Author Topic: FTK - Flotek  (Read 8598 times)

Foreign Tuffett

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Re: FTK - Flotek
« Reply #20 on: November 13, 2019, 10:29:53 AM »
I think I am beginning to understand why management is "hell-bent" (as writser put it) on trying to turn the ship here.....

Page #30 of the Q3 10-Q: They have ~ $72 million of contractual obligations for "supply commitments for raw materials."

What are these mystery supply commitments? Look at page #30 of Q2 10-Q:

"In addition, the Company executed a long-term supply agreement for terpene product, which serves as a feedstock to some of the Company’s key value-added products. The term of the agreement runs through September 2023, with an option to extend for an additional year. This agreement secures the Company’s access to a sufficient supply of terpene and includes a minimum annual purchase requirement at variable prices during the term of the agreement."

FTK can't let its horribly money losing business run off (or shrink its way to break even), as it is on the hook to continue to purchase certain quantities of terpene.


Hat tip to this smart dude on Twitter who figured all this out:

https://twitter.com/Teutoburg1/status/1194376841471156239


Foot stomp to FTK management for poor disclosure related to this issue.
Former Teldar Paper Vice President


writser

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Re: FTK - Flotek
« Reply #21 on: November 13, 2019, 11:30:34 AM »
Solid research. Not sure I agree 100% with the premise that this is limiting management. As far as I can see we're talking $18m / year for 4 years. Not sure how big of a part Terpene is of their COGS but with "product operating expenses" of ~100m+ annually I'm not quite convinced that the contract will be killing if revenue drops a bit. And with ~$110m in cash there should be room for buybacks regardless. Not to mention that they still can put up the company for sale.

But in broad lines I agree. Teutoburg calls the division sale a 'sale-leaseback' and it looks like he has a point. Also one gets the impression that management is trying to sweep this issue under the rug - not mentioned in any recent call / press release afaik.

Still happy I'm on the sidelines.
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