EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
CAVO DRILLING MOTORS, LTD. CO.
Unaudited Pro Forma Combined Condensed Balance Sheet as of September 30, 2007
Unaudited Pro Forma Combined Condensed Statement of Income for the Nine Months Ended September 30, 2007
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
FLOTEK INDUSTRIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect to the CAVO Drilling Motors, Ltd. Co. (“CAVO”) acquisition as described in Flotek Industries, Inc. (“Flotek”) Form 8-K filed on November 20, 2007. The unaudited pro forma combined balance sheet as of September 30, 2007 is presented as if the CAVO acquisition had occurred on that date. The unaudited pro forma combined statement of income for the nine months ended September 30, 2007 assumes that the CAVO acquisition occurred on January 1, 2007.
The unaudited pro forma combined financial statements should be read in conjunction with (i) the historical consolidated financial statements of Flotek included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2007 and (ii) the historical combined financial statements of CAVO included in this Form 8-K. The unaudited pro forma combined 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 acquisition 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 Financial Statements, are based upon available information and certain assumptions that Flotek’s management believes are reasonable.
FLOTEK INDUSTRIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2007
(Unaudited)
| | | | | | | | | | | | | |
| | | Flotek | | (a)
CAVO | | Pro Forma
Adjustments | | | Pro Forma
for the
Transaction |
| | | (In thousands of dollars) |
| ASSETS | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1,167 | | $ | 1,019 | | $ | — | | | $ | 2,186 |
Accounts receivable: | | | 24,939 | | | 1,319 | | | (171 | )(b) | | | 26,087 |
Inventories, net | | | 20,017 | | | 1,849 | | | — | | | | 21,866 |
Deferred tax assets, current | | | 110 | | | 95 | | | — | | | | 205 |
Other current assets | | | 1,057 | | | 75 | | | — | | | | 1,132 |
| | | | | | | | | | | | | |
Total current assets | | | 47,290 | | | 4,357 | | | (171 | ) | | | 51,476 |
Investment in affiliate | | | 7,187 | | | — | | | (7,187 | )(c) | | | — |
Property, plant and equipment, net | | | 36,747 | | | 2,472 | | | 500 | (d) | | | 39,719 |
Goodwill | | | 45,648 | | | — | | | 12,936 | (e) | | | 58,584 |
Intangible and other assets, net | | | 7,961 | | | — | | | 3,000 | (e) | | | 10,961 |
| | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 144,833 | | $ | 6,829 | | $ | 9,078 | | | $ | 160,740 |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable | | $ | 7,534 | | $ | 65 | | $ | (171 | )(b) | | $ | 7,428 |
Accrued liabilities | | | 6,081 | | | 2,128 | | | — | | | | 8,209 |
Current portion of long-term debt | | | 6,196 | | | 189 | | | (189 | )(f) | | | 6,196 |
| | | | | | | | | | | | | |
Total current liabilities | | | 19,811 | | | 2,382 | | | (360 | ) | | | 21,833 |
Long-term debt, less current portion | | | 49,501 | | | 1,120 | | | 12,689 | (f) | | | 63,310 |
Deferred tax liability, less current portion | | | 2,369 | | | 76 | | | — | | | | 2,445 |
| | | | | | | | | | | | | |
Total liabilities | | | 71,681 | | | 3,578 | | | 12,329 | | | | 87,588 |
| | | | | | | | | | | | | |
Stockholders’ equity | | | 73,152 | | | 3,251 | | | (3,251 | ) | | | 73,152 |
| | | | | | | | | | | | | |
| | $ | 144,833 | | $ | 6,829 | | $ | 9,078 | | | $ | 160,740 |
| | | | | | | | | | | | | |
FLOTEK INDUSTRIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(Unaudited)
| | | | | | | | | | | | | | | | |
| | | Flotek | | | (a)
CAVO | | | Pro Forma
Adjustments | | | Pro Forma
for the
Transactions | |
| | | (in thousands, except share data) | |
Revenues | | $ | 114,609 | | | $ | 8,649 | | | $ | (3,765 | )(h) | | $ | 119,493 | |
| | | | |
Expenses: | | | | | | | | | | | | | | | | |
Operating and administrative expenses | | | 86,198 | | | | 5,044 | | | | (1,020 | )(h) | | | 90,222 | |
Depreciation and amortization | | | 4,553 | | | | 252 | | | | 275 | (i) | | | 5,080 | |
Research and development | | | 440 | | | | — | | | | — | | | | 440 | |
| | | | | | | | | | | | | | | | |
Total expenses | | | 91,191 | | | | 5,296 | | | | (745 | ) | | | 95,742 | |
| | | | | | | | | | | | | | | | |
Income from operations | | | 23,418 | | | | 3,353 | | | | (3,020 | ) | | | 23,751 | |
| | | | |
Other income (expense): | | | | | | | | | | | | | | | | |
Interest expense | | | (2,544 | ) | | | (74 | ) | | | (656 | )(j) | | | (3,274 | ) |
Other, net | | | 709 | | | | 104 | | | | (647 | )(k) | | | 166 | |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (1,835 | ) | | | 30 | | | | (1,303 | ) | | | (3,108 | ) |
| | | | |
Income from before income taxes | | | 21,583 | | | | 3,383 | | | | (4,323 | ) | | | 20,643 | |
| | | | | | | | | | | | | | | | |
Provision for income taxes | | | (7,975 | ) | | | (1,246 | ) | | | 1,513 | (l) | | | (7,708 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 13,608 | | | $ | 2,137 | | | $ | (2,810 | ) | | $ | 12,935 | |
| | | | | | | | | | | | | | | | |
Basic earnings per common share | | $ | 0.75 | | | | | | | | | | | $ | 0.71 | |
Diluted earnings per common share | | $ | 0.71 | | | | | | | | | | | $ | 0.67 | |
Weighted average common shares used in computing basic earnings per common share | | | 18,215 | | | | | | | | | | | | 18,215 | |
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 | | | | | | | | | | | | 19,287 | |
| | | | | | | | | | | | | | | | |
FLOTEK INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
| | (a) | CAVO Drilling Motors, Ltd. Co. (“CAVO”) financials audited as of September 30, 2007. |
| | (b) | Reflects the elimination of intercompany receivable and payable. |
| | (c) | Reflects the elimination the equity investment in CAVO. |
| | (d) | Reflects the estimated increase in fair value of fixed assets. |
| | (e) | Reflects the estimated allocation of the purchase price to goodwill and other intangibles such as customer lists. |
| | (f) | Reflects the repayment of $1.6 million of borrowing under existing credit facilities for CAVO and the addition of $14.1 million of term debt taken out by Flotek to fund the acquisition. |
| | (g) | This is the elimination of CAVO stockholders’ equity balances. |
| | (h) | Reflects the elimination of intercompany revenue and operating expenses. |
| | (i) | Reflects the increase in depreciation expense as a result of the step-up in basis of fixed assets and the increase in amortization expense as a result of recording intangible assets. |
| | (j) | Reflects interest expense related to cash borrowed to affect the acquisition. |
| | (k) | Reflects the elimination of pretax income from equity investment in CAVO. |
| | (l) | Statutory tax rate of 35% was applied to the adjustments. |
