Flotek Industries, Inc. has reported results for the second quarter of 2008.
2Q 2008 Highlights vs. 2Q 2007 Highlights
Jerry D. Dumas, Sr., Chairman of the Board, CEO and President, stated, "We are extremely pleased with the second quarter performance of our Company. The marketing initiatives we have directed to the ultimate beneficiaries of our proprietary chemicals, while working in coordination with our pressure pumping customers, is resonating positively as evidenced by the sales performance of our Chemical and Logistics segment. Downhole Tool profitability is progressing as planned due to market penetration and the benefit of our strategy to move into more technological (smart iron equipment) product offerings. Management is focused on establishing greater control of SG&A costs to minimize the impact of these expenses on earnings but insure sufficient infrastructure to support the expected continued growth of Flotek."
Total revenue for the second quarter of 2008 was $56.8 million, an increase of 50.3%, compared to $37.8 million for the second quarter of 2007. Revenue increased in all three segments due to increased drilling activity, growth in rentals and services associated with the expansion of our mud motor fleet, contributions for a full quarter from Teledrift, price increases in the Chemical and Logistics segments, and the increased acceptance of our products including our proprietary suite of specialty chemical products. Revenues from recent acquisitions accounted for approximately $10.1 million of the increase.
Income from operations for the second quarter of 2008 totaled $11.0 million, an increase of 32.7%, compared to $8.3 million for the second quarter of 2007. Income from operations as a percentage of revenue decreased from 22.0% for the second quarter of 2007 to 19.4% for the second quarter of 2008. Gross margins increased to 46.6% in second quarter 2008 from 44.5% in second quarter 2007. Selling, general and administrative ("SG&A") costs and depreciation and amortization increased as a percentage of revenue during the second quarter of 2008. SG&A increased 71.6% from $6.8 million in second quarter 2007 to $11.6 million during the second quarter of 2008. This was primarily due to increased indirect personnel costs in our Chemicals and Logistics, Drilling Products and Corporate segment, increased professional fees, and costs associated with our increased international efforts. Depreciation and amortization was up 112.1 % from $1.6 million in second quarter of 2007 to $3.4 million in the second quarter of 2008. This increase was attributable to higher depreciation associated with acquired assets and increased capital expenditures. In addition, amortization expense increased due to the amortization of intangible assets acquired in 2007 and 2008.
Interest expense increased to $2.9 million in the second quarter of 2008 from $0.9 million in 2007. This increase is primarily attributable to higher debt levels incurred to finance acquisitions made in the last half of 2007 and Teledrift in the first quarter of 2008.
Flotek achieved a 4.8% increase in net income of $5.1 million, or $0.26 per fully diluted share for the second quarter 2008 compared to $4.9 million or $0.25 per fully diluted share for the same period in 2007.
Drilling Products Segment
Drilling Products revenue for second quarter 2008 was $24.3 million, an increase of 77.8%, compared to $13.7 million for the second quarter in 2007. Acquisitions accounted for approximately $8.6 million of this increase. Growth in rentals and services associated with the expansion of our mud motor fleet also contributed significantly to the increase.
Income from operations was $4.7 million for the second quarter 2008 or 192.2% higher than the $1.6 million for the same period in 2007. Income from operations as a percentage of revenue increased to 19.2% of revenue in the second quarter 2008 compared to 11.7% for the same quarter 2007. This increase can be attributed to the contributions from the Teledrift and CAVO acquisitions plus expansion of our rental tool operations.
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