amortization)									147,709	152,846	182,330
Services
Disaggregation of Revenue [Line Items]
Revenue									3,882	5,361	5,895
Operating expenses (excluding depreciation and amortization)									$ 1,516	$ 6,962	$ 6,414

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Inventories (Tables)

12 Months Ended

Dec. 31, 2019

Inventory Disclosure [Abstract]

Components of inventory

Inventories are as follows (in thousands):

	December 31,
	2019			2018
Raw materials	$	4,339		$	10,608
Work-in-process	—			—
Finished goods	23,056			18,798
Inventories	27,395			29,406
Less reserve for excess and obsolete inventory	(5,698		)	(2,117		)
Inventories, net	$	21,697		$	27,289

Schedule of inventory reserve

Changes in the reserve for excess and obsolete inventory are as follows (in thousands):

	2019			2018			2017
Balance, beginning of year	$	2,117		$	368		$	50
Charged to provisions	5,659			2,418			388
Deductions for disposals	(2,078		)	(669		)	(70		)
Balance, end of the year	$	5,698		$	2,117		$	368

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Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Summary of financial information has been segregated from continuing operations

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2018 and 2017 (in thousands):

	Drilling Technologies					Production Technologies
	2018		2017			2018		2017
Discontinued operations:
Revenue	$	—	$	11,534		$	—	$	4,002
Cost of revenue	—		(7,309		)	—		(3,236		)
Selling, general and administrative	—		(6,963		)	—		(1,759		)
Research and development	—		(5		)	—		(364		)
Gain (loss) on disposal of long-lived assets	—		97			—		—
Loss from operations	—		(2,646		)	—		(1,357		)
Other expense	—		(96		)	—		(52		)
Loss on sale of businesses	—		(1,600		)	—		(479		)
Loss on write-down of assets held for sale	—		(6,831		)	—		(9,718		)
Loss before income taxes	—		(11,173		)	—		(11,606		)
Income tax benefit	—		4,138			—		4,299
Net loss from discontinued operations	$	—	$	(7,035	)	$	—	$	(7,307	)

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2019, 2018, and 2017 (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019			2018			2017
Discontinued operations:
Revenue	$	11,031		$	72,344		$	73,992
Operating expenses	(11,572		)	(65,940		)	(63,621		)
Depreciation and amortization	—			(2,760		)	(2,391		)
Research and development	(69		)	(590		)	(515		)
Income from operations	(610		)	3,054			7,465
Other income (expense)	35			341			(284		)
Gain on sale of businesses	64,160			—			—
Income before income taxes	63,585			3,395			7,181
Income tax expense	(19,129		)	(652		)	(2,730		)
Net income (loss) from discontinued operations	$	44,456		$	2,743		$	4,451

The assets and liabilities held for sale on the Consolidated Balance Sheets as of December 31, 2019 and 2018 are as follows (in thousands):

	Consumer and Industrial Chemistry Technologies
	2019		2018
Assets:
Accounts receivable, net	$	—	$	10,547
Inventories, net	—		52,069
Other current assets	—		446
Property and equipment, net	—		15,899
Goodwill	—		19,480
Other intangible assets, net	—		20,029
Assets held for sale	—		118,470
Liabilities:
Accounts payable	$	—	$	8,883
Accrued liabilities	—		291
Liabilities held for sale	$	—	$	9,174

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Long-Term Debt and Credit Facility (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Components of long-term debt

Long-term debt is as follows (in thousands): 

	December 31,
	2019		2018
Long-term debt, classified as current:
Borrowings under revolving credit facility	$	—	$	49,731

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Leases Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Leases

Effective January 1, 2019, the Company adopted ASC 842 using the prospective method applied to those leases which were not completed as of December 31, 2018. The Company has leases for corporate offices, research and development facilities, warehouses, sales offices and equipment. The leases have remaining lease terms of 1 year to 19 years, some of which include options to extend the leases for up to 10 years.

Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Leases with an initial expected term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the expected lease term.

