Business Context and Reporting Period
Company: Flotek Industries, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: January 10, 2019
Event: Entry into a Material Definitive Agreement involving the divestiture of a wholly owned subsidiary.
Key Financial Metrics and Transaction Details
- Transaction Consideration: $175 million in cash for the sale of all membership interests in Florida Chemical Company, LLC (FCC).
- Adjustments: Consideration is subject to post-closing working capital and other adjustments.
- Expected Closing: First quarter of 2019.
- Buyer: Archer-Daniels-Midland Company (ADM).
- Financial Statements: This filing does not provide revenue, profit, cash flow, margin, debt, or liquidity metrics for the reporting period.
Material Changes and Agreements
The primary material change is the execution of a Share Purchase Agreement to divest FCC. Upon closing, the following supply agreements will be established:
- Terpene Supply Agreement: FCC will supply terpene to Flotek Chemistry, LLC. The term runs from the closing date through December 31, 2023, with an option to extend for one additional year.
- Citrus Burst Supply Agreement: Flotek Chemistry will supply citrus burst to FCC. The term runs from the closing date through December 31, 2023, with an option to extend for one additional year.
Guidance, Risks, and Contingencies
- Closing Conditions: The transaction is subject to the accuracy of representations and warranties, performance of covenants, and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
- Termination Rights: Either party may terminate if the closing does not occur by March 31, 2019, or if certain conditions are not satisfied through no fault of the terminating party.
- Indemnification: Both parties have agreed to indemnify each other for breaches of representations, warranties, and covenants, subject to survival periods, thresholds, caps, and deductibles.
- Outlook: Management expects the divestiture to close in Q1 2019. No specific financial guidance or outlook beyond the transaction details is provided in this filing.
Investor Verification Checklist
- Verify the final closing date and whether the transaction closes within the expected Q1 2019 timeframe.
- Confirm the final purchase price after post-closing working capital adjustments.
- Monitor the execution of the Terpene and Citrus Burst Supply Agreements upon closing.
- Review the full text of the Share Purchase Agreement (Exhibit 2.1) for specific indemnification caps and deductibles.
- Check for any updates regarding the Hart-Scott-Rodino waiting period status.