EX-99.2 3 dex992.htm PRO FORMA FINANCIAL INFORMATION Pro Forma Financial Information

Exhibit 99.2

Flotek Industries, Inc.

Pro Forma Financial Information


TABLE OF CONTENTS

 

     Page
Number

Flotek Industries, Inc.

  

Introduction

   1

Unaudited Pro Forma Combined Condensed Balance Sheet at September 30, 2007

   2

Unaudited Pro Forma Combined Condensed Income Statement For the Nine Months ended
September 30, 2007

   3

Unaudited Pro Forma Combined Condensed Income Statement For the Year ended December 31, 2006

   4

Notes to Unaudited Pro Forma Combined Condensed Financial Statements

   5


FLOTEK INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements give effect to the Triumph Drilling Tools, Inc. (“Triumph”) acquisition, CAVO Drilling Motors, Ltd. Co. (“CAVO”) acquisition and the Teledrift, Inc. (“Teledrift”) acquisition. The unaudited pro forma combined balance sheet as of September 30, 2007 is presented as if the CAVO and Teledrift acquisitions had occurred on that date. The unaudited pro forma combined statement of income for the year ended December 31, 2006 assumes that the Triumph and Teledrift acquisitions occurred on January 1, 2006. The unaudited pro forma combined statements of income for the nine months ended September 30, 2007 assumes that the Teledrift and CAVO acquisitions occurred on January 1, 2007.

The unaudited pro forma combined condensed financial statements should be read in conjunction with (i) the historical consolidated financial statements of Flotek included in its Annual Report on Form 10-K for the year ended December 31, 2006 and the Quarterly Report on Form 10-Q for the nine months ended September 30, 2007; (ii) the historical combined financial statements of CAVO included in the Form 8-K filed on January 29, 2008; and (iii) the historical combined financial statements of Teledrift included herein. The unaudited pro forma combined condensed financial statements are not necessarily indicative of the financial position that would have been obtained or the financial results that would have occurred if the CAVO and Teledrift acquisitions had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or financial results in the future. The pro forma adjustments, as described in the Notes to Pro Forma Combined Condensed Financial Statements, are based upon available information and certain assumptions that Flotek’s management believes are reasonable.

 

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FLOTEK INDUSTRIES, INC.

PRO FORMA COMBINED CONDENSED BALANCE SHEET

SEPTEMBER 30, 2007

(Unaudited)

 

     (a)
Flotek
   (b)
CAVO
   CAVO Pro
Forma
Adjustments
    ( b)
Teledrift
   Teledrift
Pro Forma
Adjustments
    Pro Forma
for the
Transaction
     (In thousands of dollars)

ASSETS

               

Current assets:

               

Cash and cash equivalents

   $ 1,167    $ 1,019    $     $ 1,897    $     $ 4,083

Accounts receivable, net

     24,939      1,319      (171 )(c)     4,276            30,363

Inventories, net

     20,017      1,849            2,055            23,921

Deferred tax assets, current

     110      95                       205

Other current assets

     1,057      75            34            1,166
                                           

Total current assets

     47,290      4,357      (171 )     8,262            59,738

Investment in affiliate

     7,187           (7,187 )(d)               

Property, plant and equipment, net

     36,747      2,472      500  (e)     9,055      4,956  (e)     53,730

Goodwill

     45,648           12,936  (f)          63,976  (f)     122,560

Intangible and other assets, net

     7,961           3,000  (g)          15,000  (j)(k)     25,961
                                           

TOTAL ASSETS

   $ 144,833    $ 6,829    $ 9,078     $ 17,317    $ 83,932     $ 261,989
                                           

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

Current liabilities:

               

Accounts payable

   $ 7,534    $ 65    $ (171 )(c)   $ 1,048    $     $ 8,476

Accrued liabilities

     6,081      2,128            201            8,410

Current portion of long-term debt

     6,196      189                       6,385
                                           

Total current liabilities

     19,811      2,382      (171 )     1,249            23,271

Long-term debt, less current portion

     49,501      1,120      12,500  (h)          100,000  (l)     163,121

Deferred tax liability, less current portion

     2,369      76                       2,445
                                           

Total liabilities

     71,681      3,578      12,329       1,249      100,000       188,837
                                           

Stockholders’ equity

     73,152      3,251      (3,251 )(i)     16,068      (16,068 )(i)     73,152
                                           

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 144,833    $ 6,829    $ 9,078     $ 17,317    $ 83,932     $ 261,989
                                           

 

2


FLOTEK INDUSTRIES, INC.