The components of lease expense and supplemental cash flow information are as follows (in thousands):

	For the years ending
	December 31,
	2019		2018
Operating lease expense	$	2,609	$	—
Finance lease expense:
Amortization of right-of-use assets	1,237		—
Interest on lease liabilities	10		—
Total finance lease expense	1,247		—
Short-term lease expense	123		—
Total lease expense	$	3,979	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	2,336		—
Operating cash flows from finance leases	10		—
Financing cash flows from finance leases	51		—

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

Supplemental balance sheet information related to leases is as follows (in thousands):

	December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	16,388
Current portion of lease liabilities	$	486
Long-term operating lease liabilities	16,973
Total operating lease liabilities	$	17,459
Finance Leases
Property and equipment	$	293
Accumulated depreciation	(28		)
Property and equipment, net	$	265
Current portion of lease liabilities	$	55
Long-term finance lease liabilities	158
Total finance lease liabilities	$	213
Weighted Average Remaining Lease Term
Operating leases	16.6 years
Finance leases	4.6 years
Weighted Average Discount Rate
Operating leases	8.9		%
Finance leases	9.0		%

Leases

Leases

Effective January 1, 2019, the Company adopted ASC 842 using the prospective method applied to those leases which were not completed as of December 31, 2018. The Company has leases for corporate offices, research and development facilities, warehouses, sales offices and equipment. The leases have remaining lease terms of 1 year to 19 years, some of which include options to extend the leases for up to 10 years.

Upon adoption, the Company recorded operating lease ROU assets and corresponding operating lease liabilities, net of deferred rent, of approximately $18.4 million, representing the present value of future lease payments under operating leases with terms of greater than twelve months. Leases with an initial expected term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the expected lease term.

The components of lease expense and supplemental cash flow information are as follows (in thousands):

	For the years ending
	December 31,
	2019		2018
Operating lease expense	$	2,609	$	—
Finance lease expense:
Amortization of right-of-use assets	1,237		—
Interest on lease liabilities	10		—
Total finance lease expense	1,247		—
Short-term lease expense	123		—
Total lease expense	$	3,979	$	—
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	2,336		—
Operating cash flows from finance leases	10		—
Financing cash flows from finance leases	51		—

Maturities of lease liabilities are as follows (in thousands):

Years ending December 31,	Operating Leases			Finance Leases
2020	2,012			70
2021	1,962			70
2022	1,916			47
2023	1,976			40
2024	2,017			23
Thereafter	23,692			—
Total lease payments	$	33,575		$	250
Less: Interest	(16,116		)	(37		)
Present value of lease liabilities	$	17,459		$	213

Supplemental balance sheet information related to leases is as follows (in thousands):

	December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	16,388
Current portion of lease liabilities	$	486
Long-term operating lease liabilities	16,973
Total operating lease liabilities	$	17,459
Finance Leases
Property and equipment	$	293
Accumulated depreciation	(28		)
Property and equipment, net	$	265
Current portion of lease liabilities	$	55
Long-term finance lease liabilities	158
Total finance lease liabilities	$	213
Weighted Average Remaining Lease Term
Operating leases	16.6 years
Finance leases	4.6 years
Weighted Average Discount Rate
Operating leases	8.9		%
Finance leases	9.0		%

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Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

Other Intangible Assets

Other intangible assets are as follows (in thousands):

	December 31,
	2019				2018
	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Finite lived intangible assets:
Patents and technology	$	17,493	$	6,715	$	18,884	$	6,689
Customer lists	15,367		6,013		15,367		5,259
Trademarks and brand names	1,351		1,160		1,485		1,149
Total finite lived intangible assets acquired	34,211		13,888		35,736		13,097
Deferred financing costs	—		—		1,924		496
Total amortizable intangible assets	34,211		$	13,888	37,660		$	13,593
Indefinite lived intangible assets:
Trademarks and brand names	2,760				2,760
Total other intangible assets	$	36,971			$	40,420
Carrying amount:
Other intangible assets, net	$	23,083			$	26,827

Intangible assets acquired are amortized on a straight-line basis over two to 95 years. Amortization of intangible assets acquired totaled $2.0 million, $1.4 million, and $1.5 million for the years end ended December 31, 2019, 2018, and 2017, respectively.

Amortization of deferred financing costs totaled $1.4 million, $0.4 million, and $0.5 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Estimated future amortization expense for other finite lived intangible assets, including deferred financing costs, at December 31, 2019 is as follows (in thousands):

Year ending December 31,
2020	$	1,941
2021	1,935
2022	1,915
2023	1,858
2024	1,854
Thereafter	10,109
Other amortizable intangible assets, net	$	19,612

During the years ended December 31, 2019, 2018, and 2017, no impairments were recognized related to other intangible assets.

