The board of Flotek Industries Inc. (NYSE: FTK) has authorized a $25 million share repurchase program.
In conjunction with the authorization, Flotek and its senior lender, PNC Bank, have agreed to an amendment to the company's current credit facility that allows for repurchases of up to $25 million of common stock under certain circumstances, including minimum availability under the credit facility of $10 million. Currently, there are no outstanding borrowings on Flotek's $35 million revolving credit facility.
John Chisholm, Flotek's chairman, president, and CEO, spoke to OGFJ in October about the company's turnaround. The company was on the brink of collapse in 2009, but has since been able to raise new equity and rework its senior debt. Since 2010, Flotek has reduced its debt by $99M, or 64%, mainly through cash flow. Today, the company has a modest $55M in debt, nearly $20M in cash on hand, and a $35M undrawn credit facility. Read the full interview here.
"As Flotek's financial position continues to strengthen and evolve, we are committed to exploring every avenue to maximize returns to our shareholders," said Chisholm in a prepared statement. "The availability of a share repurchase program is simply one more tool in our box of options to optimize value."
Global Securities Hunter analysts commented on the move in a note to investors Monday morning.
“We model $12MM-$17MM in free cash flow per quarter through 2013 and growth capex holding in the $3MM-$5MM range on a quarterly basis, thus it will have excess cash. However, with the ~$56MM of converts callable in Feb. 2013, we suspect it will be conservative with capital allocation to the repurchase program given it will need additional funds to take out the notes – we model a $25MM drawdown on the revolver, which based on our estimates it can repay by Q3:13. The buyback may put a floor on the stock, and based on recent volatility in the overall market we like having the authorization available, but do not believe FTK should be aggressively buying back shares at these levels as it has more immediate uses of cash,” the analysts said.