PRO FORMA COMBINED CONDENSED INCOME STATEMENT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007

(Unaudited)

 

     (a)
Flotek
    (b)
CAVO
    CAVO Pro
Forma
Adjustments
    (b)
Teledrift
    Teledrift
Pro Forma
Adjustments
    Pro Forma
for the
Transactions
 
     (in thousands, except share data)  

Revenue

   $ 114,609     $ 8,649     $ (3,765 )(m)   $ 12,816     $     $ 132,309  

Operating expenses

     91,191       5,296       (745 )(n)(o)(p)     6,577       2,102  (o)(p)     104,421  

Gain on equipment lost in hole

                       1,972             1,972  
                                                

Income from operations

     23,418       3,353       (3,020 )     8,211       (2,102 )     29,860  

Interest expense

     (2,544 )     (74 )     (656 )(q)           (4,545 )(t)     (7,819 )

Other, net

     709       104       (647 )(r)     112             278  

Provision for income taxes

     (7,975 )     (1,246 )     1,513  (s)     (453 )     (134 )(s)     (8,295 )
                                                

Net income

   $ 13,608     $ 2,137     $ (2,810 )   $ 7,870     $ (6,781 )   $ 14,024  
                                                

Basic earnings per common share

   $ 0.75             $ 0.77  

Diluted earnings per common share

   $ 0.71             $ 0.73  

Weighted average common shares used in computing basic earnings per common share

     18,215               18,224  (u)

Incremental common shares from stock options and warrants

     1,072               1,072  
                        

Weighted average common shares used in computing diluted earnings per common share

     19,287               19,296  
                        

 

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FLOTEK INDUSTRIES, INC.

PRO FORMA COMBINED CONDENSED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2006

(Unaudited)

 

     (a)
Flotek
    (m)
Triumph
    Triumph
Pro Forma
Adjustments
    Teledrift     Teledrift
Pro Forma
Adjustments
    Pro Forma
for the
Transactions
 
     (in thousands, except share data)  

Revenue

   $ 100,642     $ 15,996     $     $ 13,997     $     $ 130,635  

Operating expenses

     81,789       13,600       1,285  (o)(p)     6,635       2,884  (o)(p)     106,193  

Gain on equipment lost in hole

                       1,673             1,673  
                                                

Income from operations

     18,853       2,396       (1,285 )     9,035       (2,884 )     26,115  

Interest expense

     (1,005 )     (341 )     (1,649 )(q)     (51 )     (6,060 )(t)     (9,106 )

Other, net

     85       56             214             355  

Provision for income taxes

     (6,583 )           1,027  (s)     (374 )     285  (s)     (5,645 )
                                                

Net income

   $ 11,350     $ 2,111     $ (1,907 )   $ 8,824     $ (8,659 )   $ 11,719  
                                                

Basic earnings per common share

   $ 0.66             $ 0.68  

Diluted earnings per common share

   $ 0.61             $ 0.63  

Weighted average common shares used in computing basic earnings per common share

     17,290               17,290  

Incremental common shares from stock options and warrants

     1,298               1,298  
                        

Weighted average common shares used in computing diluted earnings per common share

     18,588               18,588  
                        

 

4


FLOTEK INDUSTRIES, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

 

  (a) Historical unaudited financial statements.

 

  (b) Historical audited financials statements.

 

  (c) Reflects the elimination of intercompany receivables and payables between CAVO and Flotek.

 

  (d) Reflects the elimination of Flotek’s equity investment in CAVO purchased on January 31, 2007.

 

  (e) Reflects the step-up in the basis of the fixed assets as a result of the acquisition to the fair market value.

 

  (f) Reflects the preliminary estimated excess of purchase price to the fair value of net assets acquired.

 

  (g) Reflects the preliminary estimated fair value of intangible assets such as customer lists as a result of the acquisition.

 

  (h) Reflects the cash needed to complete the acquisition of CAVO.

 

  (i) Reflects the elimination of acquisition stockholders’ equity balances.

 

  (j) Reflects the preliminary estimated fair value of intangible assets such as customer lists, non-competes, patents pending, trade secrets and branding.

 

  (k) Reflects the preliminary estimated deferred financing costs of $4.1 million and $0.8 million of capitalized deal expenses.

 

  (l) Reflects the debt from the issuance of $100 million in convertible notes used to complete the acquisition of Teledrift.

 

  (m) Reflects the elimination of intercompany sales.

 

  (n) Reflects the elimination of estimated cost of goods sold for intercompany sales. Elimination does not reflect elimination of overhead or indirect costs.

 

  (o) Reflects the increase in depreciation expense as a result of the step-up in basis of fixed assets.

 

  (p) Reflects the increase in amortization due to the acquisition of intangible assets.

 

  (q) Reflects the interest expense related to cash borrowed to effect the acquisition.

 

  (r) Reflects the elimination of pretax income from equity investment in CAVO.

 

  (s) A statutory rate of 35% was applied to the adjustments and the historical pretax income of CAVO. CAVO changed its tax status from an S-corporation to a C-corporation effective January 1, 2007. Historical Teledrift provision reflects international withholding taxes in accordance with their S-corporation tax status. The pro forma tax adjustment reflects the application of a 35% statutory rate to the adjustments and the historical pretax income of Teledrift, net of the international withholding taxes.

 

  (t) Reflects the interest expense related to the issuance of $100 million of convertible notes bearing interest at 5.25%, a 200 basis point increase in our floating borrowing rate under our senior credit facility and the amortization of deferred financing costs.

 

  (u) Reflects the issuance of shares of our common stock as a part of the acquisition price for the initial 50% interest in CAVO, completed January 31, 2007. The weighted average common shares does not consider the effect of the shares to be loaned to an affiliate of Bear Stearns & Co. Inc. as issued and outstanding for purposes of computing earnings per share.

 

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