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net loss attributable to Flotek Industries, Inc. (Flotek)	$ (32,279,000)	$ (70,340,000)	$ (27,395,000)
Income (loss) from discontinued operations, net of tax	44,456,000	2,743,000	(9,891,000)
Loss from continuing operations	(76,735,000)	(73,083,000)	(17,504,000)
Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities:
Depreciation and amortization	8,465,000	9,216,000	9,768,000
Amortization of deferred financing costs	1,428,000	400,000	472,000
Provision for doubtful accounts	512,000	839,000	157,000
Provision for excess and obsolete inventory	5,659,000	2,418,000	388,000
Loss on sale of business	0	360,000	0
Loss on write-down of assets held for sale	0	2,580,000	0
(Gain) loss on sale of assets	1,450,000	(443,000)	292,000
Impairment of goodwill	0	37,180,000	0
Stock compensation expense	4,235,000	7,050,000	10,643,000
Deferred income tax (benefit) provision	18,307,000	(5,950,000)	181,000
Reduction in tax benefit related to share-based awards	24,000	709,000	1,989,000
Non-cash lease expense	740,000	0	0
Changes in current assets and liabilities:
Accounts receivable, net	20,993,000	(2,606,000)	4,076,000
Inventories	(65,000)	2,597,000	(3,442,000)
Income taxes receivable	2,546,000	(1,116,000)	8,008,000
Other current assets	(8,359,000)	3,177,000	12,001,000
Accounts payable	1,131,000	4,631,000	(8,528,000)
Accrued liabilities	908,000	(8,740,000)	(6,175,000)
Interest payable	(8,000)	(35,000)	19,000
Net cash provided (used in) by operating activities	(18,769,000)	(20,816,000)	12,345,000
Cash flows from investing activities:
Capital expenditures	(2,411,000)	(3,559,000)	(4,197,000)
Proceeds from sale of businesses	169,722,000	1,665,000	18,490,000
Proceeds from sale of assets	240,000	1,387,000	689,000
Purchase of patents and other intangible assets	(614,000)	(1,602,000)	(456,000)
Net cash (used in) provided by investing activities	166,937,000	(2,109,000)	14,526,000
Cash flows from financing activities:
Repayments of indebtedness	0	0	(9,833,000)
Borrowings on revolving credit facility	42,984,000	277,599,000	383,160,000
Repayments on revolving credit facility	(92,715,000)	(255,818,000)	(393,776,000)
Debt issuance costs	0	(111,000)	(579,000)
Payments for finance leases	(51,000)	0	0
Purchase of treasury stock	(247,000)	(173,000)	(1,729,000)
Proceeds from sale of common stock	35,000	341,000	654,000
Repurchase of common stock	0	0	(5,203,000)
Proceeds from exercise of stock options	0	0	21,000
Loss from noncontrolling interest	0	(358,000)	0
Net cash provided by (used in) financing activities	(49,994,000)	21,480,000	(27,285,000)
Discontinued operations:
Net cash provided by (used in) operating activities	(322,000)	1,296,000	4,102,000
Net cash provided by (used in) investing activities	337,000	(1,303,000)	(4,078,000)
Net cash flows (used in) provided by discontinued operations	15,000	(7,000)	24,000
Effect of changes in exchange rates on cash and cash equivalents	5,000	(88,000)	151,000
Net change in cash, cash equivalents and restricted cash	98,194,000	(1,540,000)	(239,000)
Cash, cash equivalents and restricted cash at beginning of year	3,044,000	4,584,000	4,823,000
Cash, cash equivalents and restricted cash at end of year	$ 101,238,000	$ 3,044,000	$ 4,584,000

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 1,527	$ 1,190
Cumulative convertible preferred stock, at par value (in dollars per share)	$ 0.0001	$ 0.0001
Cumulative convertible preferred stock, shares authorized (in shares)	100,000	100,000
Cumulative convertible preferred stock, shares issued (in shares)	0	0
Cumulative convertible preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	80,000,000	80,000,000
Common stock, shares issued (in shares)	63,656,897	62,162,875
Common stock, shares outstanding (in shares)	57,882,396	57,342,279
Treasury stock, shares (in shares)	4,145,481	3,770,224